HOW CONTRACTOR NETWORKS HELP TO REDUCE REPAIR COSTS, IMPROVE TIMELINESS

September 22, 2025

By Ed Reis & Sarah Morris

The commercial property insurance market is navigating a constantly evolving landscape in 2025, in which rising costs, labor shortages, and the ever-present threat of business interruption are reshaping how claims are managed.

In response, many insurers and risk managers are moving away from ad hoc contractor relationships and toward managed repair models that emphasize trusted networks, transparent pricing, and proactive project oversight.

Commercial claims are an intricate puzzle, and the pressures of today’s market only magnify their complexity.

According to Verisk, U.S. commercial reconstruction costs climbed 5.7% year over year through Q2 2025, driven by material spikes–with concrete alone rising 9.3%–and compounded by persistent labor shortages, with nearly 900,000 skilled trade jobs still unfilled. Turner Construction’s cost index shows a similar 3.8% increase in non-residential building expenses, underscoring how inflationary pressures continue to ripple through the sector.

Against this backdrop, insurers and policyholders alike face a critical question: How can they adapt now to avoid being overwhelmed by the compounding costs and delays that threaten every claim?

Commercial property claims present a vastly different set of challenges than residential ones. While homeowners insurance claims often involve standardized materials and straightforward repairs, commercial losses need to consider specialized systems, strict regulatory requirements, and the very real risk of business interruption. A hospital may need temporary power solutions and phased repairs to keep critical areas operational; a restaurant may require specialized equipment replacement; a hotel faces immense financial strain if rooms are unavailable for extended periods; a manufacturing facility may be unable to fulfill contracts until production lines are restored.

And this doesn’t even include how large-scale events continue to test the resilience of claims operations and cost models. For an idea, Lloyd’s estimates it incurred $2.3 billion in losses from the January 2025 wildfires in Los Angeles alone, highlighting how quickly risks can escalate.

These challenges are compounded by the fact that commercial facilities typically already have pre-existing ties with local contractors, often built through routine maintenance or renovations. These relationships can become liabilities in both the renovations and claims process as local contractors may lack the labor capacity, supply chain access, or restoration expertise to handle large-scale damage. This can result in delays, higher costs, and substandard workmanship that requires rework and extends the claims process.

However, commercial property owners, insurers, and claims professionals do have routes to faster repairs and expedited claims processes. Step one is to have a broader, and thoroughly vetted, contractor network. This allows all parties involved to leverage a wide pool of pre-qualified contractors, ensuring capacity is available when it’s needed most. This broader pool would also allow relevant parties to identify contractors that are the best fit for the job, rather than defaulting to whoever is closest.

Step two is approaching the job with a smarter pricing model. Traditional unit pricing often fails to scale for large commercial losses, leading to significant overpayment. Meanwhile, time-and-material models offer a more accurate reflection of actual labor and material costs while simultaneously capturing economies of scale. For example, Verisk data shows that smarter review models can reduce inflated bills by 20% to 27% on commercial claims, an amount of savings that can make a measurable difference across a portfolio of losses.

Next comes proactive project management and pre-loss agreements. It’s pertinent to remember that managing a commercial repair effectively requires both strong project oversight during the claim and smart planning before a loss ever occurs. Having established pre-loss agreements lays down clear expectations from the very beginning for pricing, emergency protocols, and response times so when a catastrophe happens, everyone is aligned and mobilization is immediate.

Then once the work begins, proactive project management ensures contractors are held accountable to those agreements. Dedicated repair specialists or virtual project managers can then monitor timelines, coordinate resources strategically, and keep all stakeholders informed as the projects progress.

In tandem with each other, these ideas and practices will provide both insurers and policyholders with a clearer path forward. As U.S. commercial insurance rates increased 2.8% in the second quarter, according to Novatae Risk Group’s quarterly Market Barometer, organizations can take control of outcomes by adopting solutions that emphasize consistency, transparency, and speed, rather than being overwhelmed by the mounting costs and delays that too often define commercial property claims.

The reality is that the challenges of rising costs, labor shortages, and business interruption aren’t going anywhere any time soon. However, that doesn’t mean these trends have to dictate the trajectory of every claims process. For those who embrace structured repair models and invest in proactive planning as the commercial property insurance space continues to evolve, they will be the ones better positioned to contain expenses, reduce downtime, and deliver better results for clients.

The message is simple: Prepare now. Build the right relationships, put the right oversight in place, and invest where you can make the loss response as seamless as possible and everybody wins.

CONTRACTORS INSURANCE ALERT: CONSTRUCTION DEFECT LAWSUITS RISING

March 20, 2025

By Insurance Journal

A new report identifying commercial litigation waves likely to pick up steam in 2025 highlights one particular theme that could further lengthen the tail of general liability claims for insurers writing policies for contractors and builders.

The 2025 “Commercial Litigation Outlook,“ published by the law firm Seyfarth Shaw provides an annual look at the legal landscape in multiple areas, including Gen AI, privacy, healthcare, cannabis, intellectual property, securities, consumer protection and class actions, real estate, and antitrust, among others.

In the real estate section of the report, the firm notes the disputes over defective construction are likely to increase in 2025.

While the report describes construction defect litigation as “evergreen,” several factors could spur more of it, including the focus of President Trump’s administration on immigration. Construction defect litigation rises in years following shortages of skilled labor—and that’s been in short supply in the construction industry for most of the last decade, the report states, also noting that 30-40% of all construction workers in the U .S. are immigrants, “with an undetermined number who are undocumented.” (Editor’s Note: The National Association of Home Builders offers similar figures on its website.)

The construction labor shortage has hovered around half-a-million workers since 2023, the report says.

The Seyfarth Shaw lawyers also pointed to the high demand for rebuilding in areas that have been impacted by recent hurricanes and wildfires as another factor that could fuel future construction defect litigation. In California, the urgent need to replace housing has has already resulted in loosening or elimination of certain requirements for rebuilding, which in turn may increase the risk of defective construction.

Noting that defect claims tend to have a one to three-year lag time, claims could show up in 2025 and beyond.

Throughout much of the report, authors refer to actions by the current administration that may be changing the legal landscape in various areas—for example, shifting some types of actions to state courts.

“Federal ESG litigation has, for the moment, had its day,” the firm said in a media statement. “SEC greenhouse emissions rules announced just a year ago will probably gather dust, meaning individual states are set to become the favored fora for ESG-related allegations, such as corporate greenwashing.”

The report writers also expect consumer fraud class actions based on testing for alleged harmful substances like PFAS and heavy metals, again highlighting state-specific regulations that could spur litigation.

“Businesses selling consumer products in California should be aware of the state’s specific regulation of PFAS-containing products, including new requirements effective in 2025. Current laws already prohibit or require labeling and disclosures for certain PFAS-containing items, such as children’s products and cookware. Starting in 2025, these regulations will expand to cover more products, including textiles, clothing, and cosmetics,” the report says. “Given growing concerns over PFAS exposures, businesses will need to ensure that their products fully comply with all state and federal PFAS regulations, including upcoming California requirements.”

Whether at the federal or state level, consumer fraud lawsuits around PFAS and other substances allege two main theories of deception—that product claims of being “pure” and “organic” were false based on the presence of the substance, or simply that defendants failed to disclose the presence of the substance in its product.

Other commercial litigation trends highlighted in the Seyfarth Shaw report are two that could directly impact insurers as defendants—privacy lawsuits and Generative AI challenges.

“With the proliferation of Internet of Things (IoT) devices, telematics, and advanced tracking technologies, plaintiffs’ attorneys are leveraging both new and longstanding privacy statutes to address emerging privacy risks,” the report says, also noting heightened regulatory scrutiny that could extend to insurers relying on IoT and telematics devices.

“In 2025, privacy litigation is expected to grow in volume and scope, with corporations facing unprecedented challenges in collecting, managing, and safeguarding sensitive data,” the report says.

With respect to Generative AI, the Seyfarth Shaw focuses on the use of AI in bringing and defending lawsuits—”in everything from discovery and disclosure to the rising potential for immaculately forged evidence.”

Here, the report notes, however, that the Trump administration has “removed guardrails” in place under the former president, Joe Biden, and “embraced AI as central to the U.S, economy and national security.”

Of particular interest to D&O insurers, the report notes that business bankruptcies jumped in 2024. With “record high consumer debt, lingering inflation, labor shortages, and high interest rates, that bankruptcy number has nowhere to go but up,” the report authors said.

August 26, 2024

By Matt Barber

Matt Barber of Trucordia Construction offers a guide to two types of commercial construction insurance, and when each makes the most sense.

In the world of construction, navigating the diverse landscape of insurance programs can feel as complex as coordinating a large-scale project itself. With many policies, regulations, and terms to decipher, making the right choice for your construction project is crucial. It can be the difference between a well-protected, smoothly run operation and a storm of liabilities, unexpected costs and time delays.

Owner Controlled Insurance Programs (OCIP) and Contractor Controlled Insurance Programs (CCIP) are both insurance programs that offer uniform, consolidated coverage for various risks involved in large construction projects. However, their structures differ in critical ways, influencing the management of risks, costs and responsibilities. While the choice between OCIP and CCIP often hinges on the specific project’s details and the stakeholders’ preferences, knowing the fundamentals of each program is an invaluable asset.

Understanding Insurance in Construction

Insurance serves as a defense against uncertainties, protecting your investment, workers and the public. However, the question isn’t just about having insurance; it’s about having the right kind of insurance.

The Role and Importance of Insurance in Construction

Insurance in construction serves multiple critical roles:

• Risk management: Construction projects inherently involve various risks—from worker injuries to property damage, and from delays due to unforeseen circumstances to lawsuits. Insurance helps manage these risks by providing financial coverage, ensuring project continuity.

• Legal compliance: Many jurisdictions require certain types of insurance as a legal prerequisite for construction work. Compliance with these regulations is not just necessary for lawful operation, but it also contributes to industry standards and safety norms.

• Financial stability: Insurance policies can save construction projects from potentially crippling financial losses. They offer a safety net that can keep operations afloat, even when unexpected incidents occur.

• Confidence building: Having robust insurance coverage fosters trust among project owners, contractors, investors and stakeholders. It signals a proactive approach to risk management, adding a layer of credibility and security to the project.

The Simplified Guide to Choosing the Right Construction Insurance

Choosing between an Owner-Controlled Insurance Program (OCIP) and a Contractor-Controlled Insurance Program (CCIP) is not straightforward. Both insurance types have transformed risk management in construction, but come with their unique sets of advantages and drawbacks. This guide will offer a concise overview to help you make an informed decision for your project.

OCIP and CCIP: A Side-by-Side Comparison

OCIP (Owner-Controlled Insurance Program)

• Controlled By: Project Owner

• Pros:

  • Comprehensive, uniform coverage

  • Potential cost savings

  • Greater control for the owner

• Cons:

  • Administrative burden

  • Risk of cost overruns

• Ideal For: Large, complex projects where the owner wants more control

CCIP (Contractor-Controlled Insurance Program)

• Controlled By: Contractor

• Pros:

  • Simplifies insurance management for the owner

  • Potential cost efficiencies

  • Enables contractors to manage risks

• Cons:

  • Less control for the owner

  • May lead to higher bid prices

• Ideal For: Projects where the contractor has a strong safety and risk management track record

Factors to Consider for Your Choice

• Project Size: OCIPs often benefit large-scale projects due to potential cost savings. For smaller projects, the administrative load might outweigh the benefits.

• Project Type: Environmental risks? OCIPs offer more comprehensive coverage. Contractor skilled in managing CCIPs? Go for CCIP for its convenience.

• Risk Profile: Understand your project’s risks. If the owner is better at risk management, OCIP might be suitable; otherwise, consider CCIP.

• Administrative Capabilities: Have the resources to manage the chosen insurance efficiently.

• Control Preference: Want more control? Choose OCIP. Comfortable with less control? Go for CCIP.

Balancing Stakeholder Perspectives

Both the owner’s and contractor’s perspectives matter. The owner may prefer the OCIP’s control and coverage, while the contractor may favor a CCIP that lets them manage risks effectively. It’s crucial to consider all viewpoints to arrive at a balanced choice.

Constructing Confidence: Final Thoughts

Understanding the intricacies of OCIP and CCIP can make all the difference. Both insurance types offer unique advantages, from comprehensive coverage and control with OCIPs, to simplified management and cost efficiencies with CCIPs. Yet, they also have potential downsides that you need to carefully consider.

The decision between OCIP and CCIP should stem from your project’s characteristics, including its size, type and risk profile, alongside the available administrative resources and your preference for control. It’s also crucial to balance both the owner’s and contractor’s perspectives to ensure a successful project outcome.

At Trucordia Construction, our team of industry leaders is ready to help guide you, ensuring that you find the best fit for your project’s needs. Don’t hesitate to reach out to us. Let’s construct confidence together. Visit trucordia.com/pcf-construction-insurance to learn more.

June 15, 2015

By Dwight Kealy

To get on a job, contractors often have to show proof of insurance and name the individuals hiring them as additional insureds on the contractors’ commercial general liability (CGL) policies. By doing this, the individuals hiring the contractors hope that the additional insured endorsement will defend them in case they get sued for something relating to the contractor’s work. Whether or not this is true depends on the additional insured endorsement.

The most common additional insured endorsement for contractors is the CG 20 10.

The CG 20 10 changed significantly after the November 1985 edition. In the November 1985 edition – called the CG 20 10 11 85 – the entity being added as an additional insured was only an insured “with respect to liability arising out of ‘your work.'” The “your work” refers to the work of the named insured – that is, the contractor. “Your work” includes the contractor’s ongoing operations and completed operations.

If someone is told that they just need to be named as an additional insured to protect themselves in a construction project, they may need more information.

After 1985, the entity being added as an additional insured using the CG 20 10 was only an insured “with respect to liability … caused … by your ongoing operations.” “Ongoing operations” does not include completed operations. Therefore, the change from “your work” in the CG 20 10 11 85 to “ongoing operations” in later versions effectively removed completed operations coverage for the additional insured.

Sample Ongoing Operations Occurrence

To understand the effect of this change, imagine a property owner hiring a contractor to build a brick wall. While building the wall, the contractor drops a load of bricks on top of a line of cars. This causes property damage arising out of the contractor’s ongoing operations. The car owners sue the property owner.

If the property owner was named as an additional insured on the contractor’s CGL policy using CG 20 10 11 85, the property owner should be covered. This is because the CG 20 10 11 85 provides coverage for liability arising out of “your [the named insured/contractor’s] work,” and “your work” includes both the named insured’s ongoing and completed operations. If the property owner was named as an additional insured using the CG 20 10 after 1985, the property owner would also be covered as an additional insured on the contractor’s policy because the CG 20 10 after 1985 provides coverage for ongoing operations, and this was an ongoing operations exposure.

Sample Completed Operations Occurrence

Two months after the contractor finishes the wall, the wall falls on a line of cars. This is property damage out of the contractor’s completed operations. Once again, the car owners sue the property owner.

If the property owner was named as an additional insured using the CG 20 10 11 85, the property owner would have coverage for the completed operations exposure as “your work.” If the property owner was named as an additional insured using the CG 20 10 with an edition date after 1985, the property owner would not have coverage for the completed operations exposure under the contractor’s CGL policy. The CG 20 10 after 1985 does not provide coverage to the additional insured for completed operations. It only provides coverage for ongoing operations, and this was a completed operations exposure.

Additional Insured Endorsement CG 20 37: Completed Operations

To address the CG 20 10’s gap in completed operations coverage after 1985, the Insurance Service Office (ISO) created CG 20 37 Additional Insured – Owners, Lessees or Contractors – Completed Operations. As the name implies, this endorsement provides coverage to the additional insured for completed operations. It does not provide coverage for ongoing operations.

Using our wall example, if the contractor named the property owner as an additional insured using CG 20 37 (Completed Operations), there would be no coverage for the sample ongoing operations occurrence. There would only be coverage for completed operations exposures. The CG 20 37 is not necessary if a business is able to get the CG 20 10 11 85 because the CG 20 10 11 85 provides coverage for “your work,” and “your work” includes both the ongoing operations of the current CG 20 10 and the completed operations of the current CG 20 37.

Blanket Additional Insured Endorsements

“Blanket” – also called “automatic” – additional insured endorsements are endorsements that the insurance company provides to automatically add as additional insureds, those individuals or entities 1) for whom the named insured is performing operations, and 2) with whom the named insured has agreed in writing to name as an additional insured. A positive feature of the blanket endorsement is insurance agencies can often send out these endorsements without requesting permission from the insurance carriers. This often makes the blanket endorsements quicker to process. A negative feature is the written contract requirement.

Blanket Additional Insured Endorsement CG 20 33 Additional Insured–Owners, Lessees or Contractors–Automatic Status When Required in Construction Agreement with You

The blanket additional insured that most resembles the CG 20 10 is the CG 20 33. A significant difference between the CG 20 10 and CG 20 33, is CG 20 33’s requirement that there must be a written contract or agreement between the additional insured and the named insured. As a way to explain the significance of the written contract requirement, imagine a custom home building project. For this project there is an owner, a general contractor and 15 subcontractors.

General Contractor signs a written contract to build a house for owner. The contract requires the general contractor to have a CGL policy that names the owner as an additional insured. The contract also requires all subcontractors to have a CGL policy that names the owner as an additional insured.

The general contractor hires 15 subcontractors to help with the project. The general contractor and each subcontractor sign a written contract. The contract requires each subcontractor to name general contractor and owner as additional insureds on the subcontractors’ CGL policies. Each subcontractor sends the owner an endorsement showing the owner is an additional insureds on the subcontractors’ CGL policies using blanket CG 20 33.

The problem with this scenario is that there is no written contract between the owner and the subcontractors. The CG 20 33 requires a written contract between the named insured and the additional insured.

Imagine that there is a massive claim at the job site and the owner is sued. The claim involves the work of the 15 subcontractors. The owner thinks he or she is an additional insured with direct rights to the 15 subcontractor CGL policies. What the owner really has are 15 pieces of paper from 15 subcontractors saying owner is named as an additional insured using CG 20 33. The CG 20 33 required a written contract between the additional insured and the named insured. There was no written contract between the owner and subcontractors.

One way to avoid the owner’s situation would have been for the owner to be named as an additional insured using CG 20 10. The CG 20 10 does not require a written contract between the named insured and additional insured. A second solution would have been for the owner to enter a written contract with each subcontractor. A third option would have been for the owner to be named on the subcontractors’ policies using CG 20 38.

Blanket Additional Insured Endorsement CG 20 38 Additional Insured–Owners, Lessees or Contractors–AUTOMATIC STATUS FOR OTHER PARTIES WHEN REQUIRED IN WRITTEN CONSTRUCTION AGREEMENT

The primary distinction between the CG 20 33 and the CG 20 38 is that the CG 20 38 provides coverage for upstream parties. Upstream parties are the entities or individuals above the level where an entity is contracting. Whereas the CG 20 33 only provides additional insured status where there is a direct written contract, the CG 20 38 extends coverage to “any other person or organization you are required to add as an additional insured under the contract or agreement.”

Using our custom home example, the subcontractors signed a contract with the general contractor saying they would name the general contractor and owner as additional insureds, but the subcontractors did not sign a contract with the owner. There was no coverage for the owner under the subcontractors’ policies when they used the CG 20 33 because the CG 20 33 requires a written contract between the named insured and the additional insured. If the subcontractors used the CG 20 38, the owner would have additional insured status because the owner is a “person or organization [the named insured is] required” to add as an additional insured under the contract with the general contractor.

