Posted by Robert Phelan on Tue, Apr 20, 2010 @ 07:54 AM
Returning from a business trip recently I was relaxing in the Delta Sky Club at Hartsfield International in Atlanta. As I sipped a soda and ate some pretzels, Hulk Hogan walked in with a small entourage. He looks the same in real life as on TV - as big as a mountain and a little older but the same guy, the same twelve-time world heavyweight champion. He's 56 years old but you wouldn't want to mess with him. He is still "winning" fights this year! Read about it on wikipedia
What does Hulk Hogan have to do with insurance for contractors? A lot, if you look at the world through my eyes.
If you ever needed a bodyguard, he's your man. Read his biography at the link above. He got in the ring with the biggest and the baddest and came out on top. He was the face of WWF(Now WWE). He is a winner and the world knows it. Hogan fought to the finish and intimidated other giants of the game. If I could choose a bodyguard, Hulk Hogan would be my first choice.
If you're a business owner, after protecting your life and family, your business would probably come next. For most construction company owners, their business is their most valuable asset. But surprisingly, I can almost guarantee, none of you know the biography of the person you have chosen to protect your business, your insurance agent or broker. Why is that? How could that be?
It's simple really. Contractors buy insurance the same way they operate in their own world - low bidders win. So instead of making insurance choices based on the capabilities of the people providing the service, they buy cheap insurance.
Do you really think there is no difference between a risk advisor with thirty years of experience and a trainee insurance agent with a cheap price? After all the hard work you've put into building your business, do you really want to entrust its protection to someone you've just met? Someone whose training and skills are unknown to you?
Insurance for contractors is as complex now as it has ever been. The risks you encounter can easily produce multi-million dollar liabilities. If your workers compensation claims aren't managed properly, your EMR (experience Mod Rate) can skyrocket and destroy your ability to compete.
Don't trust the protection of your business to just anyone. When you look across the desk the next time you make an insurance buying decision, ask yourself this: Is this the Hulk Hogan of insurance agents? If you have any doubt, reconsider. Your business depends on it.
Posted by Robert Phelan on Mon, Mar 15, 2010 @ 12:49 PM
Preventing Losses
Written by Robert Phelan
Can pro football offer lessons about how to run your construction business? Well, some of the challenges you face are much like those that face Coach Bill Belichick of the Patriots or Coach Tom Coughlin of the Giants.
Like them, you have to protect your "blind side." Failing to do so can bring big losses on a football field and in your business.
In his book "The Blind Side," author Michael Lewis reveals how football strategy has changed over the past 25 years.
One player in particular spurred change. Lawrence Taylor - the legendary "LT" - was right linebacker and a feared defenseman who typically made quarterbacks shake in their cleats.
Taylor always said his mission was to "destroy" the quarterback - which he nearly did when he once broke two bones in Joe Theismann's leg in a famous Redskins game.
Most quarterbacks are right-handed, so their blind side is their left. When they turn their heads to follow their right arm, they can't see what's coming at them from the other side. If it happens to be Lawrence Taylor fast approaching, they need the best protection they can possibly have in the left tackle position.
Because of Taylor, the left tackle position on the offensive line suddenly became one of the most important positions on the team.
Meanwhile, Bill Walsh, coach of the San Francisco 49ers, built an offensive strategy based on short passes. Joe Montana and his successor, Steve Young, moved the ball down the field and won three Super Bowl championships with this new strategy. The key element was the ability of the left tackle - the best player on the offensive line - to protect the quarterback's blind side.
What's the lesson for your business? It's one that affects you every day when you bid on jobs and try to fulfill contracts you already have. You have to know that you have a blind side that contains all those risks that can potentially destroy your business. These risks that exist in our world today are bigger and more complex than ever before.
As a business owner, do you ever go to sleep at night staring up at the ceiling, wondering what's going to get through your "offensive line?" There's a world out there full of Lawrence Taylors ready to destroy your business. As you look out at your construction operations, you may see heavy equipment, workers exposed to extreme and stressful work environments, and fleets of automobiles and trucks on the highway every day, which are vulnerable to weather conditions and other drivers who are not paying attention. All of those things look like accidents waiting to happen.
In 2001, a salesperson working for a building supply wholesaler was talking on his cell phone while driving a pickup truck. He ran a stop sign and plowed into a vehicle, injuring a 78-year-old passenger. She sued the wholesaler, a large multistate company, and the jury ultimately awarded her $21 million. The company was insured, but it had much less than $21 million worth of liability insurance.
This is a frightening number for any company to see because probably all of
us have gotten distracted while driving. It just takes one moment and a catastrophe could wipe out a company built and sustained for generations.
