Posted by Dan Phelan on Mon, May 09, 2011 @ 02:57 PM
Pretty sunny here in Connecticut this afternoon. So sunny that you might need an umbrella. Do you know what else needs an umbrella? Your contractor insurance program! Just like an umbrella protects you, your hair, and your clothes from bad weather, your insurance program’s umbrella goes over several of your lines of coverage to protect your company’s checkbook. It’s common for construction companies to go their entire lifespan without ever needing their umbrella or excess limits to pay a claim. I also keep an umbrella in my car, but it too rarely gets used. But it’s still there if I ever need it.
(disclaimer: Travelers didn’t pay me to write this)
What is it?
An umbrella goes over a few lines of your insurance coverage to provide additional limits if you exhaust the policy limits of the underlying policy. In most instances, the umbrella provides additional limits to your Commercial General Liability, Business Auto, and the Employer’s Liability portion of your workers’ comp policy. Say that you have a 2 million dollar general aggregate on your CGL policy. You haven’t had any claims yet this year, so your limits are still 100% intact. Let’s say you have a massive claim that has insured costs of 2.4 million dollars. Your CGL policy will use all of its 2 million dollars worth of limits, and then your umbrella will pick up the additional 400K. If you didn’t have the umbrella, you could be getting your company’s checkbook out to cover the additional 400K. If you’ve got an extra 400K lying around, more power to you, but for 99% of contractors, coming up with a few thousand dollars for a few million dollars worth of umbrella coverage often makes a lot more sense. One caveat to how the umbrella responds, is that it normally has a Self-Insured Retention or deductible. Something in the ballpark of 5-10K is standard. 10K is nothing to laugh at, but it probably won’t bankrupt your company like a bill for 400K could.
Why should my construction company should carry it?
For our commercial construction clients, it is not that rare their upstream parties to require $3,000,000-5,000,000 limit worth of general liability limits. Very few Commercial General Liability policies will offer limits higher than $2,000,000 so to comply with their contracts, most of our clients buy an umbrella to split the difference. We advise that you buy an umbrella that will satisfy the majority of your contractual obligations. If most of the contracts you sign require a $5,000,000 limit, buy your regular CGL and a $3 MM umbrella. If most of the contracts you sign require a $10MM umbrella, either the upstream party is making you have the same limits as them even though they’re 20x your size, or you’re a huge contractor working on huge, high-profile jobs. The other reason for purchasing umbrella coverage is that it’s relatively inexpensive for the amount of coverage dollars it affords. Once you buy the first million, the subsequent millions go down in price substantially. Again, spend a few grand up front, and save your checkbook for payroll and new equipment instead of insurance claims.
Types of Claims:
The types of claims that trigger umbrellas are usually the same claims that trigger news stories, trips to the hospital, and immediate OSHA visits. I don’t mean that in a joking way, but if your company is responsible for a claim that costs five million dollars, people are going to know about it and odds are good that significant property damage has occurred. When we’re talking to clients about their umbrella, we often bring up the make believe scenario of “imagine what the claim would cost if one of your dump trucks crashes into a bus full of nuns, orphans, and their puppies.”
Loss Control Suggestions:
Any loss prevention strategies that work for CGL and Business Auto also apply to your umbrella. The umbrella doesn't cover your property because the property is insured to a specific value and maximum claim costs are predicted and insured for. It also doesn't respond to workers' comp injuries because workers' comp injuries don't have limits. The checks keep coming until the injured worker is back at 100% or compensated for any permanent disability. We hope you always buy an umbrella but never ever, ever, ever have to use it.
About the author:
Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues. If you want to connect on twitter, he's at @fixyourrisk and here on Facebook
Posted by Dan Phelan on Mon, May 09, 2011 @ 08:33 AM
Some of our clients needed some insurance help that unfortunately took precedence at the end of last week over blog posts. We’ll be cranking them out fast and furious until Friday, and will get through all 13 that were promised. Today we’re going to be digging into Workers’ Compensation.
What is it?
A number of years ago when I was in insurance school, our teacher taught us a rhyme to help us remember what workers’ comp is: Workers comp is meant to be the sole and only remedy for work related injury.
Workers’ comp has been available in the United States since 1911 as a way to prevent employees from suing their employers for at work injuries. Prior to workers’ comp, if the employee had any contributory negligence in their injury, regardless of whether it was due to faulty machinery or a dangerous location, the injury was then their problem. Industrial and construction accidents were accepted as a fact of life, and workers’ comp was designed as no-fault insurance to pay for any at work injuries with the acceptance that the injured party could not sue their employer after receiving medical and wage benefits. More history on workers’ comp systems around the world is available HERE.
Why should my construction company carry it?
Unless one of these bullet points applies to your company, you are legally required (at least in Connecticut) to carry this coverage.
In Connecticut, here are the types of employers and employees that aren't legally required to carry workers' comp:
- Domestic employees working less than 26 hours weekly – or officers of fraternal organizations paid less than $100 per year.