If someone is told that they just need to be named as an additional insured to protect themselves in a construction project, they may need more information. Does the person want to be an additional insured for ongoing or completed operations? Do they have a written contract agreement? Do they want coverage from subcontractors? A careful review of additional insured endorsements is essential to protect those looking for coverage as additional insureds.

October 30, 2023

By John Holpuch

Property insurance offers protection for a building once it’s operational. A builder’s risk policy insures against physical loss or damage to a building during construction.

A builder’s risk policy covers both hard and soft losses for contractors. Hard costs include the physical property itself and building materials. Soft costs may include construction delay fees, interest on construction loans, additional architecture/engineering fees due to the delay, project management expenses and loss of income delays.

Fire

Buildings under construction have a higher fire potential due to unprotected structural components, floor and wall openings, fire loading from construction materials and debris, and lack of fire suppression systems.

Control Measures

• Hot Work – Use of torches for welding, soldering, and roofing that may ignite combustible materials. Utilize hot work control measures such as isolating combustible materials from torches or welding activity.

• Temporary Heating – Ensure equipment is listed for the intended use and set up and operated per manufacturer safety standards to reduce potential fire risk.

• Practice good housekeeping – Clear debris and trash from the work area to reduce the chance those materials will ignite and be aware of overall fire loading within the structure.

• No Smoking signage should be posted and enforced in construction areas. Smoking should only be limited to designated safe outdoor areas of the site.

• Maintain operable fire extinguishing equipment, as quick responses can minimize fire damage.

Water Damage

Water damage may occur from weather-related events, leaking pipes or service connections. If not detected early, damage may impact multiple floors and areas causing significant damage to interior finishes.

Control Measures

• Conduct air pressure testing for water supply lines and address any leaks before water pressurization.

• Limit active water sources during construction, preferably to the lowermost floor of multi-story structures.

• Perform daily inspections of the site to check for water leaks. Especially important at the end of each workday so any problems can be corrected before leaving for the night/weekend.

• Consider shutting the main water service valve at the end of each workday and installing water detection alarms in highly susceptible areas of the project.

Theft and Vandalism

More than 11,000 thefts occurred on construction sites in 2021.[1] Copper piping, HVAC equipment, and steel waiting to be installed on a construction site are common targets for criminals. Increasingly, equipment and materials already installed in a building may also be a target for theft.

Control Measures

• Install fencing, exterior lighting, surveillance cameras, and motion detectors with local alarms and notifications sent to site managers.

• Secure the building as early as possible and lock openings at night to dissuade thieves and vandals.

• Consider security guards to add another level of protection to high-risk property on nights and weekends.

Wind

During construction, the building exterior is particularly susceptible to wind loss. Damage to partially installed roofing and siding is an increased risk and unsecured lightweight building materials may also suffer damage.

Control Measures

• Keep a constant eye on weather forecasts, especially those with the potential for high wind speeds.

• In anticipation of potentially damaging winds, take measures to more securely fasten roofing and siding materials already in place.

• Shelter onsite or offsite building materials, fixtures, and systems waiting to be installed.

Collapse

The potential risk for collapse is present in nearly every construction project. New construction framing (steel or wood), poured concrete building systems, masonry wall construction or concrete tilt panel wall construction may all be subject to collapse without engineered controls.

Control Measures

• Pre-plan and carefully adhere to structural engineering specifications regarding temporary bracing. This applies to framing systems, poured concrete systems, and wall construction systems.

• Get engineering approval to remove the temporary bracing and concrete forms.

• The use of cranes on the job site should be by certified operators and accompanied by lift plans and weather monitoring efforts.

• If higher than typical winds are forecast, pre-plan with a structure engineer to see if temporary bracing needs to be modified or strengthened.

October 2, 2023

By Rachele Holden

Construction is like insurance. The basics don’t change much, but when there are new developments, they can alter the trajectory of the industry.

Building innovations — namely 3D construction, solar panels and cross-laminated timber — are changing builders risk insurance exposures, leaving a gap in knowledge for agents. As these construction techniques grow in consumer interest, it’s important for agents to know how course of construction policies will respond to their various risks, which includes reading the carrier’s coverage form to understand the scope of eligibility.

3D Construction

In 2018, the U.S. Army “printed” out of concrete a barracks hut suitable for housing in just 22 hours. That’s less than one day to build their structure!

The global 3D printing construction market reached $1.4 billion in 2021 and is estimated to reach $751 billion by 2031, according to Allied Market Research — a compound annual growth rate of 87%. Rather than pouring concrete into traditional molds, 3D concrete printing lays materials in layers through a computerized process. This process creates walls, floors, roofs and other components, and promises greater speed of completion and lower costs than typical construction methods.

From an insurance underwriting perspective, because 3D is new it lacks the government regulations and industry standards that apply to other construction methods. Likewise, 3D design and pro- duction skill levels and quality control are in development.

Fundamental to builders risk policies is coverage for the integrity of the structure under construction. Builders risk carriers typically include collapse as a covered peril. In the event of a collapse due to a 3D component, the carrier may cover the collapse, but likely will not cover the component that caused that collapse.

Builders risk coverage typically does not cover faulty craftsmanship (the defective design, manufacture and installation of faulty building materials), unless it results from a covered cause of loss, and the insurer may then pay only for the loss or damage caused. The same is true for EDCP components.

Agents also should be aware that a 3D process may present risk of damaging already-completed construction work at the same site.

One big positive advantage of 3D is time. It now could take only days for a contractor to frame a building using 3D-printed materials. With the builder then completing interior finish work, a project might be done in as little as three months or less — less than half the time to build a conventional home.

But even as 3D printing can reduce the time frame, the value of the project is still the same. So that element of the exposure hasn’t changed.

Solar Panels

Solar power, while not new, brings promise of lower electricity bills, environmental benefits, higher home values and less maintenance. The use of solar panels in residential and commercial buildings is projected to proceed apace.

Residential solar power installations increased 34% from 2.9 gigawatts in 2020 to 3.9 gigawatts in 2021, as reported by Pew Research Center.

To put it in perspective, one gigawatt is enough energy to power about 750,000 homes. Influenced by the Inflation Reduction Act (IRA) of 2022, solar capacity will spike from 73 gigawatts in 2011 to 617 gigawatts in 2032, as forecasted by McKinsey.

Underwriting concerns include natural catastrophe damage to solar panels. Hurricane, tornado, flood, earthquake, hail, wildfire and heavy snow bring added exposure to accounts with solar panel construction.

“Micro-cracking,” a form of solar cell degradation due to expansion and contraction of silicon from thermal cycling, might be covered by some carriers, but others attach an endorsement to remove that coverage. Even carriers that insure for micro-cracking might limit coverage. Builders risk underwriters will want to know if solar storage batteries are part of a solar panel system, and they likely will prefer that a licensed electrician complete the installation of a battery energy storage system. Carriers also want to know the experience of the contractors installing these systems. They also will consider the installation location (roof or ground), whether they will be connected to the power grid, layout of the panels, costs and power output of the system.

As usual, agents need to read the policy conditions when quoting builders risk policies covering solar projects.

Mass Timber Construction

Mass timber construction is an umbrella term referring to several manufactured wood products, including:

• cross-laminated timber

• glue-laminated timber

• dowel-laminated timber

• nail-laminated timber

• structural composite lumber.

Mass timber is made from multiple solid wood panels nailed, doweled or glued together to provide a strong, stable low-carbon alternative to concrete and steel, according to ThinkWood.com.

One of the benefits (and underwriting considerations) of mass timber construction is that it might be more resistant to fire compared with conventional lumber. Like 3D, mass timber components might allow for faster construction timelines, as well as improved site safety and less construction debris. It’s like a built-in fire safety system. You won’t know the difference in quality until it matters.

Carriers will likely want to consider the experience of the building contractor with mass timber construction, and agents need to discern which building components are mass timber. Not all materials used in a building project are likely to be mass timber, so the risk profile of a project could be hybrid. With a hybrid of build- ing materials, insureds may get a break on rate compared with traditional frame lumber premium pricing. Even though mass timber components might be expensive, they don’t necessarily decrease the rating because the premiums are still based on the total completed project value.

Lastly, mass timber can be more sensitive to weather and moisture, potentially leading to warping; agents might see higher water deductibles being applied due to this increased exposure.

3D construction, solar panels and cross-laminated timber all seem to be here to stay. By familiarizing themselves with underwriting considerations for these construction types, agents can continue to play a key role in helping builders risk customers find a market and contribute to a smooth submission process.

December 19, 2024

By Dennis Verheijde

The roofing industry, recognized for its high-risk nature, demands more than skilled labor and quality materials. For long-term business sustainability, company principals need sound protection against the trade's inherent dangers. 

Roofing contractors operate in one of the most hazardously classified construction industry segments. Standard business insurance is inadequate coverage given the trade’s exposure to hazards, whether it is from a worksite accident or potential property damage. 

Instead, roofing contractors must secure specialized policies tailored to their unique needs. 

Evaluating the Costs: Understanding Insurance Expenses 

Roofing contractors should consider several factors when evaluating insurance costs, such as business size, location, project scope, and claims history. Understanding these elements is essential for legal compliance and financial stability.

General Liability Insurance Costs  

General liability insurance is crucial for roofing contractors, with annual premiums typically between $2,000 and $5,000. The cost depends on factors like claims history, type of work (residential vs. commercial), and coverage level. Contractors with a clean claims history and smaller operations usually pay less, while those with past claims or larger operations face higher costs.

Builder's risk insurance costs  

Builder's risk insurance is project-specific and typically costs between 1% and 4% of the total construction cost. For a $500,000 roofing project, the premium may range from $5,000 to $20,000, depending on factors like location and project scope. This insurance covers the property, including materials, supplies, and equipment, until the project is completed.

Workers' compensation insurance costs  

Workers' compensation insurance is calculated based on payroll and the risk level of the job. In the high-risk roofing industry, contractors typically pay a premium of about $30 to $50 per $100 of payroll. For instance, a contractor with a payroll of $100,000 could face annual insurance costs ranging from $30,000 to $50,000.

Commercial auto insurance costs  

Insurance costs for vehicles in a roofing business depend on the type of vehicle, employee driving records, and coverage limits. Premiums usually range from $1,000 to $3,000 per vehicle each year, with larger trucks or those transporting heavy equipment typically on the higher end, especially in areas with more accidents.

Tools and equipment insurance costs  

Protecting roofing tools and equipment is essential. Insurance usually costs between $300 and $1,000 annually, depending on the value covered. Premiums may be higher for high-value items or for tools frequently moved between job sites, increasing the risk of loss or damage.

Umbrella insurance costs  

Umbrella insurance provides additional liability coverage beyond standard policies, making it crucial for roofing contractors. It typically costs between $400 and $1,500 per year for $1 million in coverage, offering valuable protection in large claims exceeding regular policy limits.

Insurance costs for roofing businesses are significant but important investments in long-term stability. Without proper coverage, contractors risk financial disaster from major claims or lawsuits. Roofing contractors can protect themselves against industry risks by recognizing insurance expenses and budgeting wisely.

Ultimately, having the right insurance coverage is not just a legal requirement—it's a vital component of a resilient business strategy. From meeting insurance requirements for roofing contractors to managing the cost of roofing contractor insurance, the decisions made in securing the right coverage can determine the long-term success and stability of a roofing business.  

March 10, 2008

By Steven D. Davis

A critical yet sometimes overlooked factor in determining a contractor’s insurance premium is his or her own loss experience. Particularly in the world of workers’ compensation insurance, premiums are greatly affected by the frequency and severity of losses. For the insurer to properly assign premiums versus potential risk, they look to compare the individual contractor’s loss experience to those performing similar types of work. Simply put, the Experience-Rating Modifier (ERM) is computed as a factor of the insured’s own loss experience that is used to modify the standard premium. Therefore, those with higher-than-average losses will pay more for their insurance than those with average or lower-than-average losses.

A critical yet sometimes overlooked factor in determining a contractor’s insurance premium is his or her own loss experience. Particularly in the world of workers’ compensation insurance, premiums are greatly affected by the frequency and severity of losses. For the insurer to properly assign premiums versus potential risk, they look to compare the individual contractor’s loss experience to those performing similar types of work. Simply put, the Experience-Rating Modifier (ERM) is computed as a factor of the insured’s own loss experience that is used to modify the standard premium. Therefore, those with higher-than-average losses will pay more for their insurance than those with average or lower-than-average losses.

So, it begs the question, “What does Experience Rating do for me?” For starters, ERMs can greatly affect the amount of premium required to pay out for workers’ compensation insurance. As noted earlier, Experience-Rating Modifiers can either reward or punish individual contractors based on their accompanying loss experience. Generally, if you are able to better control the frequency and severity of your workers’ comp-related losses, you will be rewarded with lowered premiums. However, if you simply allow insurance to act as your risk manager, more than likely your loss experience will be greater than those competing against you, resulting in a higher-than-average premium requirement.

How can you control and manage your ERM? Initially, the most effective method is to manage and control losses. Calculated ERMs are more responsive to loss frequency than to loss severity. Your modifier is more likely to fluctuate with continuous, repetitive claims than it would with a few large losses. With that in mind, reducing loss frequency will greatly enhance the contractor’s ability to lower the ERM. But it goes much further than that. Here’s a quick seven-step action plan each contractor, both large and small, can undertake that will allow for greater management of their Experience Rating Modifiers:

1. Safety, Safety, Safety By developing and implementing a well thought out safety program, the severity and frequency of workers’ comp losses can be greatly reduced. The ERM formula recognizes that it is more difficult to control loss severity than frequency. With that in mind, a contractor experiencing numerous small losses will more than likely have a higher modifier than the contractor experiencing a few large losses, even if the dollar amounts total up the same. Safety and training will help to reduce the frequency of losses.

2. Ensure Proper Rating Classification Whether intentional or not, misclassification can greatly affect the ERM and the resulting insurance premium. Classification into a lower-rated class may initially result in lower premiums for the contractor; however, loss experience will soon place upward pressure on its ERM, resulting in an increased modifier and accompanying premiums. It is critical to know your classification. Misclassification can hide effective safety programs by not accurately comparing your loss history to those in your field. Work with your insurance broker/agent to ensure proper classification.

3. Review Open Claims Annually With Your Insurance Adjuster Your ERM calculation incorporates reserves for open claims as well as paid claims. The insurers generally set up an initial reserve when the claim is first filed, and will adjust this reserve as the claims process continues, with the final claim often settling for less than the initial reserve. Work with your claims adjuster on the levels of remaining reserves and negotiate a reduction or elimination of certain amounts. This needs to be done promptly in order to have any effect on the ERM calculation.

4. Audit for Mistakes Your ERM is calculated based on the year’s loss history and a combination of information from your company payroll and industry classification. As noted earlier, improper classification can greatly affect the ERM. Work with your insurance provider to review the accuracy of this information. Ensure that this data is not only properly classified, but that it is properly reported to the rating bureau. All losses, payroll levels and classifications must be turned in no later than six months prior to the rate date for the ERM to be affected.

5. Prepare a Test Modifier and Compare Year-End Calculations Have your insurance provider prepare a test modifier at least 60 days in advance of the actual rate date to use as a gauge of the potential modifier level. Use this as a benchmark for future ERM levels. You should also carefully review the factors affecting the ERM: losses, payrolls, and subrogation recoverables. Carefully analyze these inputs to ensure accuracy. By some estimates, more than half of all modifier calculations contain errors.

6. Pay the Small Medical Claims Once again, the ERM is most directly related to loss frequency than loss severity. That being said, medical-only claims of $5,000 or less can greatly affect the modifier. To offset this, contractors can pay these small medical-only claims through an agreement with their insurance provider. This will help to alleviate the frequency-driven upward pressures of the experience modifier. Set up a plan with your insurance provider whereby all small medical-only claims will be paid out of pocket.

7. Review Premium Fluctuations When premium rates fluctuate up or down, levels of expected losses generally tend to correlate. It is safe to say that if you see your premium rate drop for workers’ compensation, a lowered expected-loss rate will generally follow. Therefore, should loss experience and payroll levels stay the same, the contractor will see a rise in their ERM. Keep a close eye on your premium levels to forecast any potential future fluctuations.

Managing ERMs

As with any form of loss management, the loss experience of the contractor is greatly influenced by the degree of management commitment. Aside from the inherent goal of premium reduction, management of your Experience-Rating Modifier can offer some very positive end results. Increasing your emphasis on safety and training can result in fewer losses. This, in turn, will lead to lower ERMs and future premiums. In today’s market, ERMs not only affect premium rates, they affect your competitiveness as a contractor. Although ERMs are not an absolute gauge of safety and loss control, it does allow you to stand out from your peers. In the end, the true secret to lowering one’s experience-rating modifier is for management to fully understand the process by which this factor is calculated. From there, control what you can.

February 7, 2014

By Brian Pratt

The National Council on Compensation Insurance (NCCI) has changed the experience rating formula. The first stage of the change to the formula became effective Jan. 1, 2013. The change to the experience modification rating is called “split point.” Many roofing contractors have experienced an increase in their workers’ experience modification factor as a result of the change. It is imperative for contractors to know how the new experience modification calculation affects their insurance cost.

Understanding your company’s workers’ compensation experience modification factor (mod) is important because it provides you with the information needed to determine how to control your mod, thus reducing your workers’ compensation budget. An experience modifier is an adjustment factor assigned to an employer by a rating bureau (NCCI or state). Your company’s actual losses are compared to its expected losses by industry type. The formula incorporates factors that take into account company size, unexpected large losses, and the difference between loss frequency and loss severity to achieve a balance between fairness and accountability. The mod factor represents either a credit or debit that is applied to your workers’ compensation premium. A mod factor greater than 1.0, a debit mod, means that losses are worse than expected and a surcharge will be added to your premium. A mod factor less than 1.0, a credit mod, means the losses are better than expected, resulting in a discounted premium. By understanding how losses affect your mod, and thus your bottom line, you can create a competitive advantage for your company in its market segment. It is vital that the information being reported to NCCI or a state governing institute is reviewed annually by a workers’ compensation specialist.

The split point experience modification impacts 35 NCCI states and certain other independent states. A solid understanding of the split point rating formula will help employers identify variables that impact their workers’ compensation cost. The changes to the NCCI experience modification calculations were implemented to reward companies with favorable loss history and penalize employers with below-average loss history. The formula changes will cause a wider variance of experience modification factors between employers. The variance will provide a potential competitive advantage for roofing contractors with better-than-average loss history.

Primary losses are used as an indicator of frequency and are counted fully toward the experience modification calculation. The excess losses (loss amount over the primary losses) receive partial weight and are significantly reduced when calculating an experience modification factor.

Effective Jan. 1, 2013, the primary losses counted in the NCCI formula increased from $5,000 to $10,000 per claim. On Jan. 1, 2014, the primary losses increased from $10,000 to $13,500 per claim. On Jan. 1, 2015, the primary losses in the formula will cap out at $15,000 per claim.

The impact of the NCCI changes to the employer is that primary losses (frequency) affect your experience modification more than the excess (severity) losses. In general, a roofing company with a large number of primary losses will likely have a higher experience modification than a company that may have a greater dollar amount of single losses but lower overall frequency.

It is important to be aware of what the minimum attainable experience modification is for your company. The controllable experience modification factor is the difference between your current and your minimum attainable experience modification factor, which is the variable component of your experience modification that fluctuates with losses. The controllable experience modification is broken down between primary losses and excess losses.