Last year, a job site crew for one of my clients had just finished a safety meeting when the foreman, who was sitting in a loader and wasn't paying attention, dropped a bucket on another worker's leg. If it weren't for the quick response and medical attention he received, this worker probably would have lost his leg. It would have been a multimillion-dollar loss instead of a relatively quick recovery.
Another sobering example occurred when a bridge contractor had an employee working in an elevator shaft. He was their most experienced and safest employee. It was the end of his shift, and he thought to himself, "I just need to do one more task, take one more minute." He stretched himself beyond the safe zone and fell 30 or 40 feet down the elevator shaft, landing on his back and his legs, breaking the femurs in both legs. He would have been killed if there hadn't been loose pieces of plywood stacked in the bottom.
Everything you've worked for can vanish in a moment. It would only take one multimillion-dollar catastrophe to either leave your business with an uninsured loss or stuck with such exorbitant insurance premiums that you can't really compete anymore.
Force yourself to ask this question, "If one of our workers was involved in an automobile accident where someone was seriously hurt because the worker was texting on a cell phone, could I afford a $21 million jury verdict?"
When you have a serious accident, your workers' comp experience mod rate will soar. This is a number that compares your claims experience to other contractors of your type. If your mod rate is say, 2.0, your premiums will be twice as expensive as average. A high mod rate can put your construction company on the edge of viability.
So, who - or what - is your "left tackle?" Here are a couple real-life ideas:
First, it's an unremitting, 24/7 effort on safety. Hazards never sleep. Safety can't ever take a break, either. You have to create a safe culture. Some of the biggest companies, notably Turner Construction, have done an exemplary job with safety, striving to get as close as possible to zero losses. Small- and middle-market construction companies can do the same thing - and they must.
Second, it's having enough of the right kind of insurance, which becomes more affordable over time as you rack up an outstanding safety record year after year.
These two ideas alone could provide you with a measure of safety equal to a left tackle holding back Lawrence Taylor. It's a blind side you simply must patch up.
Robert Phelan is CEO of Construction Risk Advisors in Torrington, Conn.
Link to the article on Building & Construction Northeast's site
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Posted by Robert Phelan on Thu, Jan 14, 2010 @ 09:40 AM
The following article is taken form the web site of Connecticut-based law firm
Stratton Faxon who represented the plaintiff in the case described here. There are four points for contractors to pay attention to:
1) Safety has to be a cultural imperative for your company
2) You have to read all contracts and understand the liabilities imposed by them
3) Think twice about using temporary help. What looks inexpensive in the short run can be very expensive in the long run if you lose your immunity to be sued by an injured worker
4) Re-think your limits of liability. This is a precedent-setting case and an injury like this can happen to a contractor of any size. $10 Million is the new minimum limit.
November 2, 2009
BIG SETTLEMENT RAISES JOB SITE LIABILITY ISSUES
In the highest-ever construction injury settlement in Connecticut history, and one of the state's costliest personal injury cases, a North Canaan laborer has settled a federal negligence suit for $11.35 million.
The case of Benjamin Wohlfert v. Stop & Shop and Pyramid Contractors is bound to raise serious new questions about construction hiring practices and insurance. Contractors might now think twice about hiring tradesmen from temporary agencies without paying directly for their workers' compensation coverage. While not paying workers' comp premiums saves money at the outset, it leaves contractors more vulnerable to unpredictable tort liability down the line.
"We have seen a trend toward the hiring of temp workers because the contractors feel it is cheaper to do that than employ a union laborer," said plaintiff's attorney Joel Faxon of New Haven's Stratton & Faxon. "Historically, unions have had very strict training and safety practices. In the temporary worker market, there's no specific safety training requirement."
Benjamin Wohlfert, then 29, was working for Providence, R.I.-based Pyramid in March 2006 at the construction site of a North Canaan supermarket. Pyramid hadn't hired Wohlfert directly. Torrington-based Alternative Employment Inc. "leased" Wohlfert to Pyramid.
Wohlfert was with two other men -- carpenters Gerald Bates and Jean Kennedy -- both of whom were working for Pyramid in a similar arrangement with other temp agencies.
It happened to be St. Patrick's Day. "The boys are probably thirsty," said Faxon. "It doesn't take a genius to find that."
Perhaps that's what led them to do something dangerous. Before knocking off for the day, they had to retrieve from the roof of the project a metal-cutting tool, known as a plasma cutter. But the one ladder to the roof had already been removed by the roofers. So Bates, who was the de facto foreman, instructed Kennedy and Wohlfert to get into a three-sided plywood box used for picking up construction debris.
