Construction companies face numerous risks in their daily operations: defects due to a subcontractor cutting corners, accidents at the work site, and even cyber threats and pollution incidents. To learn about how Construction Insurance policies can help them mitigate these threats, we spoke with Anthony Kobets, Senior Broker, Commercial Insurance, Burns & Wilcox, Kansas City, Kansas.
What are some of the greatest risks faced by construction companies today?
A.K.: Risks in the construction industry include construction defects, the rising cost of projects, the shortage of labor, and bonus-incentivized timelines. Incentives could lead to cutting corners that then lead to a defect. With something like a tract housing project, once there is one defect, the likelihood is that all homes within the development will be defective. Another risk is using the wrong type of subcontractor or someone who is not properly vetted to complete specialized work like plumbing or electrical, which can cause defects.
What should companies be aware of relative to these risks?
A.K.: Given the shortage of skilled labor, construction companies should make sure their subcontractors are properly insured and that they are hired with risk transfers and hold-harmless agreements in place. Safety training is always important, as well.
Which insurance policies can help them respond to these threats?
A.K.: Construction companies can purchase practice policies annually based on their focus. For example, a general contractor’s practice policy could be Custom Home Builders Insurance, and we would make sure this particular policy covers the state in which they are working. Making sure that they have the proper practice policy for the state is very important. There are also project-specific policies, or Wrap-Up Insurance policies, which would cover all aspects of the scope of their risk for a specific project, including Commercial General Liability (CGL) Insurance and Excess Liability Insurance. For some companies, they may need Auto Liability Insurance, Workers’ Compensation Insurance, Builder’s Risk Insurance, and more. The other policy that is becoming more important these days is Cyber & Privacy Liability Insurance, which can cover social engineering and other cyber threats that CGL Insurance will not cover. Pollution Legal Liability Insurance is also very important.
What steps should companies take or services they should invest in that complement insurance coverage from a prevention standpoint?
A.K.: Whether it is for a welder or a custom home builder, they should think about how they are vetting their subcontractors for experience and what risk transfers they have in place. Construction companies should also review their safety procedures, and make sure they have insurance coverage that addresses all of the states in which they are working.
What advice would you give brokers to increase their success rates within Construction Insurance?
A.K.: A lot of success in Construction Insurance comes down to the relationship between you and the retailer that you are working with and their experience. The success rate is ultimately going to come back to the retailer being able to understand the risks, talk through the risks, and lay out the options. If you want a higher success rate, make sure the retailer you are working with has a good understanding of the knowledge and sophistication of the business you are quoting.
Why should someone consider Burns & Wilcox for their Construction Insurance needs?
A.K.: We offer a whole spread of services and products, from Contractors Pollution Liability (CPL) Insurance to Cyber & Privacy Liability Insurance and Inland Marine Insurance, so we have the scope and experience to write multiple facets of operations. With the experience we have in the industry — almost 20 years, for me — they are going to have professionals with experience to review their construction risks, tell them where they may be lacking coverage, and help them along the way.
What questions should brokers be asking clients relative to these products?
A.K.: What types of projects do you plan to work with? What types of risk transfers are in place — how many subcontractors are used and what is the vetting process for them? Also, what states do you work in or are you planning to work in? That will ultimately influence the decision on the carriers that we go to to make sure that we are not limited or giving you a quote that might have restrictions that you cannot have.
Construction Insurance
WHY YOUR CLIENTS MIGHT NEED IT: Accidents happen at construction sites large and small that can result in serious injury or property damage. Contractors cutting corners can lead to defects.
PROTECTS AGAINST: Claims of property damage and worksite injuries for personal and commercial construction projects; it also can protect against issues related to subcontractors.
EXPERT OPINION: “The success rate is ultimately going to come back to the retailer being able to understand the risks, talk through the risks, and lay out the options.”