It is critical to focus on your actual losses vs. expected losses relative to industry averages. It is also important to identify trends and the injury drivers that impact your loss experience, resulting in elevated insurance costs. Taking control of your workers’ compensation budget is critical for many reasons. Workers’ compensation is a line of insurance coverage that your company can truly have a direct impact on when it comes to future costs.

After the NCCI formula changes, there is a greater variation in the workers’ compensation experience modifications between employers. There is an opportunity to create a separation in workers’ compensation cost as compared to your peers.

Strategies that are effective at mitigating loss experience and hence reducing experience modifications include:

• Aggressively manage claims by assigning a dedicated adjuster.

• Have an aggressive return-to-work program and offer light-duty options.

• Structure a disciplined new-hire orientation process.

• Implement a disciplinary program that is written and enforced.

• Review and enforce safety/loss control program.

The result of an increased experience modification factor can have disastrous results including:

• The roofing contractor must increase bids to cover increased overhead, which will likely result in lower closing ratios and reduced profit margins.

• Many larger general contractors and certain government entities will remove contractors from the lists if the contractor has an experience modification greater than 1.00, thus limiting sales opportunities.

Given the relatively thin average profit margins in the roofing industry, it is important to make sure your company’s experience modification factor is at the lowest possible level.

Roofing contractors should view the formula change by NCCI as an opportunity to further outperform their peers. Roofing professionals can enhance financial results with a disciplined loss control strategy and solid understanding of the new split experience modification formula. 

August 14, 2024

By Daniel Gray

As one of the most common types of insurance, general liability insurance mitigates risk for construction businesses. This type of policy protects contractors against claims that their work caused bodily injury or property damage. A single large settlement from a liability claim could financially ruin a contractor, so general liability insurance is considered fundamental for nearly every construction company.

While general liability insurance is not legally required in most cases, it may be required for licensure in certain states. Whether a general liability policy is legally mandated, it's essential for most construction businesses. Read on to see everything you need to know about general liability insurance for contractors. 

What is general liability insurance?

General liability insurance, also called commercial general liability (CGL), protects a contractor in the event the contractor's work led to bodily injury or property damage. 

Because construction businesses frequently perform work that is complex, difficult, and potentially risky, there is a high potential for causing injury or property damage to third parties. A general liability policy can protect contractors in these situations by providing support for legal fees and paying settlements that would otherwise be the contractor's responsibility. 

General liability insurance is used almost universally among contracting businesses since the financial burden from even a single lawsuit is too high for most construction businesses to handle. Therefore, general liability insurance is known as a form of risk transfer, because it shifts the risk for property damage and bodily injury away from the contractor and onto the insurance carrier. 

What does general liability insurance cover?

General liability insurance covers most claims made against contractors in the following situations:

• Bodily injury: When a customer or other third party experiences an injury related to your work (like tripping over some wiring), they could sue, and general liability insurance would cover court fees and potential settlements up to your coverage limits.

• Property damage: While performing work, you may cause unintentional damage to customer's property (for example furniture, drywall, or flooring), and general liability insurance would help recoup the cost of damages.

• Personal and advertising injury, including libel or slander: You may unintentionally harm another business through advertising, libel, or slander, and a general liability policy can help pay damages to the other business.

For each of these covered categories, a general liability insurance policy will cover attorney fees, court fees, and settlements up to the coverage limit. 

General liability policies have coverage limits per incidence as well as in aggregate. For example, a common general liability policy for small and medium-sized contracting businesses will have limits of $1 million / $2 million, which means that each incident is covered up to $1 million, and the annual policy covers a total of $2 million for all claims combined. 

Many policies have the option for additional endorsements or coverage depending on a business's particular needs. For example, mobile equipment, data breaches, and reputation repair are common add-on coverages that many construction businesses opt to include in their general liability policy.

Coverage period, territory, and premises

When reviewing a general liability policy, you’ll want to be careful to note the coverage period, territory, and premises that the policy lists. Contractors need to make sure that a policy covers the situations they’ll find themselves in, and that includes ensuring that the coverage terms suit their needs.

Here’s what to keep in mind:

• The coverage period is generally the length of the policy (often one year), meaning that claims can only be made for injuries and damages that occur while the policy was active. However, many general liability policies include completed operations coverage, which means that the policy covers claims that arise on completed work for a specific period of time. 

• The coverage territory is usually the country in which the policy is signed, meaning that claims are only valid for work performed within a specific country. 

• The coverage premises will likely offer more specificity for where claims are valid. For example, a plumber’s general liability policy may specify that only certain working locations are covered while others are not.

Importantly, reviewing the terms of a policy carefully will ensure that you have the coverage you need when you need it.

What's excluded from general liability insurance?

Although general liability provides exceptional coverage, it does not cover everything. Here are a few situations that would be excluded from a general liability insurance policy:

• Intentional damage: While general liability does cover negligence that leads to bodily injury or property damage, it does not cover intentional damage or acts that someone would reasonably expect to lead to injury.

• Contractual liability: Your general liability coverage only protects your actions, so if you assume the liability of another party through a contract, they need their own general liability coverage.

• Workers' compensation: Injuries to employees are not covered by general liability, but instead are covered by legally required workers' compensation insurance.

• Pollution: A construction company whose work causes pollution that leads to injury or damage is not covered by general liability insurance, but must instead get a specific policy to cover pollution.

• Errors and omissions: Negligent work can lead to claims of financial loss by customers, but these claims are covered by professional liability insurance rather than general liability.

• Damage to property: Damage to a contractor's property is covered by inland marine insurance rather than general liability, which protects a third party's property.

There are many other situations that are not covered by general liability insurance. Additionally, even covered situations come with exclusions, so it's important to read a policy closely to ensure that your business's work is well covered by your insurance carrier.

How much does general liability insurance cost?

While there is no standard cost for general liability insurance, there are a number of factors that may influence the actual cost of general liability insurance, including:

• Geographic region

• Contractor specialty

• Annual revenue

• Claim history

• Desired coverage limits

• Employee headcount

It’s important for contractors to discuss their coverage needs with an insurance broker to receive an accurate general liability insurance quote for their business. Another option is to bundle together several policies, like general liability, tools and equipment, commercial auto, commercial property, professional liability, and workers' compensation. 

What other insurance policies do contractors need?

General liability is a fundamental form of insurance coverage for construction businesses, but it's not the only useful or necessary insurance. 

Other forms of insurance that are common for construction companies include:

• Workers' compensation

• Professional liability

• Builder’s risk

• Subcontractor default insurance

• Inland marine

By using a sound collection of insurance policies, most construction companies are able to mitigate the risks associated with financial losses, bodily injury, property damage, and natural disasters.

November 6, 2023

By Jeremy Eveland

When it comes to commercial real estate in Utah, having the right insurance coverage is crucial to protect your investment. In this article, we will explore the importance of commercial real estate insurance, as well as the various types of coverage available to ensure compliance with legal requirements. Whether you are a property owner, tenant, or real estate investor, understanding the details of commercial real estate insurance can provide peace of mind and financial security. So, let’s dive in and discover how you can safeguard your commercial property and assets through proper insurance coverage.

Understanding Commercial Real Estate Insurance

What is Commercial Real Estate Insurance?

Commercial real estate insurance is a type of insurance that provides coverage for properties used for commercial purposes. It is specifically designed to protect owners, landlords, and tenants from financial losses due to property damage, liability claims, and business interruptions. This insurance policy offers coverage for a wide range of risks associated with commercial properties, ensuring that owners and tenants can effectively manage their risks and protect their investments.

Importance of Commercial Real Estate Insurance

Commercial real estate insurance is essential for anyone involved in commercial property ownership, leasing, or management. It acts as a safety net, protecting against unexpected events that could result in significant financial losses. Without insurance, property owners and tenants may be held personally liable for repairs, medical expenses, or legal claims arising from accidents, injuries, or property damage on their premises. Commercial real estate insurance provides peace of mind and financial protection, allowing businesses to focus on their operations without worrying about potential risks and liabilities.

Types of Commercial Real Estate Insurance

There are several types of commercial real estate insurance policies available to protect against different risks. Some common types include:

1. Property Coverage: This type of insurance covers damage or loss to the physical structure of the property, as well as any contents or inventory within. It typically includes coverage for events such as fire, storms, theft, vandalism, and other perils.

2. Liability Coverage: Liability coverage protects property owners and tenants from legal claims and expenses in the event that someone is injured or their property is damaged on the premises. It helps cover medical expenses, legal fees, and settlements or judgments.

3. Business Interruption Coverage: Business interruption coverage is designed to provide financial support when a covered event, such as a fire or natural disaster, interrupts normal business operations. It helps cover lost income, ongoing expenses, and the costs of temporarily relocating or renting alternative space.

These are just a few examples of the types of coverage available. It’s important to assess the specific needs and risks of a commercial property to determine which coverage options are necessary.

Coverage Options for Utah Commercial Real Estate Insurance

Property Coverage

Property coverage is crucial for protecting the physical structure of a commercial property, as well as its contents and inventory. In Utah, commercial property coverage may include protection against common risks such as fire, storms, theft, vandalism, and water damage. It’s important to carefully review the policy to understand the specific covered perils and exclusions.

When considering property coverage for commercial real estate in Utah, factors such as the property’s location, building type, and construction materials will influence the premium. Additionally, the coverage limit, deductible, and any optional endorsements should be taken into account to ensure adequate protection.

Liability Coverage

Liability coverage is essential for commercial real estate owners and tenants in Utah. It provides financial protection in case someone is injured or their property is damaged on the premises. Liability coverage helps cover medical expenses, legal fees, settlements, or judgments resulting from lawsuits.

Utah commercial real estate owners and tenants should carefully consider the specific risks associated with their property, such as slip and fall accidents, product liability, or property damage claims. Adequate liability coverage should be in place to protect against potential financial losses and legal obligations.

Business Interruption Coverage

Business interruption coverage is a valuable option for commercial real estate owners and tenants in Utah. This coverage provides financial support when a covered event, such as a fire or natural disaster, causes a temporary suspension of business operations.

In Utah, business interruption coverage can help cover lost income, ongoing expenses, and the costs associated with temporarily relocating or renting alternative space. It is important to review the policy terms, including the waiting period for coverage to begin and the duration of coverage, to ensure it aligns with the specific needs of the business.

Compliance Requirements for Utah Commercial Real Estate Insurance

State Laws and Regulations

Utah has specific laws and regulations that govern commercial real estate insurance. It is important for property owners and tenants to understand and comply with these requirements to avoid penalties or potential legal issues.

Utah’s laws and regulations may specify minimum coverage requirements, licensing obligations for insurance providers, and other relevant provisions. Consulting with a knowledgeable insurance professional or commercial real estate lawyer can help ensure compliance with state regulations.

Minimum Insurance Requirements

Utah may have minimum insurance requirements that commercial real estate owners and tenants must meet. These minimum requirements could vary depending on the type of property and the nature of the business conducted within it.

It is vital to review Utah’s specific insurance requirements for commercial real estate and ensure that adequate coverage is in place to meet these requirements. Failing to meet the minimum insurance requirements could result in fines, penalties, and potential legal consequences.

Mandatory Coverage Types

Utah may also require specific types of coverage for commercial real estate properties. These mandatory coverage types are designed to protect against specific risks that are deemed essential by the state.

Commercial real estate owners and tenants should familiarize themselves with Utah’s mandatory coverage types and ensure that their insurance policies include these provisions. Some common mandatory coverage types may include liability coverage, workers’ compensation insurance, and minimum property coverage limits.

Factors Affecting Commercial Real Estate Insurance Premiums

Location and Environment

The location of a commercial property and the environmental risks associated with it can significantly impact insurance premiums. Factors such as proximity to bodies of water, flood zones, seismic activity, and crime rates can influence the risk profile of the property.

In Utah, properties located in areas prone to wildfires or floods may have higher insurance premiums to account for the increased risk. Additionally, urban areas with higher crime rates may require additional security measures, which can also impact insurance costs.

Building Type and Construction Materials

The type of building and the construction materials used can affect insurance premiums. Buildings made of non-combustible materials, such as steel or concrete, may be cheaper to insure compared to those constructed with combustible materials like wood.

In Utah, properties with older buildings or unique architectural features may require specialized coverage or higher premiums due to their increased risk profile. It’s important to consider these factors when selecting an insurance policy for a commercial property.

Insurance History and Claims

Insurance history and claims play a role in determining insurance premiums. A history of frequent claims or high dollar-value claims may result in higher premiums due to the perceived higher risk associated with the property or the policyholder.

Utah commercial real estate owners and tenants should maintain a good claims history by adhering to proper risk management practices and promptly addressing any property maintenance or safety issues. This can help keep insurance premiums more affordable and maintain a positive insurance track record.

Choosing the Right Insurance Provider for Utah Commercial Real Estate

Researching Insurance Providers

When selecting an insurance provider for commercial real estate in Utah, thorough research is essential. Start by researching reputable insurance companies that specialize in commercial real estate coverage. Look for providers with experience in the Utah market and a proven track record of reliable and efficient claims processing.

Consulting with industry professionals, such as commercial real estate lawyers or insurance brokers, can also provide valuable insights and recommendations for reputable insurance providers. Online reviews and ratings can further help gauge the quality and customer satisfaction of potential insurers.

Comparing Coverage and Cost

Comparing coverage options and costs from multiple insurance providers is crucial for finding the right policy for a commercial property in Utah. Obtain quotes from several insurers and carefully review the coverage terms, limits, deductibles, and any exclusions or endorsements that may apply.

Consider the unique needs and risks associated with the commercial property, and ensure that the insurance policy adequately addresses these concerns. Remember that the cheapest policy may not provide sufficient coverage, so it’s important to find the right balance between cost and coverage.

Reading Insurance Policies Carefully

Reading insurance policies carefully is essential to fully understand the coverage provided and any limitations or exclusions that may apply. Policy documents can be lengthy and complex, but taking the time to thoroughly review them can help avoid surprises and misunderstandings in the future.

Pay attention to details such as coverage limits, deductibles, claim procedures, and any additional endorsements or riders that may impact coverage. If any terms or conditions are unclear, seek clarification from the insurance provider or consult with a commercial real estate lawyer for guidance.

Steps to File a Commercial Real Estate Insurance Claim in Utah

Documenting the Damage

In the event of property damage or loss, it is crucial to document the extent of the damage thoroughly. Take photos or videos of the affected areas, and make a detailed inventory of damaged or lost items.

Keep any receipts, invoices, or repair estimates related to the damage. These documents will be essential when filing an insurance claim and can help ensure a smooth and fair claims process.

Contacting the Insurance Provider

As soon as possible after the damage occurs, contact the insurance provider to initiate the claims process. Follow their instructions for reporting the claim, providing the necessary documentation, and completing any required forms.

It’s important to keep all communication with the insurance provider well-documented and follow up promptly on any requests for additional information or documents.

Working with Adjusters and Professionals

Once the claim is filed, an insurance adjuster will be assigned to assess the damage and determine the coverage and payout. Cooperate fully with the adjuster, providing them access to the property and any necessary information.

Consider consulting with professionals, such as contractors or estimators, to ensure that the scope of the damage is accurately assessed. This can help support the claim and ensure that all necessary repairs or replacements are covered by the insurance policy.

Common Exclusions and Limitations in Utah Commercial Real Estate Insurance

Acts of God

Many commercial real estate insurance policies exclude coverage for “acts of God.” These are events or disasters that are considered beyond human control, such as earthquakes, floods, or hurricanes. It’s important to review the policy to understand these exclusions and consider additional coverage if the property is at risk of such events.

Intentional Damage or Negligence

Insurance policies typically exclude coverage for intentional damage or damage caused by negligence. For example, if a property owner intentionally damages their own property or fails to properly address maintenance issues, resulting in damage, the insurance claim may be denied. It’s important to maintain the property responsibly to avoid such exclusions.

Expected Wear and Tear

Commercial real estate insurance usually does not cover expected wear and tear on a property or its components. Routine maintenance, repairs, and equipment replacement are typically the responsibility of the property owner or tenant. Insurance is designed to protect against unforeseen accidents, events, or perils, not the regular wear and tear associated with normal use.

Frequently Asked Questions about Utah Commercial Real Estate Insurance

What does Commercial Real Estate Insurance cover?

Commercial real estate insurance typically covers property damage, liability claims, and business interruption. It may include property coverage for the physical structure and its contents, liability coverage for injuries or property damage on the premises, and business interruption coverage for lost income and ongoing expenses during a temporary halt in operations.

How much does Utah Commercial Real Estate Insurance cost?

The cost of Utah commercial real estate insurance can vary depending on factors such as the property’s location, construction type, coverage limits, deductibles, and the selected insurance provider. It’s important to obtain quotes from multiple providers and carefully review the coverage terms and costs to find the best policy for the specific property and its risks.

Can I change my insurance policy anytime?

Insurance policies typically have specific terms and conditions regarding changes or modifications. While some changes may be allowed during the policy term, it’s important to review the policy documents and consult with the insurance provider to understand any restrictions or requirements for making changes to the policy.

Benefits of Consultation with a Utah Commercial Real Estate Lawyer

Understanding Legal Obligations

Consulting with a Utah commercial real estate lawyer can provide valuable insight into the legal obligations and requirements associated with commercial real estate insurance. A lawyer can help review insurance policies, assess compliance with state regulations, and provide guidance on best practices for managing risks and liabilities.

Navigating Complex Insurance Claims

Insurance claims can be complex and time-consuming, especially in cases involving significant damage or disputes with the insurance provider. A commercial real estate lawyer can provide guidance throughout the claims process, ensuring that the policyholder’s rights are protected, and negotiating a fair settlement if necessary.

Maximizing Insurance Coverage

A commercial real estate lawyer can help maximize insurance coverage by identifying potential gaps or limitations in the policy and suggesting additional endorsements or coverage options that may be necessary. They can work with insurance providers to negotiate favorable terms and ensure that the policy provides adequate protection for the property and its unique risks.

Conclusion

Commercial real estate insurance is a critical component of protecting commercial properties in Utah. Understanding the coverage options, compliance requirements, and factors that affect insurance premiums is essential for property owners and tenants. By choosing the right insurance provider, carefully reviewing insurance policies, and consulting with a commercial real estate lawyer when needed, property owners and tenants can ensure that their investments are adequately protected and that they have the necessary support in the event of unexpected events or liability claims.

January 27, 2020

By Michael Park

Keeping today’s small and midsize roofing companies on track with marketplace changes and innovation is far more complicated than it was a generation ago. The labor pool is smaller, the supply chain is more complicated, demands on communication have multiplied, and sustainable, durable and “smart” construction are the new industry norms.

In this fast-moving environment, the old way of conducting business is not enough to keep up. The industry needs disruption with a focus on the future. And the future is digital.

Adopting technology-based solutions to disrupt inefficient, manual processes will deliver tangible benefits. Roofers and others in the construction trade who embrace digital tools will expand their time and productivity through improved efficiency. Operable from a smart phone or tablet, these tools are critical for powering business growth. They also reflect the ability to meet or even set the pace and expectations of the digital world where customers work and, increasingly, want to live.

However, much of the roofing and construction industry has not kept up with the digital world in which it builds. And, when it comes to being “future-ready,” the industry admits it largely isn’t.

According to a recent analysis of the industry’s adoption of digital technology, there is widespread agreement that digital transformation must happen. Nearly 90% of construction companies believe digitization will transform the industry and 70% believe those who don’t move to digital technologies will go out of business. Yet, 46% report their roofing or construction business either has not started to adopt digital technology or remains in the early stages of adoption.