- A corporate officer is automatically included and must carry WC unless they elect to exclude themselves.
- Sole Proprietors and partners are automatically excluded , but may elect to include themselves.
- Single Member LLC are automatically excluded, but may elect to include themselves.
- Multi Member LLC members are like Corporate officers – automatically included but can exclude.
If you’re a contractor with a wife and kids, here are some more reasons to buy it http://www.constructionriskadvisors.com/construction-risk-blog/bid/60425/Every-Contractor-With-a-Family-Should-Buy-Workers-Compensation-Insurance
Types of Claims:
Any injury sustained by an employee in the course of performing their job is considered a workers’ comp claim. Whether it happens in the office, in the field, in the car, or at your desk, workers’ comp is your first dollar source for getting compensated for medical treatment and lost wages.
Loss Control Suggestions:
Make safety your construction company’s #1 goal.
Provide safety training and personal protective equipment to each and every field employee.
Post-offer, pre-hire drug testing. People that aren’t drunk or on drugs, statistically don’t injure themselves at work as much as people that are.
Safety committees. Make one. Meet quarterly at the very least.
Toolbox talks. No matter how seasoned the employee, people can forget and become complacent. Keep safety top of mind at all times.
One last thing to think about. Your experience modification factor drives your comp premium and your ability to bid jobs with certain general contractors and owners. Keep it low, and keep your company competitive.
If you want to read some more on workers' comp, here are the other 20 or so blog posts that we have written about it
About the author:
Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues. If you want to connect on twitter, he's at @fixyourrisk and here on Facebook
And because everybody enjoys funny safety pictures...
Posted by Dan Phelan on Thu, May 05, 2011 @ 09:39 AM
Day 3 of “Back to the Basics” is going to cover Contractor Commercial Property coverage. While there are several lines of coverage that cover various types of property and equipment, today’s post will specifically cover your buildings that you operate out of and store your machinery and equipment in. Later in our 13 part series, we’ll be addressing contractors equipment, property in transit, inland marine exposures, and builders risk.
What is it?
Contractor commercial property insurance is designed to cover damage to your existing buildings and the property inside and within 100 feet of these buildings. This policy covers claims for losses or damages in connection with the physical aspects of your facilities. And this coverage will only pay on losses for direct physical loss or damage from a covered cause to covered property that is located at the premises covered in your policy. Builders risk will be discussed next week to address property that is still under contruction.
Why should my construction company carry it?
We all show up to our offices every morning with the expectation that the office and everything inside of it will be just like we left it the night before. However, pesky things like fires, wind, falling trees, lightning, hail, smoke damage, vandalism, leaky sprinklers, and collapse(from specified causes) can sometimes disrupt this. And that’s where property insurance comes in. Several of the perils that property insurance covers are due to mother nature, and she has been consistently known to thwart even the most comprehensive loss prevention strategies. There are things that can happen to your building which most property policies will not cover. Such as wear and tear, mechanical breakdown, boiler explosion, FLOOD, sewer backup, snow/water damage to property outside, theft of building materials, off premises utility service interruption, and others depending on who your company has as an insurance carrier. Some of these exclusions can be added to a policy by endorsement or another insurance product. Give your agent or broker a call to discuss what your options are.
Types of Claims:
Each policy is different. And each policy will cover and exclude different perils (causes of loss). Property coverage has many nuances and options depending on where you are located, so please review your own policy, covered perils and exclusions with your agent. Please note also, that property and contents coverage usually has low limits on currency, software, intellectual property, and DOES NOT COVER EMPLOYEE THEFT OR DISHONESTY. Other insurance products are available to cover some of these risks, but do not assume that your property policy fully covers every piece of property under your roof.
Loss Control Suggestions:
Sprinklers are great for stopping fires from spreading and to get a discount on your property insurance. Security systems and exterior lighting are great for thwarting thefts and vandals and also help with insurance discounts. Don’t allow employees to smoke inside or burn candles, incense, etc. Use caution during the colder months when utilizing space heaters. If snow is building up on your roof like it was in Connecticut this year, clean it off periodically. If you have combustible materials in your shop or garage, make sure they are disposed of and stored properly. Common sense goes a long way in preventing many property losses. If you wouldn’t do it at home, don’t do it at work. A parting tip for you is to read the property section of your insurance policy. As far as insurance policies go, the perils and exclusions section of most commercial property policies are the most straight forward and easy to read. Most are clear on what is and what isn't covered. Questions on whether you have coverage for a certain peril? Call your agent. We're here to help, and preventing uncovered claims is a lot more fun than telling our clients they are going to have to pay for a new building with their own checkbook rather than the insurance company's.
Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues. If you want to connect on twitter, he's at @fixyourrisk and here on Facebook
It's great that Osama bin Laden is dead, but the folks in the South still need a lot of help! http://www.constructionriskadvisors.com/construction-risk-blog/bid/63278/Helping-Out-the-Tornado-Victims-in-Alabama-Updated-Contact-Info
Posted by Dan Phelan on Wed, May 04, 2011 @ 11:05 AM
Day 2 of “Back to the Basics” is going to cover Business Automobile coverage. Some of this could be old hat for the readers that have a large fleet and have been buying this coverage forever, but for our younger contractors and those acquiring their first or second company vehicle might glean some knowledge.