Bates then lifted the box with a type of forklift that was not designed to pick up people. When the lift was some 25 feet in the air, the box began to break apart. Kennedy jumped to the roof - and to safety. Wohlfert fell to the ground, severely injuring his spine, and became a paraplegic. He required spinal fusion surgery, two months of hospitalization, and was transferred to a Colorado rehabilitation facility for "several more months," according to federal court documents.
After returning to Connecticut, he suffered from infections and had to be hospitalized again. During the second hospital stay, he contracted the drug-resistant bacterial infection known as MRSA, and had to have a substantial portion of his hip removed.
Temp Pros, Cons
The use of construction workers from temp agencies has some advantages for general contractors. By paying the agency a premium over the worker's normal hourly wage, the contractor no longer has to handle the paperwork and expense of workers' compensation coverage, payroll or unemployment insurance. Union contracts, requirements and protections also don't come into play.
As one Pyramid supervisor testified in a deposition, a worker doesn't need to be fired or laid off. The temp agency is simply notified that he or she is "no longer needed," with a notation on his or her time card. This effortless termination process removes the threat of a suit for discriminatory firing.
But because Pyramid did not pay the workers' compensation insurance for Wohlfert, it did not get the benefit of the workers comp "bar" to a civil suit. In other words, Wohlfert was able to collect workers' comp payments without jeopardizing his ability to sue Pyramid, which wasn't his actual employer.
Wohlfert went on to sue Pyramid and Stop & Shop directly in federal court, and that was the case that recently settled for $11.35 million. At first he was represented by Trumbull lawyer Richard G. Kascak Jr., of Mihaly & Kascak, who referred the matter to Stratton & Faxon.
Most often, co-workers such as Wohlfert, Bates and Kennedy cannot sue each other for on-the-job injuries. But that was not the case here, because all were hired by temp agencies. Wohlfert sued Kennedy, TradeSource, Bates and Spec Personnel in Bridgeport Superior Court. That case is scheduled for trial in May 2010.
Pyramid was represented by James G. Geanuracos, of West Hartford's Malliet & Geanuracos. "We're under a confidentiality agreement to only disclose the name of the plaintiff and the settlement amount," Geanuracos said. "I can't comment further."
Pyramid also sued several third party co-defendants. They included carpenter Bates, an Orleans, Mass. resident; his Fairfield temp agency, Spec Personnel; carpenter Kennedy; and his Warwick, R.I., temp agency, TradeSource Inc.
After Pyramid brought in TradesSurce and Kennedy as co-defendants to share in any potential liability imposed, TradeSource countersued Pyramid. The personnel agency said that its employment contract had an indemnity clause purportedly requiring the general contractor to hold TradeSource harmless from any on-the-job liability. On Oct. 29, TradeSource and Pyramid settled and withdrew their federal court claims.
Unexpected Deep Pocket
Normally workers' compensation coverage limits the liability exposure of contractors and building project owners, like Pyramid and Stop & Shop. But the fact that separate employment agencies were making the payments to the three key workers prevented the contractor and owner from enjoying the protection and benefit of the workers' comp bar. In such a case, the injuries suffered by Wohlfert become liabilities in the less predictable realm of tort law, to be compensated from general liability coverage. It was no different than if a member of the general public was injured on the job site.
In this regard, this case is analogous to the momentous construction case of state case of Pelletier v. Sordoni-Skanska, in which a subcontractor's employee won a $23 million verdict against the general contractor. The defendant in that case, like the defendants in the Wohlert case, had the means to pay a huge judgment. But in the Pelletier case, Sordoni won a 2008 reversal at the state Supreme Court, and contractors breathed a sigh of relief.
In the current case, no new case law has been created, but the large settlement is a loud and clear warning of the potential risks when hiring temporary workers through an agency.
General contractor Pyramid, in its federal court actions, has advanced an untested legal theory. It noted that it paid a premium over the workers' normal salary to the three temp agencies. Pyramid contended that by doing so, it was in essence paying for their workers' comp insurance, and deserved to get the legal benefits of doing so.
Various defendants in the federal case had motions for summary judgment pending when the case largely settled, and U.S. District Judge Alfred V. Covello had not ruled on any of them. Now that the two main defendants have settled the federal action, there is no longer any need for Covello to rule on the outstanding summary judgment motions. It is therefore not likely that any court will now rule on the defendants' theory of "pass- through" workers' compensation immunity.
Covello, in a ruling on a motion to dismiss last year, signaled that he was unlikely to embrace that theory, said Faxon, because a Connecticut statute specifically states that the temp agencies are responsible for paying the workers' comp coverage. Another statute says the benefit or tort immunity flows to the employer paying the workers' comp premium, he added.
"The statute is very specific about who can claim workers' comp immunity from suit in a leasing arrangement," said Faxon, "and it's only the temp agency.