What’s more, at a time when the industry’s steep global growth contrasts sharply with productivity that has remained nearly flat, 77% of builders believe that digitization will improve productivity. That leaves an estimated $1.6 trillion in revenue on the table due to a lack of digital adoption and, consequently, lost potential productivity.

One reason for this disconnect may be time or budget constraints that roofers, builders and other contractors say limit their ability to explore, learn and adopt new technology solutions. Other staff or subcontractors may be reluctant to use new tools, as discomfort with — and distrust of — unfamiliar technologies or new ways of doing business can often paralyze advances into digital solutions.

But in today’s world, homes are increasingly digital and old analog equipment has all but disappeared. And the trends of moving more towards a digital future are increasingly evident in consumer attitudes.

Samsung, for example, estimates consumers will spend $90 billion on digital smart-home technologies over the next four years. Building and roofing companies that aren’t digitized — in both equipment and process — will struggle to accommodate this demand from consumers and earn trust in this evolving environment.

The industry’s transformational shift can be seen among trends in job assessment, measurement and quotation. In the past, quoting construction and roofing work was an analog process involving a ladder, tape measure and notebook. It was time-consuming and prone to human error, often with diminished accuracy. However, using new technologies such as advanced aerial imagery and drones, this process can be completed digitally, from the safety of a desk, in a fraction of the time and with higher accuracy.

Such innovations allow roofers and contractors to deliver intelligent sales appointments at a client’s convenience, with 3-D renderings of the property, precise measurements and highly accurate quotes that instantly cite time, material options and costs. Better still, for both roofers and homeowners, the presentation is “future-ready,” provided electronically and ready for signing and scheduling.

Disrupting and digitizing the customer acquisition process also saves money. Underbidding or overbidding a job due to measurement inaccuracies can conservatively cost several hundred dollars, whereas a modest investment in an aerial imagery-based roof report costs far less per project and can pay dividends over a job’s lifecycle. The payback in digital adoption comes in many forms, including recovered time and productivity, more accurate measurements that lead to correct estimates, precise purchasing, improved safety and fewer accidents.

Bringing measurement and estimation into the digital age can transform some of the most time-consuming, dangerous tasks into competitive, productivity-gaining differentiators, ultimately keeping employees safer, impressing customers and driving scale. 

In the roofing and construction industry, it’s time to look beyond the analog age to embrace a more digital future.

January 6, 2025

By Elizabeth Rivelli

Most contractors rely on tools and equipment to complete construction projects. But if something happens to those items, they can be expensive to replace. Contractors can benefit from purchasing an equipment floater to protect business property from damage and theft. 

In this article, we’ll explain how equipment floaters work, what they cover and how much they cost. 

What is an equipment floater?

An equipment floater provides insurance protection for movable business property that gets damaged or stolen. It covers portable tools and equipment that are transported, stored on the job site, or kept in another location. 

Equipment floaters are a type of inland marine insurance, which is designed to protect business property regardless of where it travels on land. 

These floaters are often added to a commercial property insurance policy. They can also be added to a business owner’s policy (BOP), which includes commercial property insurance with general liability insurance.

What does an equipment floater cover?

An equipment floater covers most of the tools and construction equipment that contractors transport to and from job sites. Here are some examples of items that are routinely covered by equipment floater insurance: 

• Hammers 

• Drills 

• Saws 

• Ladders 

• Scaffolding 

• Generators 

• Compressors 

• Excavators 

• Skid steers 

• Forklifts 

• Computers

• Cameras

Contractors can get an equipment floater with all-risk coverage or named perils coverage:

• An all-risk policy provides the broadest protection, covering every risk except those specifically excluded in the contract. 

• A named perils policy only includes coverage for hazards distinctly listed in the insurance agreement. 

Equipment Not Covered by a Floater

Equipment floaters have limitations, and not all business property is covered. Below are some items that aren't typically covered by equipment floater insurance: 

• Heating units 

• Cooling units 

• Windows 

• Flooring 

• Siding 

• Cultured or natural stone 

• Plumbing fixtures 

• Plywood 

• Decking

• Cabinetry 

One of the main exclusions under an inland marine insurance policy is vehicles.

An equipment floater won’t cover work trucks, vans or cars — even though they’re considered business property and are movable.

Business-owned vehicles must be insured under a separate commercial auto policy, which provides third-party liability coverage.

Who needs equipment floater insurance?

Most contractors own business property that gets moved from one job to another. An equipment floater can help protect valuable business property regardless of where it’s located.

Below is a list of specialty contractors who may benefit from purchasing an equipment floater:

• Excavators 

• Masons 

• Carpenters 

• Plumbers 

• Electricians 

• Painters 

• Landscapers

• Roofers 

• Concrete contractors 

• Flooring installers 

It’s also important to note that subcontractors who are listed as additional insureds on a general contractor’s (GC) insurance policy don't necessarily receive business property coverage. 

Just because a GC has an equipment floater, doesn’t mean that their additional insureds are also covered. Subcontractors should get their own equipment floater if they have business tools or equipment to insure. 

How much does an equipment floater cost?

The cost of an equipment floater varies and is different for every contractor. Here are some of the biggest factors that can impact the cost of this insurance policy. 

Operating in High-risk Areas

An equipment floater may cost more for contractors who operate in high-risk areas. For example, a residential home framer might pay a higher rate in a coastal area than they would in a region not prone to hurricanes or flooding. 

Value of Insured Items

The amount of equipment and value of the items that a business owner needs to insure is factored into their premium. The more business property that is insured under the policy, the more the contractor can expect to pay for their insurance floater. 

Business Type

Businesses that own specialty tools often pay higher rates for equipment floater insurance. For instance, a woodworker who uses expensive specialized tools might pay more than an interior painter who needs to insure brushes, rollers, and sprayers.

Security Measures

The degree to which a business safeguards its business property can have an impact on the cost of insurance. For instance, rates might be cheaper for contractors who keep equipment in a facility that has a security system that is wired to police departments.   

Equipment Floater vs. Installation Floater 

Equipment floaters and installation floaters are important insurance policies for contractors, but they have some distinctions.

An installation floater covers the materials a contractor intends to install on a specific project, whereas an equipment floater protects the tools and equipment the contractor owns and uses on each project.

Installation floaters cover materials that contractors purchase and store temporarily, like lumber, shingles, and tiles. If these materials get damaged or destroyed in a covered peril, the installation floater will pay to replace them. 

Covering All Bases With a Floater

Many contractors spend a considerable amount of money on tools of the trade. Unexpected damage to those items can cause a major financial setback, especially for smaller businesses. An equipment floater helps protect contracting businesses from loss if their business property is destroyed by perils such as theft, vandalism, fire, and windstorms.

Because most commercial insurance policies provide limited coverage for business property, an equipment floater may help fill the gaps in foundational policies. 

October 6, 2014

By Grant Chiles

Just as the construction industry’s multifamily sector grows post-recession – creating a spike in retailer brokers’ demand for builder’s risk insurance – massive fires at construction sites have created a market transition.

In the past year, there have been numerous disasters near Denver, San Francisco, Houston, Des Moines, Rockville and Anaheim. The fires spurred hundreds of millions of dollars in damages. They’ve also shown why it’s increasingly important to understand how underwriters approach risk, how superior submissions can help secure enhanced terms and conditions and how to differentiate your risk from others in the multifamily space.

Here are some key tips for retail brokers to review with their clients to secure the best pricing and coverage:

Consider different scenarios on the front end

Massive fires at construction sites have created a market transition.

Timeline. What values will be exposed and when? The consideration of secondary factors like value build-up and critical milestones help to paint an accurate picture of peak and reduced exposures during the project. This component is essential for projects in catastrophe-prone areas where modeling and risk cost is the central rating factor.

Site plan.Wood frame construction is often considered to be 100 percent Probable Maximum Loss (PML) for the fire exposure. Evaluating a site plan for building separations is key to demonstrating a lessor PML. The site plan showing elevation data is also necessary for projects in or around critical flood zones.

Budget and pro forma. Go line-by-line to avoid over- or under-insuring project values. For Soft Costs coverage, make sure that the expense allocation only applies to costs that would be re-incurred in the event of a delay. Regarding Loss of Income/Rents, make sure to allocate an accurate period for the loss of potential income. The period of indemnity should match the period calculation.

Decide what subjectivities should be deal breakers

It is proven that Protective Safeguard Warranties do not stand up in court, but they have crept into some builder’s risk policies due to recent losses. The warranty endorsements are designed to deny potential claims if set measures are not in place at the time of loss. A site protection plan for the project should be evaluated and agreed upon with the carriers, but there should not be any warranty associated with the builder’s risk policy.

Evaluate different considerations with the growing trend of urban infill apartments

These projects are typically podium style wood frame structures creating critical values between four walls. Firewall divisions should be identified and taken into consideration in order to determine a lessor fire PML. Contractor hot works protocols should be reviewed to ensure proper and adequate measures are taken into account when performing hot works. Review project manuals to determine how the insured plans to protect project sites in urban locations, where crime can be more prevalent.

Determine what coverage enhancements are available

When construction work slowed during the recession, many carriers were agreeable to broad terms and conditions that were traditionally unavailable. Today, even with the recent construction growth, those enhancements remain if brokers work aggressively with carriers.

Avoid conflicting policy language

Unlike property insurance, most builder’s risk carriers have their own non-standard, specialized forms. Manuscript policies are available including a participation subscription page to eliminate conflicting wording and non-concurrencies.

May 5, 2011

By Zachary Stock

For most roofing contractors one of their largest and perhaps most frustrating expenses is workers’ compensation insurance. Roofing contractors pay more for workers’ comp than nearly any other contractor and as a result learning how to control that cost is essential to running a successful roofing business. The key to controlling your workers’ comp cost is controlling your experience modification factor.

For most roofing contractors one of their largest and perhaps most frustrating expenses is workers’ compensation insurance. Roofing contractors pay more for workers’ comp than nearly any other contractor and as a result learning how to control that cost is essential to running a successful roofing business. The key to controlling your workers’ comp cost is controlling your experience modification factor.

Your experience modification factor or mod is the single most important controllable factor of your workers’ comp pricing. Depending on your experience mod you could either be paying 50 percent less than your competitors for workers’ comp or as much as 300 percent more. Controlling your experience mod is the best way to lower your workers’ comp premium. Companies that actively work to control their mod can see tremendous savings on workers’ comp. Below are several common myths regarding the experience rating system. By better understanding the system, your company can reduce your workers’ comp premium dramatically.

Myth No. 1

My Experience Mod is based on my premium paid in and claims paid out. This is perhaps the most common misconception regarding the experience rating system. Many businesses and insurance agents think that your experience mod is a calculation based on the premium the business paid in versus the claims paid in out in a given year.

This couldn’t be further from the truth; in fact your premium has nothing to do with the calculation of your experience mod. Your experience mod is calculated based on a formula established by the National Council of Compensation Insurers (NCCI). NCCI has gathered the payroll and claims information of thousands of businesses over the years and has established the experience rating system as a way of either crediting or debiting an insureds workers’ comp policy based on their loss performance compared to peers in their industry. If a company has fewer losses than their industry peers, they receive a credit mod (or a mod lower than 1.00). If the company has higher than average losses, they receive a debit mod (or a mod above 1.00). The actual calculation of the experience mod is based on the amount of payroll in each workers’ comp class code and the actual losses incurred by the company over a three-year period. Nowhere does premium become involved in the calculation.

Myth No. 2

An experience mod of 1.00 is good. WRONG! This is another common myth perpetuated throughout the business community. A mod of 1.00 means simply that you are average. When you sell your goods or services/ do you tell you prospect that you exceptionally average? No - you work hard to be the best in your field. With a mod of 1.00, your claims history is in line with that of your peers in your industry, but it does not mean you are receiving the best workers’ comp pricing possible. For many businesses, their experience mod can go to the mid 0.80’s or lower, saving them thousands on workers’ comp insurance. For a company that spends $50,000 per year on workers’ comp, a 0.87 mod would save them $19,500 over three years. Every business has a different minimum experience mod based on their size and type of business; find out what your minimum experience mod is and aim to lower your mod to get as close to that minimum as possible in order to receive the best workers’ comp pricing.

Myth No. 3

Large (severe) claims hurt your experience mod the most. For 99 percent of businesses, this is not true. While the experience rating system does penalize you for large or severe claims, the formula behind the system is actually designed to reduce the impact of large claims on your experience mod. Large claims frequently impact employers much less than they would expect due to the intricacies of the experience rating system. For most employers it is small indemnity claims that drive up their experience mod. In 90 percent of cases, the driving factor behind a higher-than-minimum experience mod is mishandled small indemnity claims. By working with an agent/broker or consulting firm that specializes in managing workers’ comp, insureds can reduce the impact of these small claims on their experience mod and ultimately reduce their experience mod, leading to lower workers’ comp premiums. A total understanding of the experience rating system is a must to receive the best workers’ comp pricing possible.

Myth No. 4

There is nothing you can do to control or lower your experience mod. This is the most frustrating myth for employers. Their experience mod goes up year after year, and when they ask their agent/broker what they can do to reduce their premiums the agent simply says, “Have fewer claims,” and “Wait for it to come down.” While there is perhaps some truth to these statements, there are many ways that employers can take control of their experience mod and reduce their workers’ comp cost. By completely understanding the formulas behind the experience rating system, employers can effectively manage claims, reduce the impact of small claims, implement an effective return-to-work program, initiate a “no accident” certification program, and explore the use of deductibles and loss-sensitive program. These and many other small changes can lead to a lower experience mod.

The bottom line is that in order to remain competitive your business must control its experience mod. A lower experience mod can reduce workers’ comp insurance costs dramatically, as well as position your business to be a fierce competitor, no matter what industry you are in. Lower operating costs are good for everyone. By working with an agent/broker or consulting company that can assist you in better understanding the system, you will take advantage of the experience rating system and save on your workers’ comp insurance.

November 4, 2010

By Andy Fulford

Your vehicles are the backbone that keeps your business up and running. So when it comes to insurance for those vehicles, make sure that you’re covered by an insurance company that fits your business needs - because the last thing you want when you have a claim is to find out you have insufficient coverage. 

Your vehicles are the backbone that keeps your business up and running. So when it comes to insurance for those vehicles, make sure that you’re covered by an insurance company that fits your business needs - because the last thing you want when you have a claim is to find out you have insufficient coverage.

When you’re working with a local independent agent to build your policy, make sure to ask these eight questions to help you decide which carrier is right for your business.

1. Are all of my drivers covered, even if they’re not listed on my policy? Ask your insurance company about their policy for covering employees who drive your business vehicles. Some vehicle insurers will only extend coverage to drivers who are specifically named on the policy. So, if you regularly employ temporary workers, you would need to call your insurer and add them to the policy each time or else they wouldn’t be covered in case of an accident.

While you should always list employees who always drive your vehicles, some insurers allow “permissive use,” which means that temporary drivers are covered as long as they have your permission to operate the vehicle

2. Are my employees’ personal vehicles covered if they get into an accident while running a business errand? What about rental cars? In many cases, rental cars and employee vehicles aren’t covered under a standard commercial auto insurance policy. And if one of those vehicles is damaged in an accident, you could be liable.

If your business often uses rental vehicles, or if you send employees on business errands in their personal vehicles, consider adding Hired Auto, Non-Owned Auto or Any Auto coverages to your policy.

3. I’m a seasonal business and don’t need full coverage in my off months. Can I move to a comprehensive-only policy in slow months? Absolutely. A comprehensive-only policy provides coverage for businesses that don’t need liability coverage during certain months, but want basic protection against incidents like vandalism, theft, falling tree branches and hail. This is ideal for vehicles that sit for long periods during off-season.

Plus, a comprehensive-only policy provides continuous insurance. If you were to drop your insurance completely, you might pay significantly more to get a new policy when your peak season rolls around because most insurance companies want to see proof of continuous coverage.

4. What kind of service can I expect if I have a claim? Find out how quickly your insurer resolves claims on average. The faster they take care of your claim, the faster you can get your vehicle back to work.

One thing that can affect turnaround time is whether your insurer uses full-time, part-time or contract claims adjusters. Some companies use part-time or contract adjusters to handle commercial vehicle claims, which can slow down the process.

5. When I have a claim, is there anything I can do to get my vehicle back on the road quickly? Even if the accident isn’t your fault, report the claim to your insurer as soon as possible. They can work with the at-fault driver’s insurer to help resolve the claim and get your vehicles repaired quickly.

Additionally, put an accident information kit in each of your vehicles to make it easy for your drivers to capture insurance, driver and witness information following an accident. Most fleet safety companies and local agents have these readily available.

6. Is 24/7 service included with all policies? Many insurance companies are only available during regular office hours, which can make filing a claim, adding a vehicle to your policy and paying bills inconvenient. Before you buy, check with your insurance company to make sure they’re available when you need them.

7. Will all agents shop my policy on a regular basis? Although it’s easier to stay with the same insurance company than shop around for new coverage, ask your agent to regularly quote your policy with other carriers to make sure that you’re getting the best deal.

In addition to vehicle insurance, you may need a wider range of additional coverages to protect your business, from general liability to workers’ compensation. While it might be easier to buy all of these products from the same company, you could save big bucks by buying your policies from separate providers.

8. What are my payment plan options? Do I have to pay my entire premium up front? Some insurers have significant finance charges associated with their bill plans, or don’t have flexibility in payment schedules. Look for companies that offer flexible pay plans, including low initial payments and no finance charges.

Have a few questions of your own? Talk to a local independent agent. He or she can answer them and help you determine which insurer and coverages are right for your business. 

July 12, 2019

By Tyler Leach

Insurance can be a difficult field for anyone to navigate. To start, there’s so many different types for a roofing contractor to worry about:

• Life Insurance or Personal Insurance

• Property Insurance

• Marine Insurance

• Fire Insurance

• Liability Insurance

• Guarantee Insurance

• Social Insurance

Trust us when we say that the list can go on. In fact, strange ones exist like wedding insurance, kidnapping insurance, and even body part Insurance. With all these types of insurance two really stand out for roofers: homeowner’s insurance and commercial property insurance. Though some roofing companies focus just residential or commercial, most will have to deal with both types.

Why Claims Mean Money for Your Roofing Company

With insurance comes claims. A savvy homeowner or commercial property owner will know to file a claim for water damage, ice damage, lightning strikes, power surges, wind, hail, and fallen trees. However, many homeowners won’t know what to damage to look for, especially on a roof. Even worse, many roofers won’t know what to look for either. Unfortunately, roofs aren’t inexpensive and a roof repair or roof replacement can be hard to pay completely out of pocket. If the roofing contractor doesn’t know what to look for, a potential storm damage claim could be missed along with the ability to pay for a reroof.

Claim Experts are a Must for Any Roofing Contractor

With all of this potential money lying around every roofer needs an expert. Many times, adjusters will deny claims. However, having a roofing technician that is well versed in insurance claims can make the difference between the adjuster denying or accepting the claim. This is not just for the gain of the roofing company. The home or building owner is provided a low deductible and now will be able to fix a roof they may not have had money for.

Credibility as a Roofer

Having experts in storm damage and insurance claims not only helps with a current project but also with projects down the road. In fact, that homeowner will be more likely to refer your business to friends and family. Also, if the commercial property owner has more than one property, you may be given more work for your efforts. All in all, it makes sense to have someone on your team who can navigate the insurance jungle.

December 19, 2024

By Elizabeth Rivelli

Contractors and construction businesses that rent equipment should consider getting construction equipment rental insurance. This type of insurance covers the cost of replacing rented tools and equipment if they get damaged or stolen. 