What is it?
Much like the car insurance you purchase, this coverage covers you for bodily injury, property damage, theft, and other incidental things that the combination of comprehensive and collision covers. It also indemnifies(makes you whole again) if you are hit or injured by an uninsured driver.
Collision covers losses caused by an accidental collision or overturn with another object or vehicle.
Comprehensive covers everything that happens to a vehicle that isn’t a collision or overturn. Theft of contents in the car or a broken windshield from a rock would be examples of what comprehensive covers.
Why should my construction company carry it?
I worry that many contractors don’t take business auto coverage serious enough. If you have any heavy vehicles on the road, there is potential to exhaust your limits and finally need to use your umbrella in auto coverage more than other coverage lines (with exceptions.) If you’re a Connecticut contractor reading this, you’re well aware of what happened when the brakes failed on a poorly maintained dump truck and it collided with rush hour traffic at the bottom of Avon Mountain; killing 4 people, and injuring another 11. Accidents of this severity are rare, but still too common.
Types of Claims:
Collisions. Car on Car. Car into building. Car flips into ditch.
Comprehensive . Car is stolen. Car is broken into. Windshield is smashed.
Loss Control Suggestions:
Defensive Driving Training
Annual MVRs for all personnel operating company vehicles.
Drug testing. Pre-hire and ongoing.
NO CELL PHONE USE IN COMPANY VEHICLES (especially in states where it is illegal)
Schedule all vehicles under Symbol 1. This will cover every vehicle for highway/roadway use that your company has, and will automatically add any vehicle that you purchase throughout the course of the insurance policy term. Otherwise, if you purchase a vehicle and neglect to update your agent or broker, the vehicle could potentially be operating without insurance.
One last thing…there is a bit of ambiguity on some vehicles as to whether they should be covered by a Commercial General Liability policy or a Business Auto Policy. Some pieces of equipment can be considered automobiles one minute and mobile equipment the next. The answer to how to cover this exposure is “it depends”. If you’re driving a cherry picker to the job site, it’s an automobile. But as soon as it is parked and is being used to service a power line, it becomes mobile equipment. We find that insuring it as both a vehicle and as well as scheduling it on your mobile equipment helps to cover all your bases and claim scenarios.
Check back this afternoon for another exciting blog post about Commercial Property Coverage!
About the Author:
Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues. If you want to connect on twitter, he's at @fixyourrisk and here on Facebook
Posted by Dan Phelan on Tue, May 03, 2011 @ 10:12 AM
This is part one of a THIRTEEN part series called “Back to the Basics”. The 13th post will be on Friday the 13th, so we figured what the hell. Our goal is to take a step back from the complexities of contracts and endorsements and provide a simple refresher on the lines of insurance coverage that most commercial contractors need. This series will outline what each line covers, why you need/should carry it, some claim scenarios that you could face, and some suggestions on how to prevent losses in each coverage part.
If you have any follow-up questions, please utilize our Ask A Risk Advisor tool.
What is it?
We’re going to start with the line of coverage that every legitimate, by the book contractor carries; Commercial General Liability. Commercial general liability (referred to as CGL). The CGL at its most basic level is in place to protect the insured (you) from lawsuits that stem from bodily injury or property damage to a third party. Another way to think about it CGL is that it’s lawsuit insurance. If someone claims that they were injured by your company and sues you, the CGL will pay defense costs, awards, and settlements to the injured party if they were injured by your premises, operations, completed operations, or 1099s that were working on your behalf. (some of this varies by state, so please contact your agent or broker for specific questions). Normally, the CGL also has a contractual liability insurance feature to it which means that it will also offer protection to other contractors when they are held harmless and/or indemnified in a written contract.
Why should my construction company carry it?
If you want to start bidding commercial jobs, you will need it.
If you’re signing contracts, you are mandated to carry this 99.9% of the time.
If you are a residential contractor that wants to go legit, you will need it.
Types of Claims:
Slip/Fall. A client, vendor, salesperson, etc., comes to your office to drop something off, pick something up, etc., and on their way out, they slip on some ice because you didn’t shovel the walkway. They sue you for negligence because you didn’t clean the walkway. Your CGL pays for defense and settlement.
Completed Operations. In a building you helped build, your portion of the work was not completed correctly and the building collapsed. Since the faulty work was your fault, your CGL will be paying the bill. More info on Completed ops here
Loss Control Suggestions:
Maintain public areas.
Shovel snow and ice, fill potholes, warn of wet floors, rope off holes.
Check back tomorrow for another exciting blog post about Commercial Business Automobile Coverage!
About the Author:
Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues. If you want to connect on twitter, he's at @fixyourrisk and here on Facebook