Learn what construction equipment rental insurance covers, how much it costs and who can benefit from this kind of coverage.

What does construction equipment rental insurance cover?

Construction equipment rental insurance covers tools and equipment that are rented from a rental company. It pays to repair or replace items that get damaged by covered peril, like theft, vandalism and natural disasters.

Most tool rental companies offer insurance as an optional add-on to a rental contract. However, this type of policy can also be purchased separately from an insurance provider. Coverage is available on a short-term basis or as a permanent policy.

It’s important to point out that equipment rental insurance does not cover maintenance issues, misuse, or abuse of the equipment. Any damages caused by lack of maintenance or abuse are the responsibility of the customer. 

Equipment Rental Insurance vs. General Liability Insurance

General liability insurance covers damage caused by tools and equipment that a business owns or rents. It doesn’t cover damage to the actual tools or equipment that are rented. 

For example, imagine that a residential contractor rents an excavator to build an in-ground hot tub, and they accidentally back the excavator into the side of the house. Not only does it damage a portion of the siding, but it also damages the excavator.

In this case, the contractor’s general liability insurance policy would pay to repair the homeowner’s damaged siding, but it wouldn’t cover damage to the excavator. A construction equipment rental insurance policy would pay to fix the machine.

In addition, some tools and equipment might not qualify for coverage under a general liability policy. For instance, a work truck could be considered business equipment but business-owned and leased vehicles are only covered under commercial auto insurance. 

Equipment Rental Insurance vs. Damage Waivers

When a contractor rents construction tools or equipment, they have the option to add a damage waiver to their rental agreement. The damage waiver limits the contractor’s financial responsibility if their rented equipment comes back damaged or stolen.

If something happens to the rented tools or equipment, the customer is only required to pay a certain percentage of the cost of repairing or replacing the items. For example, a waiver might require the customer to pay 50% of the value of stolen equipment. 

A construction equipment rental insurance policy covers the full cost of repairing damaged items or replacing stolen equipment, minus any deductibles.

How much does equipment rental insurance cost?

The cost of equipment rental insurance depends on a few factors, including:

• Age of the equipment and its value

• Duration of the rental period

• Type of work being performed

• Deductible and coverage limits

Equipment rental insurance premiums are typically higher for heavy machinery and expensive equipment, like bobcats, cranes and bulldozers. Less valuable tools, like table saws and carpet installation tools, usually have lower premiums. 

Additionally, contractors will pay more for rental insurance if they need coverage over multiple months or years. Some insurance companies also offer short-term policies for week-long or month-long projects, which are cheaper.

Considering that construction equipment can be very expensive to rent, the price of insurance is quite inexpensive in comparison. Before purchasing equipment rental insurance, it’s a good idea to shop around and get multiple quotes to find the best policy at the lowest price. 

Why do contractors need equipment rental insurance?

Contractors who rent a lot of equipment have more exposure to risk if they don’t have equipment rental insurance. They are responsible if tools or equipment get damaged or stolen, which can lead to serious financial consequences. Having equipment rental insurance provides peace of mind in case something unexpected happens.

For contractors who rarely rent tools, the coverage offered by a rental company might be sufficient. In this case, a damage waiver could be cheaper than getting a standalone rental equipment insurance policy. 

For contractors who rent tools and equipment often, the rental company’s damage waiver may not offer enough protection. A separate equipment rental insurance policy could be a good investment, which covers all the items a business rents during the policy period.

Equipment rental insurance helps protect business assets.

Contractors may want to consider purchasing equipment rental insurance if they frequently rent tools and machinery. The comprehensive coverage provided can safeguard their operations against potential liabilities, and help projects proceed smoothly without the burden of unexpected costs. Shopping around for competitive quotes and consulting with an insurance broker can help contractors secure the best coverage that meets their business needs.

August, 20, 2024

By Jeremiah Woods, Melody Bell and Julia Tell

Determining the price of construction insurance is complex, with much of the work happening behind the scenes. Most construction companies interact primarily with an insurance broker or agent, but actuaries and underwriters work to develop models and adjustments that establish the price that an insured entity pays for the policy.

Understanding how actuarial models work, and the interlocking role of underwriters can help demystify construction insurance pricing.

Actuary’s Role in Construction Insurance

Actuaries play a pivotal role in the construction insurance pricing process. They gather data from various sources, including more comprehensive industry resources and the insurance company's internal data, to formulate construction pricing models for different types of work, locations, companies and projects. This detailed data includes risk assessments for various scenarios — such as concrete vs. drywalling work, a project in Idaho vs. California or residential vs. highway construction. The actuary uses a broad data set to assess exposure to potential hazards.

Actuarial Models

Actuaries typically analyze risk to establish a rating plan for an insurer’s whole set of clients. The base rates in the actuary’s model must make financial sense for the insurer so that the totality of policies they write will allow them to profit. With a view of the broader data, actuaries crunch the numbers to price insurance policies, so the insurance company is factoring in the risk when pricing insurance to construction companies.

Calculating the exposure units, or units of measurement to underlie the pricing of policies, for each characteristic in construction projects requires actuaries to develop a model that can cover a wide variety of projects. With a large enough data set, actuaries can formulate a credible model that accounts for the numerous variables needed to set insurance rates.

Actuarial Pricing Factors

With the different types of construction insurance policies, varied details impact pricing. For instance, a worker’s comp policy will have different metrics to consider than a general liability policy. The size of the project is the most significant determinant in insurance pricing, as the number of exposure units goes up with the dollar amount and scope of a project. Actuarial models include these foundational categories:

• Project Characteristics

  Size, type, location, frame factor, fire protection class

• Builder Characteristics

  Number of years in business, experience, operational practices

• Coverage Details

  Limits, deductibles, exclusions

• Loss History and Claims Data

  Losses in the types and locations of work across the larger dataset

Project types have varied risk exposure, which is derived from data. A hospital project is more complex and hazardous than a school building. The height of a structure impacts the risk. There are class codes for the various types and specifics related to building types. The project's location is another variable that is part of the model.

Specific builder characteristics can reduce the price of a policy within the actuarial rating structure. For instance, a contractor with no losses in the previous three years may get a credit that reduces the overall policy cost. Conversely, a builder with more than two yearly claims may merit a surcharge. The actuarial model gives underwriters guidance on the percentage of credit or debit to apply to specific company characteristics.

Underwriter’s Role in Construction Insurance Pricing

Actuaries analyze exposures by examining company and industry data overall, while underwriters assess the company seeking coverage and the project more closely. Underwriters are usually the ones to price a policy, using expert judgment to apply credits and debits to the pricing model provided by an actuary.

Underwriter Adjustments to Insurance Pricing

Starting from the actuarial model, underwriters use information about a specific company or project to determine whether to credit for lower risk or, in some cases, higher risk. The underwriter plugs in the actual project information, such as size, type, claim limits, and information about the construction company. Each type of insurance may have varied categories for the underwriter to enter into the model.

For instance, a company seeking builder’s risk insurance with a robust safety plan in place and regularly implementing all facets of the plan might be a somewhat lower risk than average. In that case, the underwriter may apply a credit to lower the policy cost. If the builder uses digital tools that validates the implementation of the safety measures, the underwriter can use that data to offer credit for sound risk management more confidently.

Underwriters have discretion in applying credits or possible surcharges when formulating policy pricing. Some of the features underwriters look at include:

• Company Financial Records

• Loss History

• Project Experience

• Quality Assurance Program

• Location

• Safety Plan

• Site Protection

• Technology Adoption

Trends in Construction Insurance Pricing

The increasing use of construction technology makes more data available to actuaries to assess broad data sets and to underwriters to validate operational performance metrics when setting pricing. Builders who provide detailed data from construction management technology confirm operational performance and can benefit from individualized pricing that more accurately represents the risk.

Pricing insurance historically relied upon data, data that was provided by the builder or their representative, yet verifying that data was difficult. With more technological data, actuaries can offer a more nuanced set of metrics to assess risk. Underwriters can better apply this to a pricing model that is more sophisticated and customized so that policies can be tailored to each insured and their specific exposures.

As more hard data exists in construction procedures, construction software management platforms can help insurers manage the complexity of insurance pricing processing. However, actuaries and underwriters create and apply models with expertise, and their interlocking roles allow insurance companies to remain profitable and continue to offer policies that builders need to operate.

August 14, 2024

By Melody Bell and Julia Tell

Self-insured retention (SIR) is a mechanism in construction insurance policies that is often compared to a deductible. However, SIRs operate slightly differently and have unique benefits. Understanding how to navigate SIRs can help companies negotiate with insurance companies to find the best balance between the SIR dollar amount and the policy cost.

In this article, we’ll explore the ins and outs of SIR policies, their benefits and disadvantages and how they stand against deductible policies. 

How does SIR work?

A self-insured retention policy is a specific dollar amount that the insured party is responsible for paying out in claims up to that limit. After the insured reaches the upper limit of the SIR, the insurance company will start to handle and pay claims. The insured construction company manages all the claims and pays out for any losses before they reach the SIR limit, and the insurance company doesn’t get involved until the SIR is exhausted. 

SIRs are similar to deductibles except that the builder has control over expenditures within the SIR limit, subject to reporting requirements. Deductibles are controlled by the carrier, which means the insurance company controls all claims from the start. 

This structure incentivizes construction companies to manage risks to avoid paying out-of-pocket for claims if possible. For insurers, GCs with “skin in the game” will likely have better risk management and actively work to keep their claims low. 

Reporting and Record-Keeping

Construction companies with a SIR need to track any losses they pay out. They will need to report all of this to the insurance company if they reach their SIR limit and need the company to start covering claims. The policy will specify what types of claims and costs count towards the SIR, and the GC needs to have records to show the details for all payouts and related expenses. 

Insurers will check the records to ensure that all reported amounts conform to the terms of the policy, as some companies attempt to claim inappropriate expenses, such as gifts to clients, against SIR limits. Many contractors hire a third-party administrator (TPA) to handle the claims against the SIR.

Insurance companies have reporting requirements for claims over a certain amount, when a certain percentage of the SIR is reached, or for certain types of losses. 

For instance, a policy with a $100,000 SIR might require reporting for any single claim over $25,000, when the insured reaches 50% of the SIR in more minor claims or when a significant loss such as a collapse or loss of a limb happens. A different policy could require the insured company to report to the insurance carrier any claim or cost of repair exceeding $10,000 — the specific amount is set by the insurer — or any claim that impacts more than 5 units, involves serious injury or death or denies the tenant the ability to use or inhabit the unit. Each policy will have reporting requirements set by the carrier. 

Insurers require this reporting to give them notice that the insured is getting closer to exhausting the SIR, and the insurer may be required to step in and start covering claims. In the case of a catastrophic loss, even if the initial claim isn’t over the SIR limits, it is likely to grow because of the nature of the loss.

Carriers may also require insureds to report annual SIR spend. Once SIR is exhausted, the carrier will begin to pay the first dollar, so the reporting helps determine and prepare for stepping in.

Structure and Balancing Risk

Companies can negotiate with insurers based on their business needs. Setting aside funds to cover claims within the SIR should be part of a construction company’s overall cash flow management strategy. Some may choose a higher SIR with a lower policy cost, while others may prefer a lower SIR and be willing to pay more in premiums. 

When pricing insurance, insurers use actuarial models to consider a company’s project types, risks and loss history. It is the policy owner’s responsibility to maintain the SIR. To handle claims, reporting, and record-keeping, GCs need their administrative staff to stay on top of these tasks or hire a TPA to manage the paperwork.

Construction companies can also work with the carrier to structure SIRs during the underwriting process to cover a region, a division, a company, or certain parts of a project. For instance, a residential development project with 125 new homes could be divided into 5 SIRs covering 25 homes each. The policy may also have an aggregate SIR limit and a per-occurrence SIR limit. With this structure, the policy could have an aggregate SIR of $1 million and a $250,000 limit for each occurrence.

Differences Between a Deductible and an SIR

Smaller construction companies may only choose an insurance policy with a deductible. Larger companies often prefer SIRs but might opt for a deductible policy if that best suits their business needs.

A major difference between a SIR and a deductible is in who handles the claims. With a deductible, the insurer handles claims and bills up to the deductible amount and bills the insured company for any amounts under the deductible limit. SIR, on the other hand, requires the insured to take care of all claims and payouts until the SIR limit is reached.

The Pros and Cons of SIRs

SIRs are an advantage for companies with solid paperwork controls and risk management.

Larger construction companies often opt for SIRs for the following reasons:

• The premium costs may be lower than with a deductible policy, especially with a higher SIR limit.

• The construction company can address exposures and manage risks well, thereby minimizing the claims paid out.

• Control of smaller claims rests with the GC.

• Policies can have higher liability limits.

• Flexibility to structure SIR amounts within the policy to cover different portions of projects.

• If the losses are minimal enough that they don’t need to be reported to the insurer, claims may not appear on loss history.

• The financial incentives to mitigate risks can prompt more proactive risk management.

On the flip side, there are some disadvantages to SIRs:

• GCs face increased work to manage and track claims, even if a TPA is involved.

• Policy requirements are complex, so understanding what types of claims are applied against the SIR can require careful reading of the insurance contract to comply.

• The GC has more financial responsibility for claims within the SIR limit.

• A company’s loss history is more significant when determining the cost of the policy.

Choosing the Right Policy

SIRs can help construction contractors manage their overall costs and encourage careful risk management. Companies can negotiate their policy and SIR limits with the insurer to find the best balance, and SIRs allow GCs more control over minor claims.

As with all policies, the details matter, and negotiating pricing, what types of losses are covered, and whether the defense of claims is inside or outside the limits can help align the insurance with a company’s needs.

Just as builders, subcontractors and owners collaborate in construction projects, insurance brokers and companies can help general contractors achieve their business goals. Therefore, providing a complete insurance submission can help companies work well with insurers. Ensuring the construction company, broker, and insurance company are on the same page with the policy details can help mitigate problems should significant losses occur.

October 20, 2025

By Brian Johnston and Anthony Venette

When it comes to commercial real estate, nothing has been constant or predictable since the pandemic. The costs of materials, labor and code-driven rebuilding have been uneven since 2020. But many insureds still apply carry-forward trend factors to last year's numbers.

In today's property market, taking valuation shortcuts puts you at risk of underinsurance, coinsurance penalties and contentious claims. But having an independent appraisal of your property gives you a more disciplined approach that aligns your schedules with actual reconstruction costs and asset mix. Brokers can take the lead by helping clients scope, commission and maintain defensible values that the market will underwrite.

Rolled-forward values are easy to place until a loss exposes the gap. That’s where an independent property appraisal comes in. Here are three of the most important advantages of having an independent property appraisal:

1. Clear definition of value. Commercial property programs typically insure on replacement cost or actual cash value, and unique facilities may require reproduction cost.

2. Asset-level accuracy. Buildings, site improvements and movable equipment do not inflate at the same rate. An appraisal classifies assets, captures additions and disposals, and corrects legacy errors in fixed-asset reporting.

3. Schedule credibility. Appraisals provide the granularity that underwriters need for rating and catastrophe modeling.

A broker-led process that works

Establishing accurate property values requires a structured approach that balances rigorous methodology with practical maintenance. Here are five key steps to build and sustain defensible insurance schedules:

Confirm policy intent and valuation basis. Align with replacement cost, actual cash value or reproduction cost based on the asset type and policy language. Where code upgrades are likely, address ordinance or law coverage explicitly. Address specific catastrophe modeling data elements that an underwriter feels are important.

1. Commission an appraisal that takes the specific industry and region into consideration. The most durable engagements combine physical inventory of buildings and major equipment with methods tied to recognized cost sources and current indices. Deliverables should include location-level schedules.

2. Capture code, debris and soft-cost realities. Debris removal, professional fees and ordinance or law upgrades can materially increase rebuilding budgets and are not always captured by simple trending.

3. Tie annual updates to credible benchmarks. After a full appraisal, apply annual updates using reputable sources that fit the asset mix rather than a single house factor. Consider engaging an appraisal specialist for updates and reappraisals.

4. Refresh on a cadence, not in a crisis. For diversified portfolios, a three-year full refresh with annual indexation is a practical rhythm, accelerated after major capital projects or market shocks. Ongoing industry coverage underscores the benefits of defensible schedules at placement and claim time.

Underinsurance is not theoretical

Coinsurance clauses and sub-limits can erode recoveries even on partial losses when reported values lag the true replacement cost. Survey and market commentary point to persistent valuation gaps.

What ‘good’ looks like in the work product

Here are important considerations for addressing risk mitigation:

• Scope letter that mirrors the policy. Reference the valuation basis used in the policy and specify inclusions such as foundations, site improvements, and specialized equipment.

• Location-level schedules with roll-ups. Carriers need a clean link from asset detail to total insurable value and premium calculation.

• Assumptions tied to named sources. Cite recognized cost services and current PPI or industry indexes for trend factors and disclose regional adjustments and lead-time allowances.

• Reconciliation to the fixed-asset register. A tie-out that flags ghost assets and misclassifications improve both insurance and financial reporting hygiene.

• Executive summary for underwriters. A two-page overview stating methods, data sources, and sensitivity to key drivers makes placement discussions more efficient.

 How to position updated appraisals with clients

Here are three important considerations:

• Better market access. Underwriters price uncertainty. A defensible schedule can expand capacity options and reduce friction on limits, deductibles and sublimits.

• Claim-time leverage. When everyone agrees upfront on definitions and scope, disputes over actual cash value versus replacement cost new or ordinance and law are less likely to stall recovery.

• Operational benefits. Cleaning the fixed-asset register supports budgeting, maintenance planning and capital allocation.

A note on cost trend storytelling

Clients will likely ask you if costs are still rising. The honest answer is nuanced. Some inputs cooled from the spikes of 2021 and 2022, but aggregate materials and construction inputs remain above pre-pandemic levels and have resumed modest year-over-year increases. This is exactly why single-factor trending is risky. Use an appraisal to reset the base, then apply targeted, source-based updates each year.

Real world example

Scenario: Brewery with outdated valuation.

Business: Brew pub opened in 2019. Building appraised for $2 million, and ownership purchased a commercial property policy.

Policy details

• Building coverage: $2 million.

• Coinsurance clause: Requires coverage of at least 90% of the replacement cost.

Building valuation updates: Since the 2019 valuation and policy creation, the insured and their broker have used a 2.5% to 4% inflationary factor to update the property’s replacement cost. By 2025 the building’s valuation had increased 15% to $2.3 million based on these calculations. Due to rising cost of construction and upgrades made to the property, the actual increase in replacement cost -- which an appraisal would have identified – was 60%. Thus, the building should be appraised at $3.2 million, not at the original $2.3 million. That means the building is underinsured by $900,000, or 28%.

 Coinsurance penalty calculation

• 1: Determine the required coverage: The policy's 85% coinsurance clause means the owner should have $2.88 million in insurance coverage ($3.2 million x 90%).

• 2: Calculate the penalty: The owner only carried $2.3 million in coverage, so the property is underinsured. The penalty is the percentage of required coverage that was missing: $2.3 million (coverage carried) / $2.88 million (coverage required) = 80% payout factor.

 Loss scenario (partial). A faulty valve causes flooding on the second floor utility room. The flood is discovered relatively quickly, but damage to the kitchen and dining room are calculated at $500,000.  The payout will be $400,000 ($500,000 x 80%), a bad situation for the owner.

Loss Scenario (total). A fire broke out due to a faulty electrical panel overnight. The building is determined to be a total loss. The payout will be $1.84 million ($2.3 million x 80%), this is a terrible situation for the owner as the building will cost $3.2 million to replace and it will have less than 60% of that in an insurance settlement to do so.  

Getting insurance-to-value correct is about more than compliance or underwriting — it’s about ensuring that the policy responds as intended when a loss occurs. Brokers play a central role in closing the valuation gap by helping clients establish accurate property schedules and maintain them over time. An appraisal that captures asset-level detail, code requirements and soft costs sets the foundation for coverage that aligns with reality rather than outdated assumptions.

Accurate values are the broker’s best tool to ensure property insurance delivers when it matters most.

June 20, 2024

By Gary Grindle

Contractor’s general liability policies can contain a myriad of amendatory endorsements and exclusions. Careful review of the terms and conditions, especially when working with E&S markets, is critical to ensure proper coverage for insureds and no unpleasant surprises when a loss occurs.

This article explores 11 of the most common and challenging endorsements and exclusions found on contractor’s general liability policies.

Hypothetical Claim Scenario

Gencon, a general contractor, was nearly finished constructing a five-story apartment building when an employee accidentally damaged a sprinkler head, causing a leak. Gencon made an emergency call to the plumbing store next door and “Joe the plumber” promptly arrived and quickly repaired the damaged sprinkler head before any significant water damage occurred.

Unfortunately, one year after completing the project, the repair failed and the building experienced significant water damage. Gencon was sued and submitted a claim to its insurer. Much to Gencon’s dismay, the insurer denied coverage based on the fact that the faulty work was done by a subcontractor, “Joe the plumber,” who did not have insurance that complied with the subcontractor’s warranty limitation form on Gencon’s General Liability policy (e.g., inadequate limits, no additional insured status, etc.). In their rush to fix the damaged sprinkler head, Gencon had failed to review “Joe the plumber’s” insurance. Gencon learned a hard lesson and worked with their agent to negotiate for a less punitive subcontractor’s warranty endorsement at their next renewal.

This type of restriction is not uncommon. Contractor’s general liability policies, particularly in the E&S marketplace, often include a variety of onerous endorsements. Be aware that carriers may apply different labels to many of these forms.

The following endorsements and exclusions should be avoided, or less restrictive options negotiated whenever possible, if they appear in your client’s policy.

1. Injury to Employee Endorsements

What it is: The ISO Commercial General Liability Coverage Form (CG0001 04/13) provides for an important exception to the exclusion for bodily injury to the insured’s employees (exclusion d, Section 1, Coverage A). The standard exclusion does NOT apply to liability assumed by the insured under an “insured contract.” It is not uncommon for carriers to attach forms which eliminate this important exception to the employee exclusion, particularly for contractors operating in New York where “Action Over” claims are relatively common.

These endorsements are often informally referred to as “Labor Law” exclusions. Their intent is to preclude coverage for claims by injured employees or workers and typically involve claims made against the general contractor and/or job owner, alleging they violated “safe place to work” requirements (e.g. NY Labor Law S240 commonly referred to as “the Scaffolding Act”). The specific exclusionary language is often contained within endorsements labeled as Employers Liability Exclusion, Worker Injury Exclusion or Contractual Limitation.

Coverage limitation: The general contractor, upstream contractor or owner would typically look to the injured employee’s employer (i.e., the general contractor or subcontractor) for coverage via the indemnification agreement in the construction agreement. The elimination of coverage for these “Action Over” type claims presents a major gap in coverage.

2. Sub-Contractor/Independent Contractor Injury Endorsements

What it is: Like Injury to Employee Endorsements, these forms typically eliminate “Labor Law” or “Action Over” coverage as respects injury to independent contractors and their employees.

Coverage limitation: The upstream contractor or job owner would typically look to the downstream sub-contractor for coverage should any downstream contractor’s employee be injured (via the indemnification agreement in the construction agreement). The elimination of coverage for these “Action Over” type claims presents a major gap in coverage for contractors utilizing sub-contractors.

3. Classification Limitation Endorsements

What it is: Carriers will use this type of endorsement to restrict coverage to the specific operations/exposure they’ve classified and rated for on the policy or described on the declarations or by endorsement language. One carrier’s form reads as follows:

This insurance applies to “bodily injury,” “property damage” or “personal and advertising injury” not otherwise excluded herein, arising out of only those operations which are described by the classification shown on the Commercial General Liability Coverage Declarations, its endorsements and supplements.

Coverage Limitation: ISO commercial lines classifications were never intended to be fully descriptive of a contractor’s operations. Likewise, an underwriter’s description inserted on the declarations or endorsement often do not fully capture the breadth of an insured’s activities. As a result, they leave significant room for coverage disputes in situations where a contractor is involved in ancillary activities not clearly described by the ISO classification(s) or business description language drafted by the underwriter.

If these limitations cannot be removed, it is imperative that the classifications or business description utilized be made as broad as possible to ensure they are inclusive of all the insured’s potential activities.

4. Contractual Limitation Endorsements

What it is: The ISO Commercial General Liability Coverage Form (CG0001 04/13) provides relatively broad contractual coverage within the basic contract. Most notably, item f. within the definition of “insured contract” specifies that an insured contract includes:

That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. Note: There are exceptions to this section - refer to the policy language for details.

This is the section of the definition most applicable to contractors utilizing construction and sub-contractor agreements. Carriers, particularly in the E&S markets, often attach ISO form CG2139 (10/93), Contractual Liability Limitation, which eliminates section f. of the definition of “insured contract.” Carriers may utilize proprietary forms with various titles that do much the same thing, making careful review imperative.

Coverage limitation: By eliminating section f., most contractual coverage is removed. There would be no coverage for liability assumed in a construction agreement including for “Action Over” type claims. These limitations also rarely comply with the requirements of construction agreements.

5. Cross Suits Exclusions

What it is: These endorsements are sometimes very broad and may exclude coverage for suits by any insured against any other insured. There are also examples where carriers include language that precludes coverage for suits by employees (with no exception for liability assumed under an “insured contract”). This is a major concern in states such as New York where employee “Action Over” claims are common.

Coverage limitation: Most notably, these endorsements can exclude coverage for a suit brought by any party included as an additional insured under the named insured’s policy. For example, should a job owner, who is an additional insured, bring direct suit against the named insured, there may not be coverage. If this type of endorsement cannot be removed, every attempt should be made to limit its applicability to suits by one named insured against another named insured or at least only to suits between organizations in which the named insured has a controlling interest.

6. Damage to Work Performed by Subcontractors on Your Behalf Exclusion

What it is: ISO form CG2294 (10/01), or a carrier’s equivalent endorsement, eliminates the exception to the exclusion for damage to “your work” (exclusion l., Section I, Coverage A of the Commercial General Liability Form 04/13) for work performed on the insured’s behalf by subcontractors.

Coverage limitation: If your insured utilizes subcontractors, this type of restriction presents a significant gap in coverage. If your insured is a general contractor, it virtually eliminates completed operations property damage coverage, at least in respect to the work done on behalf of the insured by subcontractors.

7. Independent Contractors Limitation / Subcontractor Warranty Endorsements

What it is: These endorsements establish minimum requirements for subcontractors relative to what is considered “adequate insurance” and what risk management controls must be in place.

Examples most often include:

• Written indemnification agreement in favor of the insured

• Certificates of insurance obtained from the subcontractor

• Specific minimum limits of insurance

• Additional insured status on the subcontractor’s General Liability policy

• No restrictions of coverage as respects “insured contracts” or worker injury

Coverage Limitation: Typically, failure to comply with the terms of these endorsements results in one of four types of penalties:

• Coverage is nullifed relative to any loss resulting from the work of the subcontractor (commonly referred to as a hammer clause)

• Higher deductible or retained limit applies to any loss resulting from the work of the subcontractor

• Lower limit of liability applies to any loss resulting from the work of the subcontractor

• Higher rate applies to the sub cost for the subcontractor

If removal of such endorsements is not possible, every effort should be made to avoid the first type of penalty (hammer clause).

8. Prior Work Exclusions

What it is: Liability Coverage Form (CG0001 04/13) provides coverage for injury or damage that is caused by an “occurrence” during the policy period regardless of when the work was done.

Coverage limitation: These exclusions create a significant gap by excluding coverage for work completed prior to the inception date of the policy. Any future “occurrence” related to work done prior to the policy inception is excluded.

9. Subsidence / Earth Movement Exclusions

What it is: Subsidence or earth movement exclusions are being used much more often. Underwriters will typically agree to remove these exclusions if the insured can demonstrate proper controls (e.g., routine geotechnical review) and that there is no history of subsidence claims.

Coverage limitation: For contractors involved in ground up construction, foundation construction, excavation or any other activity involving the movement of earth, these limitations are particularly onerous and create a significant coverage gap.

10. Residential Exclusions

What it is: Residential exclusions can be very broad (e.g., all types of residential, possibly including apartments) or more narrowly focused (e.g., only applicable to work involving new condominium, multi-unit habitational or tract homes). Some forms specify the maximum annual number of new starts for home builders, the number of homes within a development or the number of condominium units in a given project.

Coverage limitation: Contractors of all types, including “commercial” contractors, may get involved to some degree in residential work, even if on a very incidental basis. Coverage for such work may be excluded entirely by these exclusions. It’s imperative to fully understand the scope of such exclusion to ensure gaps in coverage do not exist.

11. Total Pollution Exclusions

What it is: The pollution exclusion within the ISO Commercial General Liability Coverage Form (CG0001 04/13), although very restrictive, does provide limited pollution coverage.

For example, coverage is not specifically precluded for injury or damage arising out of the products and completed operations hazard. Additionally, coverage is not precluded for the accidental escape of fuels, lubricants or other operating fluids that are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of “mobile equipment” as well as for the accidental release of gases, fumes or vapors from materials brought into a work site in connection with operations being performed by the contractor.

Additionally, for ongoing operations at an additional insured’s site, there is the following exception:

‘Bodily injury’ or ‘property damage’ for which you may be held liable, if you are a contractor and the owner or lessee of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing operations performed for that additional insured at that premises, site or location and such premises, site or location is not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured.

There are also exceptions to the exclusion for premises occupied by the insured for bodily injury  “sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for personal use, by the building's occupants or their guests” as well as for bodily injury or property damage “arising out of heat, smoke or fumes from a ‘hostile fire.’”

Coverage limitation: Carriers (especially those in the E&S space) often attach a “Total Pollution Exclusion” to their policies which is much more restrictive than the standard ISO GL pollution exclusion and eliminates the exceptions to the standard exclusion noted above.

NOTE: As most contractors have a need for this coverage, consideration should always be given to the purchase of a separate Contractors Pollution Policy.

June 16, 2022

By Susan Van Bell

It is important to have some knowledge about insurance and bonds going into a construction project. What types of insurance should your architect and contractor carry? What insurance should you have? And, what does it mean for a contractor to be bonded? We will discuss these topics in this article.

Insurance

Architect: Standard insurance coverages that an architect should carry are commercial general liability, automobile liability, workers’ compensation, and employers’ liability, which covers claims by employees not otherwise covered by workers compensation. Commercial liability insurance is a common type of insurance that most businesses carry. It covers third-party claims for personal injury and property damage arising out of the course of normal business operations. Commercial automobile liability insurance covers liability for accidents involving business vehicles. Workers’ compensation insurance is required by statute and provides coverage for injuries sustained by the business’ own employees in the course of their work. It is important to be sure that any business that operates on your premises has workers’ compensation insurance because, if not, you could potentially be liable if the employee of a business is injured on your property.

The architect should also have professional liability insurance. You probably have some familiarity with the types of insurance discussed above but you may not know about professional liability insurance, also referred to as errors and omissions or E&O, insurance. This policy covers the architect for claims made relating to their performance of professional services, such as claims for additional costs required due to a design error.

Some contracts will include fill points in which to specify the amount of coverage that the architect should carry for each of these types of insurance. Contracts for smaller projects may not include that, but you should check with your architect to make sure that they have these types of insurance policies and that you are covered by them, as applicable.

Contractor: Your contractor should also carry commercial general liability, automobile liability, workers’ compensation, and employers’ liability insurance. In addition, the contractor should  have builder’s risk insurance, which covers damage to the work under construction. If the contractor is providing design services, the contractor should have professional liability insurance. In some instances, the contractor may need to carry a specialized form of insurance which is project specific, such as pollution insurance.

As with the architect’s contract, there may or may not be fill points to specify the types and limits of required insurance coverage in the owner/contractor agreement, but you should make sure your contractor has the standard insurance. In some jurisdictions, contractors are required to post their insurance coverages online with the governing agency so the clients can easily access the information. If a specialized form of coverage is needed, that should be written into the owner/contractor agreement.

Owner: You should have liability insurance and property insurance to cover the value of your property. For a residential project such as a remodel, you would want to provide property insurance sufficient to cover the replacement value of your property that might be damaged or destroyed and that is not otherwise covered by the contractor’s builder’s risk insurance. This might be relevant if, for example, during the course of a remodel, there is damage to another part of the structure.

It’s a good idea to contact your insurance agent or broker before signing your agreements to ask for recommendations on what insurance and coverage limits all of the parties should have. You would also want to confirm that the other parties have the required coverages by asking for certificates of insurance or looking at the web site for your jurisdiction if the information is posted there.

Bonds:

Most states require contractors to be licensed and bonded. You can check on a contractor’s license status by inquiring with the relevant government agency in your jurisdiction. States typically have training or education requirements for obtaining a license, which gives you some assurance that your contractor is competent to do the job. The state-required bonds, which are issued by a surety company, usually provide financial resources for completion of the job if, for some reason, the contractor cannot complete it. The owner can make a claim against the bond. Note that a bond is not the same thing as insurance and the surety company, which is paying under the bond, may have rights, such as providing the new contractor and overseeing completion of the project. Again, you should check your state’s specific requirements so that you know exactly what the contractor’s bond will cover. There may be different requirements for commercial and residential bonds.

There are also many types of specialty bonds, such as bid bonds, or bonds that may exceed the state’s minimum bonding requirements, such as performance and payment bonds written with higher limits. These are not typical in residential and small commercial projects but, if you have a project with a higher budget than the state-required bond amount, you may wish to look into requiring your contractor to obtain an additional bond. In that case, you might need to negotiate which party will pay for the cost of the additional bond.

Conclusion

Insurance and bonds are excellent tools by which to allocate risks and provide protections in construction projects.  Although not as exciting to think about as materials for your new countertops or your new gaming room, they are important to incorporate appropriately into your project requirements.

We hope you have enjoyed reading these articles and that they have helped to equip you with some basic knowledge about construction projects. We encourage you to consult with your attorney, insurance adviser, and other relevant professionals prior to beginning a project. And, mostly, we hope you have great success with your project!

March 28, 2025

By Insurance Journal

Whether you’re a general contractor managing large-scale construction projects or an artisan contractor specializing in smaller, detailed work, your business faces a wide array of risks. From accidents on the job site to equipment damage and legal liabilities, various types of construction insurance can help protect your business.

What Is Construction Insurance?

Construction insurance refers to a range of commercial policies designed to protect contractors and projects under construction. Since every contractor’s needs vary, there’s no one-size-fits-all construction insurance policy. Instead, your agent will help tailor a mix of coverages to match your specific needs and safeguard your business against the most relevant risks.

Who Needs Construction Insurance?

Regardless of your operation, construction business insurance is essential for protecting your business, assets, employees, and clients. Here’s a quick overview of the contractor categories we commonly insure:

• General Contractors: Contractors who typically oversee construction projects and hire subcontractors for specialized work.

• Artisan/Trade Contractors: Contractors who specialize in particular trades or services, such as carpenters, drywall installers, electricians, flooring contractors, framers, glass and glazing contractors, HVAC contractors, insulation installers, landscapers, painters, plumbers, residential remodelers, and tile setters.

What Types of Insurance Do Contractors Need?

Many insurance coverages can help protect contractors throughout a project, with some construction insurance policies being required by law. The types of construction insurance you need will depend on your specific operations and the state(s) in which you perform work, but a well-rounded policy may include:

General liability

General liability coverage helps cover financial losses related to lawsuits and third-party claims involving bodily injury, advertising-related issues, or property damage caused by your business operations. Claims can range from slip-and-fall accidents on a job site to damage caused by faulty workmanship. Many states require contractors to carry a minimum level of coverage to obtain a license or secure contracts.

Property Insurance

Property insurance helps cover financial losses related to the damage or loss of owned or leased buildings, as well as the assets inside, including tools, equipment, and inventory. Covered risks can include fire, theft, vandalism, and certain weather-related events. Many clients and contracts require contractors to carry property insurance.

Workers’ Compensation

Workers’ compensation insurance is designed to cover lost wages, medical and rehabilitation expenses, and, in some cases, funeral costs or death benefits for employees injured on the job. It helps businesses protect both their bottom line and the wellbeing of their employees. In most states, workers’ compensation is mandatory for businesses with a certain number of employees.

Builder’s Risk

Builder’s risk insurance, also known as course of construction insurance, provides coverage for buildings and structures under construction, protecting against damages like fire, vandalism, and weather-related incidents. Suitable for projects of all sizes — from residential remodels to large commercial builds — it generally covers materials, supplies, fixtures, and machinery intended for permanent installation. Builder’s risk insurance is usually purchased by the project owner or general contractor and can be customized to address project-specific risks like theft, personnel errors, or delays.

Commercial Auto

Commercial auto insurance provides coverage for company-owned vehicles, such as trucks and vans, protecting against damages from accidents, theft, and vandalism. It’s required in every state for vehicles used by businesses, including those owned, leased, or hired. Commercial auto policies typically include liability coverage to help shield your company from costly litigation arising from accidents. Whether you operate a small business or a large fleet, commercial auto insurance helps you reduce exposure to high repair costs, medical expenses, and legal fees.

Professional Liability Insurance

Professional liability insurance, or errors and omissions (E&O) insurance, protects contractors against claims of mistakes or negligence in their work.* For example, if you install plumbing incorrectly, leading to water damage in the client’s home, the homeowner may sue for repair costs. An E&O policy helps cover legal costs, defense fees, and any settlements or judgments.

Inland Marine

Inland marine insurance is designed to cover property in transit over land or stored off-site, helping protect assets from risks like theft, fire, and weather events. For contractors, this insurance typically applies to tools and equipment — from large machinery like excavators and forklifts, to smaller items like drills and saws. Many inland marine policies provide coverage regardless of location. These policies are often called “floater” policies because they offer coverage that follows the insured property wherever it goes.

Umbrella Insurance

Umbrella insurance provides an extra layer of protection by extending the limits of your existing liability coverages, such as general liability and commercial auto insurance. It typically kicks in when the limits of your primary policies are reached, helping cover additional costs like legal fees and medical bills. For contractors, umbrella insurance is crucial for managing risks inherent to the industry, as it offers financial protection against catastrophic losses that may exceed the limits of your primary policies.

Other Important Considerations for Contractors

In addition to your insurance policies, there are several key factors contractors need to consider for well-rounded coverage and compliance. Make sure you do the following:

Request Certificates of Insurance for Subcontractors: Ensure that all subcontractors carry the appropriate insurance. This helps prevent liability gaps and ensures your entire team is adequately protected.

Follow State and Industry-Specific Regulations: Requirements can vary by state or project type (e.g., government vs. private projects). Stay informed about local regulations to ensure compliance and avoid potential penalties or fines.

Secure Appropriate Surety Bonds: While surety bonds provide financial protection, they differ from insurance in several ways. Here are some common types of construction bonds and the protections they offer:

• Performance Bond: Guarantees the contractor will complete the project according to the terms of the contract. If the contractor fails to meet the terms, the bond protects the owner from financial loss.

• Payment Bond: Ensures subcontractors, laborers, and material suppliers are paid for their work, helping to maintain trust between all parties.

• Maintenance Bond: Provides protection against faulty or defective materials for a specified period after the project is completed, similar to a warranty.

• Bid Bond: Guarantees that the bidder will enter a contract if awarded the project, protecting the project owner from bid-related issues.

• Supply Bond: Ensures a supplier will provide the required materials. If the supplier defaults, the bond compensates the purchaser for any covered losses.

How Can Contractors Reduce Risk?

There are many ways that contractors can reduce risks and keep operations running smoothly. Here are a few strategies to help minimize exposure to potential losses:

• Ensure Subcontractors Have Insurance: Verify and track that your subcontractors carry proper coverage to avoid gaps in protection.

• Implement Risk Control and Safety Programs: Establish proactive safety measures, conduct regular training, and ensure employees follow proper safety procedures to prevent accidents.

• Conduct Employee Trainings: Maintain a safe and reliable work environment with well-trained employees that are more likely to avoid accidents and costly mistakes.

• Perform Routine Maintenance: Regularly inspect and service tools, equipment, and job sites to identify and address hazards before they lead to injuries or damage.

• Invest in the Right Insurance: Make sure your insurance coverage evolves with your growing business needs and regularly review your policies to ensure you’re covered against emerging risks.

How Much Does Construction Insurance Cost?

The cost of construction business insurance can vary based on several factors. Key elements that influence your premium include:

• Claims history

• Coverage limits and deductibles

• Credit history of the business or policyholder

• Employee training and safety protocols

• Equipment used

• Industry experience

• Location(s)

• Materials handled

• Number of employees

To potentially lower your premiums, focus on enhancing safety protocols, implementing risk control programs, training your employees, and maintaining a favorable claims history. The most accurate way to determine your insurance premium is to get a quote from an agent.

How Do I Choose the Right Insurance Company?

Selecting the right construction insurance company is essential to protecting your business. A trusted provider will offer expertise, financial strength, and robust coverage tailored to your needs — while staying within your budget. Look for these qualities:

• Industry expertise

• Financial stability

• Risk control programs

• Customizable coverage

• Strong customer service and reputation

January 28, 2015

By Bricker Construction

Proper insurance is a crucial risk management tool for contractors, design professionals and project owners. Each is generally required by contract, statute, or sense of self-preservation, to purchase and maintain appropriate insurance coverage. Since everyone has insurance, it is easy to assume that most risks on a construction project are covered. The purpose of this article is to correct that misperception, by describing the typical scope of protection offered by three forms of insurance commonly found on a construction project: Commercial Liability Insurance, Builders Risk Insurance, and Professional Liability Insurance.

Of course, the exact coverage provided by an insurance policy can only be accurately assessed by reviewing the policy at issue, which can vary widely depending on the form, carrier and endorsements. It is important to review every policy benefiting your project to ensure the policy is appropriate for the project, and complies with both the contract and state law.

Commercial General Liability Insurance

Almost all construction contracts require that contractors and subcontractors carry Commercial General Liability (“CGL”) insurance. Good contracts also specify the CGL industry forms permitted for the project, the minimum coverage amounts, the required endorsements, and the policy duration. Generally speaking, CGL policies typically cover (1) an occurrence, (2) causing an injury to a person or property, (3) that is not subject to an exclusion. While coverage may appear broad, each of those three elements gives an insurer a way around covering your loss.

The primary purpose of a CGL policy is to protect the contractor and owner in the event an accident on the jobsite causes property damage or personal injury to a third-person. If a carpenter drops a hammer, injuring a bystander or her property, any claim by the bystander against the contractor would be covered by the contractor’s CGL policy. By adding the owner as an additional insured, coverage is extended to any claim by the bystander against the owner. Of course, things are almost never that simple. For example, while the term “occurrence” seems self-explanatory, courts’ interpretations are inconsistent. As a rule of thumb, a foreseeable or expected event is not an “occurrence,” whereas an unforeseeable or “fortuitous” accident (like a dropped hammer) is more likely a covered occurrence.

The most frequently litigated question in the construction context is whether the CGL policy covers defective work performed by the insured contractor, or any resulting damage. The current national trend is for courts to construe faulty workmanship as an “occurrence,” and the resulting damage as “property damage,” both of which are covered under the policy. But, Ohio courts take a narrower view.

In Westfield Ins. Co. v. Custom Agri Systems, Inc. 133 Ohio St.3d 476 (2012) the Ohio Supreme Court held that faulty performance is not an “occurrence” because it is “not unexpected.” The Court also held that the faulty work itself is not “property damage” under a CGL policy. Instead, in Ohio, CGL policies will only cover unanticipated damages resulting from faulty construction. For example, defective installation of a roof on an existing structure is not an occurrence or property damage, but a subsequent rain storm that infiltrates the defective roof may be an occurrence, and any resulting property damage to the preexisting property would be covered by the CGL policy. The occurrence must be an event independent of the defective work, which is made possible as a result of the faulty construction.

The following summary describes the typical coverage and limits of CGL insurance. As noted however, CGL policies can differ depending on the industry form and endorsements, which should be included in your contract documents.

Builder’s Risk and Property Insurance

Most contracts also require the owner to purchase and maintain property insurance that protects the work-in-progress and certain materials, which remains in effect throughout construction. This type of property insurance is referred to as “builder’s risk insurance,” and it is most often written on an “all-risk” policy. The term “all-risk” falsely implies that the insurance will protect the owner against any loss or damage to the property. As is true of CGL policies, the protections afforded may be quite limited.

Under a typical builder’s risk policy, the insurer agrees to pay for “direct physical loss” or “damage to the covered property” during the course of construction, unless the loss is subject to an exclusion. The “covered property” usually consists of the building or structure under construction, as well as machinery, equipment, materials, and supplies that will become a part of the improvement.

In more general terms, builder’s risk insurance typically covers damage to the work during the course of construction. The purpose is to protect against losses arising from the negligence of contractors, as well as certain “acts of god” like fire and lightning. Many courts have held that builder’s risk insurance is, by its nature, intended to cover only new work, not preexisting structures. Accordingly, if a project entails improvement to an existing structure, the owner should consider purchasing an endorsement, or expand the policy’s definition of “covered property.”

In contrast to CGL policies, builder’s risk insurance only offers “first-party” coverage. First-party coverage protects the insured against damage to its own property, not for the claims of a third-party. Accordingly, a builder’s risk policy should name each owner, contractor, subcontractor, and design professional as an insured. Also, unlike CGL policies, builder’s risk policies are not written on industry forms, and can differ more significantly from carrier to carrier. In fact, the most commonly litigated issue arising from builder’s risk insurance is whether an owner breached its contract by purchasing less coverage than was required. This highlights the importance of reviewing and understanding your builder’s risk policy.

Another common coverage issue is the degree to which builder’s risk insurance covers costs indirectly resulting from the accident, such as delay damages, acceleration costs, lost use, and other consequential effects. Most builder’s risk policies exclude “consequential” damages and similar losses, however these “soft costs” may be added by a coverage extension.

The following summary describes the coverage generally afforded by builder’s risk insurance. Once again, this summary merely describes industry norms, which vary by carrier and endorsements. Minimum coverages, and the party responsible for purchasing builder’s risk insurance, should be clearly defined in the contract documents.

Professional Liability Insurance

In many ways, the potential for loss arising from poor design work is greater than any other risk on a construction project. There is a possibility that the owner, contractors and subcontractors will suffer substantial delays, bodily injury or property damage in the event of defective design. Further, depending on the project delivery model, all claims will flow through the owner, which in many cases is the only party in privity of contract with the architect or engineer. This risk is somewhat reduced on design-build projects. Regardless of the delivery model, it is crucial that the design professional on your project has professional liability insurance tailored to the project.

Professional liability insurance covers losses arising from services considered professional in nature, typically architectural, engineering or other design services. Professional liability policies generally cover the “wrongful act” or “professional negligence” of an architect or engineer. A wrongful act may be defined, depending on the carrier, as a negligent act, error, omission, and sometimes a breach of contract. Dishonest or fraudulent acts are generally excluded.

In addition to the acts and actors covered by professional liability policies, coverage differs from CGL and builder’s risk insurance in several respects. Most importantly, professional liability policies do not require bodily injury or property damage to trigger coverage. While those damages are covered, professional liability insurance may also cover some nonphysical and purely economic damages caused by design errors and any resulting delays. On the other hand, defense costs of the insured are often deducted from the policy limits. The result is that the amount available to pay claims is depleted by the insured’s legal costs related to the claim. Further, professional liability insurance is typically written on a “claims-made” policy, meaning that the claim must be made during the policy term. CGL policies are most commonly “occurrence-based,” meaning coverage depends on the date of occurrence, not the date of the claim.

Another important characteristic of professional liability insurance is that it may cover contractual liability. However, there is a gap in coverage when the breach of contract does not rise to the level of “professional negligence.” While a professional standard of care is typically incorporated into design contracts, technical breaches – which in many cases can cause substantial harm – may not constitute professional negligence. For example, if an architect fails to turn over plans or respond to a contractor’s request for information within the time required, there may be a breach, but not professional negligence. Coverage for this sort of breach can be added through an endorsement for “insured contract coverage.”

Clearly, not all risks on a construction project are covered by insurance. Understanding the general scope of common insurance forms is an important first step in any effort to address gaps in insurance coverage, and ensuring proper compliance with your contract, state law, and your appetite for risk. Consulting with your legal counsel and insurance professional is a good way to gain that understanding.

As a contractor in Utah, it is important to have the right insurance coverage to protect your business and your clients. Without proper insurance, you could face financial ruin if something goes wrong on the job. In this article, we will explore the various types of insurance that contractors in Utah should consider, as well as what to look for when shopping for coverage.

General Liability Insurance for Contractors in Utah

General liability insurance is a type of insurance that protects contractors from financial loss due to liability claims. In Utah, contractors are required to have general liability insurance in order to operate their business. This insurance can help protect contractors against claims arising from accidents, injuries, or damages that occur on the job site.

General liability insurance can cover a variety of potential claims, including:

• Property damage: If a contractor damages a client’s property while working, general liability insurance can help cover the cost of repairs.

• Bodily injury: If a contractor or their employee is injured on the job, general liability insurance can help cover medical expenses.

• Personal and advertising injury: This coverage can help protect contractors against claims related to defamation, slander, or false advertising.

It’s important for contractors to carefully review their insurance coverage and ensure that it meets their needs. It’s also a good idea to speak with an insurance professional to determine the appropriate amount of coverage for their specific business.

Workers’ Compensation Insurance for Contractors in Utah

In Utah, contractors are required to carry workers’ compensation insurance if they have at least one employee. This insurance helps cover the medical expenses and lost wages of an employee who is injured on the job.

Workers’ compensation insurance can provide benefits to employees for:

• Medical expenses: This includes the cost of medical treatment and rehabilitation services.

• Lost wages: If an employee is unable to work due to a job-related injury, workers’ compensation insurance can help cover their lost wages.

• Permanent disability: If an employee is permanently disabled as a result of a job-related injury, workers’ compensation insurance can provide benefits to help compensate for their loss of earning capacity.

It’s important for contractors to make sure they have adequate workers’ compensation insurance coverage to protect their employees and their business. If an employee is injured on the job and the contractor doesn’t have adequate coverage, the contractor could be held responsible for paying the employee’s medical expenses and lost wages out of pocket.

Commercial Auto Insurance for Contractors in Utah

Commercial auto insurance is a type of insurance that covers vehicles used for business purposes. In Utah, contractors who use vehicles for their business operations are required to have commercial auto insurance. This includes vehicles such as pickup trucks, vans, and trailers used to transport equipment and materials.

Commercial auto insurance can provide coverage for:

• Property damage: If a contractor’s vehicle is involved in an accident and damages another vehicle or property, commercial auto insurance can help cover the cost of repairs.

• Bodily injury: If a contractor or their employee is injured in a car accident while driving a business vehicle, commercial auto insurance can help cover medical expenses.

• Liability: If a contractor’s vehicle is involved in an accident and the contractor is found to be at fault, commercial auto insurance can help cover liability claims made by the other party.

It’s important for contractors to carefully review their commercial auto insurance coverage and ensure that it meets their needs. It’s also a good idea to speak with an insurance professional to determine the appropriate amount of coverage for their specific business.

Builder’s Risk Insurance for Contractors in Utah

Builders risk insurance is a type of insurance that helps protect contractors against financial loss due to damages or losses to a construction project. In Utah, contractors may choose to purchase builders risk insurance to protect their investment in a construction project.

Builders risk insurance can cover a variety of potential losses, including:

• Property damage: If a construction project is damaged by fire, vandalism, or other covered perils, builders risk insurance can help cover the cost of repairs.

• Materials theft: If construction materials are stolen from the job site, builders risk insurance can help cover the cost of replacement materials.

• Delay in completion: If a construction project is delayed due to covered perils, builders risk insurance can help cover the extra costs associated with the delay.

It’s important for contractors to carefully review their builders risk insurance coverage and ensure that it meets their needs. It’s also a good idea to speak with an insurance professional to determine the appropriate amount of coverage for their specific construction project.

Inland Marine Insurance for Contractors in Utah

Inland marine insurance is a type of insurance that covers property that is transported over land, such as equipment, tools, and materials. In Utah, contractors may choose to purchase inland marine insurance to protect their property while it is being transported to and from job sites.

Inland marine insurance can provide coverage for:

• Equipment: If a contractor’s equipment is damaged or stolen while in transit, inland marine insurance can help cover the cost of repairs or replacement.

• Tools: If a contractor’s tools are damaged or stolen while in transit, inland marine insurance can help cover the cost of repairs or replacement.

• Materials: If a contractor’s construction materials are damaged or stolen while in transit, inland marine insurance can help cover the cost of replacement materials.

It’s important for contractors to carefully review their inland marine insurance coverage and ensure that it meets their needs. It’s also a good idea to speak with an insurance professional to determine the appropriate amount of coverage for their specific business.

Commercial Umbrella Insurance for Contractors in Utah

Commercial umbrella insurance is a type of insurance that provides additional liability coverage above and beyond the limits of a contractor’s other insurance policies. In Utah, contractors may choose to purchase commercial umbrella insurance to provide an extra layer of protection for their business.

Commercial umbrella insurance can provide coverage for:

• Excess liability: If a contractor’s liability claims exceed the limits of their other insurance policies, commercial umbrella insurance can provide additional coverage.

• Uninsured or underinsured motorists: If a contractor or their employee is involved in an accident with an uninsured or underinsured motorist, commercial umbrella insurance can help cover the costs of damages and injuries.

• Personal and advertising injury: This coverage can help protect contractors against claims related to defamation, slander, or false advertising.

It’s important for contractors to carefully review their insurance coverage and determine if commercial umbrella insurance is necessary for their business. It’s also a good idea to speak with an insurance professional to determine the appropriate amount of coverage for their specific needs.

ACORD Certificates for Contractors in Utah

An ACORD certificate is a standardized form used to provide proof of insurance coverage. In Utah, contractors may be required to provide an ACORD certificate when bidding on a project or when working on a job site. The ACORD certificate provides information about the contractor’s insurance coverage, including the types and limits of coverage.

It’s also important for contractors to ensure that their ACORD certificate is up to date and accurately reflects their current insurance coverage. It’s also a good idea to keep a copy of the ACORD certificate on hand at all times in case it is needed while working on a job site.

Business Insurance for Contractors in Utah

As a contractor in Utah, it’s important to have the appropriate insurance coverage to protect your business and your employees. General liability insurance, workers’ compensation insurance, commercial auto insurance, builders risk insurance, inland marine insurance, and commercial umbrella insurance are all types of coverage that contractors in Utah may need to consider. Working with a trusted insurance professional like ours can help contractors determine the appropriate coverage for their specific business needs and find the best rates.

November 1, 2005

By Monroe Porter

want to start this article by making sure readers understand that I am not an insurance consultant, lawyer or any other type of expert on the insurance industry. My comments and information are based on 30 years of consulting and interaction with contractors. You must contact your local program agent and advisors if you have questions about workers' compensation issues, as each and every state has different requirements. This article is not meant to provide advice but rather to provide insight and urge you to obtain a better understanding of the situation in your area. Always consult your local professionals if you have questions about your company's obligations.

For roofers, workers' compensation rates are particularly high and a really touchy subject. In some areas, it is difficult for roofers to obtain coverage, and, since rates are so high, many contractors try to cheat the system. In today's litigious work environment, such avoidance is extremely foolish.

Understanding the Insurance Bet

Workers' compensation is a form of insurance. Insurance is a statistics-oriented proposition. When buying insurance, understand that the higher the premium, the higher the likelihood you may need to use it. If you have a poor driving record, insurance premiums are high because you are more likely to have an accident. If you are buying health insurance and are a smoker, you pay more because insurance companies run the numbers and they bet their money on the odds of you having a claim. Life insurance companies know that smokers don't live as long as nonsmokers, so they charge smokers more to cover this risk. So, as painful as the workers' compensation premiums might be for contractors, they are based on realistic statistics.

Many of your employees simply do not understand what workers' compensation is and how it impacts the company and their own wages. Some mistakenly think it is a government program and if they do not have a claim, they are not taking advantage of money that has been paid in. Make sure your employees understand that workers' compensation is claim based.

A good way to do this is to explain what the Experienced Modifier Rate (EMR) is and how it works. First, compare EMR to a person's driving record. Your employees understand the more tickets and accidents they have, the higher their insurance rate is. Next, show them some simple math and break down the cost per hour. Let's look at a hypothetical example; you can make up your own example according to your own situation. Always convert your workers' compensation costs to hourly wages, as employees can relate to this concept more easily.

Suppose workers make $20 an hour and your workers' compensation rate is 50 percent, which means that for every $20 an hour paid to the employee, you pay $10 an hour in workers' compensation fees. This $10 an hour is based on an EMR rating of 1 (or average). If accidents drive up your rate to 1.5, then the $10 an hour will increase to $15, or a $5 an hour increase. If the company is safe, and the rate is 0.5, then the rate drops 50 percent, to $5 an hour, resulting in a savings of $5 an hour. Employees are not dumb. Explain to them that as you pay more money to the insurance company, less money is available for wages. Also, carry out these numbers per year at 40 hours a week. Five dollars an hour is $200 a week on a 40-hour week. This equates to $10,400 a year, and, if you have 10 employees, this would run $104,000 per year.

Befriending the Auditor

Workers' compensation rates are audited by an industry person who checks your books and makes sure you do what you say you do, etc. For a small contractor, the auditor may simply send a form to be filled out. For a larger, multi-branch contractor, the process may take several days.

Remember that the auditor is an employee of the insurance company doing a job. Auditors are human beings, not computers. Make their job more difficult, and they may make things tougher on you. Try to be nice and cooperative. It may not help, but it won't hurt. Forcing the auditor to cancel and reset appointments is not going to help the process.

Heading Off Claims

Obviously, the safer your company is, the lower the premiums will be, but it is more complicated than that. Workers' compensation is a game where a good offense can be a bad defense. Understand and have safety systems in place. But don't stop there - know the rules for reporting claims and have them clearly laid out. Sloppy procedures can create a situation where previous injuries or injuries sustained at home end up being part of your costs. Know the rules and build into the system methods for avoiding false claims.

Know the classifications and rating options. State programs and classifications vary, but you should know your options. Years ago, one of our large concrete pumping customers convinced the workers' comp carrier to classify time when pumps were driving from job to job as trucking time. All of the time was documented, and his contention was that when the pump was driving, it was really a truck, not a piece of construction equipment. One carrier agreed to this and saved him $200,000 a year. Some states do not require workers' comp on the premium portion of overtime. In other words, if a worker is normally paid $10 an hour but he makes $15 while working overtime, the $5 an hour premium pay is not subject to workers' comp. If this is the case, remember it is your responsibility - not your carrier's responsibility - to document this information.

Subcontractor Rules

Rules for subcontractors and coverage also vary by program. Getting cute with subs and workers' compensation can be a disaster waiting to happen. You can be audited and suddenly have to pay huge premiums you were not prepared to pay. Worse yet, you may have a sub injured and suddenly claim to be an employee and sue you for coverage you don't have. Know the rules, document your procedures and make sure you are covered.

In summary, I wish I had a magic wand to make workers' compensation rates drop. I don't. Just like other forms of insurance, the costs are ever increasing, and, as difficult and discouraging as it might be, you must be prepared to manage these costs. Again, I am not an expert in this area. Call a local expert and learn the rules. Each and every state is different.

June 11, 2018

By Richard Alaniz

Workers’ compensation claims, and how to keep them under control, have always been a focus for most employers. They occur in virtually all industries and can be costly and time consuming. There’s no federal workers’ compensation law that addresses workplace injuries. It’s a state-law issue and each state enacts and enforces its own legal framework. Today, every workers’ compensation claim raises the potential for a variety of workplace laws to come in to play. Some have referred to this intersection of laws as the Bermuda Triangle of the workplace. To keep from being overwhelmed, you must look at what each of the laws requires separately. What rights and responsibilities apply to the situation under those laws?

Disability and Employee Injuries

Given that many workers’ compensation claims involve injuries that could be considered a “disability” under the provisions of the Americans with Disabilities Act (ADAAA), there’s a likelihood that it may apply at least in some work-related injury situation. In addition, since many workers’ compensation claims involve some period of leave from normal job duties, leave laws can also come in to play. It requires patient analysis to work one’s way through the various laws to determine whether they apply, to what specific issues, and most importantly what steps must the employer take to be in compliance. The ADAAA, like the anti-discrimination rules of Title VII, applies if the employer has 15 or more employees and the injury at issue is a “disability.” It requires an employer to go through the interactive process to determine if a reasonable accommodation is possible without creating an undue burden. 

The Family Medical Leave Act

The Family Medical Leave Act (FMLA) applies to all employers with 50 or more employees within a 75-mile radius. These numerical limits, like the 15 employee threshold under the ADAAA, cannot be waived. The FMLA requires employers with 50 or more employees to provide up to 12 weeks of unpaid leave each year to employees who qualify. An employee must have worked at least for one year and a minimum of 1,250 hours in that year to be eligible for the unpaid leave. Numerous states and even some cities have adopted medical and family leave laws in recent years. Most are similar to the provisions of the FMLA, and in some cases, it’s paid leave. If the injured employee is eligible for FMLA leave, most employers run that leave concurrently with the workers’ compensation leave, at least for up to 12 weeks. The employer has the right to designate the leave as FMLA qualifying.

The Usual Claim

Let’s look at a typical workers’ compensation scenario: an employee with a serious back injury caused by heavy lifting at work would fall under all three of the laws mentioned above. If, as almost always occurs, the treating medical provider requires that the employee be off the job for a period of time to recover, they would be out due to the workers’ compensation qualifying injury. However, the employee might also qualify for FMLA leave as well. If the nature of the back injury required follow-up treatment, such as periodic physical therapy or other medical treatment, available FMLA leave could also be used intermittently to cover those periodic absences. Intermittent leave, even in increments as small as one hour, can be used until all 12 weeks in a year are exhausted. It’s not uncommon for injured employees who have resumed work to have a series of follow-up medical visits or treatments. Intermittent leave could apply to those absences.   

A serious back injury would likely also qualify as a “disability” under the ADAAA given the very broad reading of what constitutes a disability. It would entitle the employee to greater protections and impose greater obligations on the employer. If, for example, the employee was able to work with limitations, the employer would be obligated to go through the “interactive process” to try to identify a reasonable accommodation for the limitations. In addition, if the employer had a policy that limited leave to a specific maximum, say one year, an extension of a few weeks or perhaps even a few months to permit full recovery would likely be considered a “reasonable accommodation” mandated by the Act. A few workers’ compensation state laws may have a maximum limit for workers’ compensation leave, but most do not and the period of permitted absence can be quite extensive. They do require periodic recertification of the medical inability to return to work. An ADAAA-mandated extension beyond maximum leave periods would also require medical confirmation.

Back to Work

When an employee is released to return to work from a workers’ compensation leave virtually all employers return the person to their former job, although it’s not a requirement of most workers’ compensation laws. Under the FMLA, the individual must be returned to their former job or one that is substantially similar. This means virtually identical positions in work duties as well as compensation. As for the ADAAA, it has, in practice, virtually the same requirement as the FMLA. However, as noted above, if the person cannot perform all of the essential functions of the job -- for example the person is released with limitations, the employer must engage in the “interactive process” and determine what accommodations might be available that do not create an undue hardship. “Reasonable accommodation” here could mean reducing the non-essential duties of the job, switching the person to another open position consistent with any limitations, or offering other accommodations that do not create an undue hardship.

Best Practices

Investigate the injury as soon as you can. Speak with witnesses and the employee’s supervisor, take photos of the area where the injury occurred, document everything, and be sure to make the proper OSHA log filings or recordings.

Have the injured employee complete an injury/incident/near-miss report.

Train supervisors to appropriately respond to injuries, direct injured employees to the appropriate people at the company, assess whether the claim is valid, and determine whether any safety rules were violated.

Communicate with the employee, health care provider, and claim representative frequently to let the employee know that you’re concerned for their health and to assess when they may return to work. DO NOT: demand that they return by any set date; tell the employee that you think they are “faking it;” or “should already be back at work;” or make any other statement that could be considered retaliatory.

Determine whether the FMLA and/or the ADAAA apply and act accordingly.

Review past claims at your worksite to determine the problem areas or issues that need to be addressed. Where do most injuries occur? Why do they occur? Are proper safety procedures followed? What have you done to prevent injuries? If you can prevent the injury, then you prevent the claim. That’s a win.

Conclusion

In addressing the issues in any work-related injury, all three of the laws discussed must be kept in mind. Each may have a role to play and failure to comply with the obligations each one imposes can lead to possible legal action and damaged employee relations. The goal is to properly address work-related injuries and have employees back to work when they’re medically cleared to resume their duties.

November 4, 2010

By Chip Macdonald

The Experience Modification Rate (X-Mod) is a percentage-based multiplier (pricing mechanism) established by each state’s Workers’ Compensation Insurance Rating Bureau (WCIRB). It’s used to calculate an employer’s workers’ compensation premium based on a number of empirically confusing statistical factors.

The Experience Modification Rate (X-Mod) is a percentage-based multiplier (pricing mechanism) established by each state’s Workers’ Compensation Insurance Rating Bureau (WCIRB). It’s used to calculate an employer’s workers’ compensation premium based on a number of empirically confusing statistical factors, including:

• The employer’s 4-digit workers’ comp classification code established by the National Council on Compensation Insurance (NCCI) (over 6,000 codes listed).
• Total man-hours worked.
• Taxable annual payroll.
• Number of employees’ loss and injury claims for the previous three years.
• Severity of claims.
• Repetition of claims.

An EMR of 1.00 is the national average rate code for an employer’s particular NCCI classification code. If your composite employees’ workers’ comp claims result in an EMR that is less than the national average for your code, then your premium is credited (and you pay less). If your EMR is higher than average, then it your premium is debited (and you pay more). Multiple classifications may be provided for general contractors in construction depending on the number of man-hours per year spent in various trades.

The purpose of the EMR is to provide employers with tangible goal and fiscal incentive to effect a loss-preventative Health and Safety Program (HASP) for their employees to understand and follow. The following are five steps you can perform to reduce your EMR:

1. Institute an Out-of-Service policy immediately:

• Put an “Out-of-Service” card and wire-tie in every paycheck.

• Repair/replace defective equipment immediately (without any hesitation or dismissive complaint).

• Make violation of the tag-out policy grounds for immediate dismissal.

2. Develop a Job Safety Analysis (JSA) Program in the next three months:

• Institute the buddy system: Make every employee responsible for himself or herself and one other person on the job. 

• Make each middle manager responsible for his/her crew and one other crew as well.

• Assume the responsibility for listening carefully to everyone.

3. Write a Health and Safety Program that actually “lives, breathes and bleeds” this year:

• Design the HASP by compiling/analyzing all your JSAs.

• Personally hand an individual copy of the HASP to every employee.

• Ask them to edit it and hand them back, and do it every December.

• Train employees on its contents until zero questions are achieved.

4. Designate, train and develop every crew foreman into a Competent Person (CP) to represent you on every jobsite:

• Declare three priorities as “conditions of employment: safety, quality and productivity (in that order).

• Print these priorities on your letterhead and business checks.

• Print these priorities on LARGE company job signs.

• CP can “spend the boss’s money” on material, labor and equipment without asking first. 

• Your CPs are literally legal clones of yourself on every jobsite. Trust them with the lives they are dedicated to protect and the future of your company.

5. Invite everyone you’ve hired to a company lunch once a month:

• Open your books and review their jobs in less than 15 minutes.

• Make “safety first” a condition of employment (last warning).

• Invite everyone to stand up and “speak their piece.” Listen carefully.

• Take notes. You’re also paying for what’s above their shoulders.

• A profit-sharing plan will make your tools, equipment and workforce live longer. I guarantee it.

According to a friend in the business, “insurance is a legal racket.” It is based on the principle of betting against yourself, so don’t get too fancy. Always “Keep it Simple, Stupid.” Bet on your well-trained, totally equipped crews instead. It takes three years to begin to effectively lower your EMR. Don’t ever quit, and you will succeed. Higher morale, fewer accidents and greater profits will follow.

September 2, 2003

By Rick Damato

Workers’ compensation insurance has moved past pain to a “critical” stage for many in the trade.

No matter the type, background, or present circumstances, all roofing contractors have one thing in common: They must manage the many risks that come with being in this business.

Surely risk management has been a source of pain for roofing contractors as long as there have been roofing contractors. In the past several years, however, the changing world of business insurance and workers’ compensation insurance has moved past pain to a “critical” stage for many in the trade. In the last year, I have had to bear witness to good friends who have literally given up trying to find liability insurance, or workers’ compensation insurance they could afford to buy. Not trunk-slammers or jacklegs, but legitimate roofing contractors who are being left to fend for themselves, assuming all the risk, possibly to the detriment of their employees and clients.

There are reasons the insurance market has soured, and there are reasons risky enterprises like roof contracting are targeted by insurers. The problem is greater in some states than others, and has impacted some market segments harder than others.

What to do?

No offense to my beloved publisher, but if I had a solid answer to that question I wouldn’t be writing here, but would be charging you $1,500 each to teach it in seminars at fancy hotels all over the country. There are, however, just a couple of things to share that may not give you instant relief, but might make you feel better.

First, understand that while “risk” is a four-letter word, it is part of the reason you get paid for what you do. If this stuff was easy, anyone could do it and we would all be out of a job. It comes with the territory. Your most important job in times like this is not seeking out the best insurance for the least money, but is (as it always should be) proactively managing your risk. Operating a sound, organized and safe roofing operation will always, always make you a more attractive client to insurers. You simply must be highly “insurable” to survive today’s market.

Second, the fortunes of the insurance industry, as with all businesses, tend to run in cycles. This is a notably rough time for insured and insurers alike, but if history repeats itself it will improve in time. As we pass through this cycle, we all will lose a certain amount of time and focus working on solutions. But remember that insurance, by design, is a way of spreading risk among a broad group, so even when disaster strikes we can survive.

Last, but not least, let me share one success story with you. The Florida Roofing, Sheet Metal and Air Conditioning Contractors Association Inc. sponsors a self-insurers fund (FRSA/SIF) for workers’ compensation that is available to FRSA member firms. The FRSA/SIF operates in one of the toughest workers’ comp markets in the nation, and has for many years. The members who join the fund are required to maintain a strong safety program and continuously work to improve loss ratios.

FRSA recently announced the passage of Florida Senate Bill 50A – a workers’ compensation reform that contains initiatives that the association has been actively promoting for many years. This piece of legislation places limits on construction exemptions (individuals who put themselves forward as sub-contractors to “opt out” of paying workers compensation premiums) and increases the authority of the state to prosecute those who contribute to the worst problems in the system. Additionally, this legislation reigns in fraudulent workers’ comp claims and legal expenses on a number of levels. This is a vast oversimplification of sweeping legislation, but before the ink dried on Florida governor Jeb Bush’s signature, the bill yielded a “level 14 percent rate reduction” on workers’ compensation premiums effective October 1. Also, some insurers that had fled the state have agreed to reenter the market increasing availability for everyone.

Hopefully other state legislatures will take note. I encourage you to take note of the efforts of the FRSA and the FRSA/SIF as well. There are many obstacles to self-insuring in many states, but roofing contractors as individuals and through the various trade associations can certainly lobby for positive change in their respective state legislatures.

I congratulate all my friends at FRSA and thank them for the encouraging news in an insurance market that continues to give us little to cheer about.

July 15, 2013

By Richard Alaniz

Nearly 3 million workers were injured or became ill on the job in 2011, according to the U.S. Department of Labor’s Bureau of Labor Statistics (BLS). More than 900,000 of those cases resulted in days away from work.

Dealing with those injuries, managing workers’ compensation issues and getting people back on the job can be complicated, expensive and time-consuming. That’s true even when employers and employees do everything correctly. When matters slip through the cracks, supervisors fail to follow protocol or employees try to game the system, it becomes even more difficult. In order to manage the expenses, time and effort involved with the different aspects of workers’ comp, here are 10 best practices.

1. Train and educate. When employees understand their rights and supervisors know how to respond to workers’ comp issues, the process will go more smoothly and satisfactorily. That means ongoing training and education must be a priority for employees, managers, supervisors and senior-level executives. Training manuals should be regularly updated. Along with handbooks, companies may want to consider more interactive methods, such as videos or computer-based training.

Beyond general workplace safety training, companies may want to institute specific safety training for jobs that may be more complicated or potentially dangerous. Supervisors should follow up to make sure new hires have properly absorbed their training, along with company procedures regarding workers’ comp.

2. Promptly investigate every accident. Regardless of how minor a workplace accident initially appears, an immediate and thorough investigation should be launched. After the employee has been given medical treatment, if necessary, the next step is to quickly figure out what happened and what may have contributed to the situation. Companies should compile information from the worker and other witnesses. They should also determine if there are any other sources of information, such as video monitoring of work areas. The company should also designate a point person with the authority to decide whether to bring in attorneys or other experts for advice right away.

Paperwork is another consideration. Employers and employees must complete all the relevant forms, including those dictated by the state and the insurance company. By moving quickly, companies can capture facts before the scene of the injury has changed and witnesses forget what happened.

3. Report claims quickly. Workers’ comp claims need to be reported promptly. This ensures that employees will receive the help and benefits they are entitled to and minimize snarls with insurance companies. It also decreases the chances that employees will become disgruntled with the way their accident is being handled — one of the primary sources of workplace complaints.

The company should consider designating one person or a group of people to manage all workers’ comp claims to ensure the process moves swiftly and all relevant issues are addressed.

4. Develop internal and external partners. Dealing effectively with claims and injuries requires a team approach. Members of the team should include in-house employees, such as HR, external providers, such as insurers, brokers, adjusters, and, as needed, outside law firms. Medical care providers, including pharmacists, should also be considered part of the team.

5. Prioritize claim management. Staying on top of workers’ comp claims can quickly fall down the to-do list, especially if the company has built up the network of trusted partners. However, being proactive and organized will pay off when employees return to work faster and paperwork is handled on schedule.

As part of the claims management process, the company should regularly touch base with workers to ensure that all their questions are being answered and they are receiving appropriate care. Getting employees back to work in an appropriate job will minimize the chances of long-term or permanent disability claims and help the employee return to a normal life. Someone at the company should also regularly review all medical bills to be sure that protocols are being followed, drugs are not being oversubscribed, and that all the charges are accurate.

6. Implement a “return-to-work” program. Getting employees back to work after an injury should be a top priority. Companies should develop return-to-work programs that explicitly describe goals, and then develop standard procedures for how to achieve those goals. Companies should consider including explicit agreements that employees who reject their return-to-work or modified job assignments could be hampering their benefits.

If injured employees return to work in a modified duty, the company should maintain regular contact with them regarding their progress. Supervisors should be trained about enforcing work restrictions and creating a professional atmosphere while injured employees are on modified duty to help ensure that injuries are not aggravated.

7. Develop a strategy for workers’ comp. The fact is, workers will get injured and companies will need to comply with workers’ comp laws and regulations. Developing a plan to deal with workers’ comp will help both employees and the company. The strategy should encompass cost management, as well as litigation and settlement approaches.

The cost-containment strategy can include regularly reviewing relationships with medical providers and pharmacists. The company should periodically review its contracts with other providers, such as adjusters and brokers.

When it comes to litigation and settlement, the company should review current and past cases to identify trends or changes. Then, this information should be carefully reviewed with in-house counsel and outside attorneys. The company may find that some cases that were settled should have been litigated, and vice versa. It may make sense to determine ahead of time if there are winnable cases that should be settled, due to the time, stress and expense that going to trial entails.

8. Think about workers’ comp when hiring. Employers should be thinking about possible injuries and claims before job offers are extended. To cut down on the chances of an incident, employers should make sure that job descriptions accurately reflect actual job duties. By clarifying the physical nature of the job, working conditions, the type of tools that will be used and other factors, it may be easier to weed out unqualified applicants who may be more likely to be injured at work.

9. Focus on injury prevention. The best way to manage workers’ comp claims is to avoid them completely. To do this, the company should create a culture of safety. This kind of culture starts at the top and extends across the company.

Data can help achieve this goal. That includes regularly reviewing every injury, accident and potential problem to identify what went wrong and how it could have been prevented. A suggestion box or anonymous tip line can yield valuable ideas and information from employees.

Companies should encourage employees to report near misses and safety concerns, without fear of punishment or retaliation. Companies may want to consider designating a non-supervisor or third party to receive the concerns, or set up an anonymous system for compiling them, which could range from a toll-free number to a designated email address to a suggestion box.

10. Stay up-to-date with trends and laws. An aging workforce, growing obesity rates, changes in health care laws and other issues are constantly reworking the workers’ comp landscape. State laws, such as efforts in the Oklahoma legislature to privatize the state’s non-profit workers’ comp insurer, can also have significant impacts on employers and employees.

Companies need to stay up-to-date with new workers’ comp trends and requirements. Internal and external experts, including HR and legal advisors, should pay specific attention to new developments.

It goes without saying that everyone benefits when employers proactively work to avoid accidents and injuries. Such events do happen, so the next step is to get workers healthy again and ensure that any mistakes that led to the injury are identified and mitigated. Companies need to anticipate issues and stay on top of the paperwork. Taking the right steps will boost worker morale, improve productivity and minimize the expense of workers’ comp claims.

November 4, 2010

By Andy Fulford

Your vehicles are the backbone that keeps your business up and running. So when it comes to insurance for those vehicles, make sure that you’re covered by an insurance company that fits your business needs - because the last thing you want when you have a claim is to find out you have insufficient coverage. 

When you’re working with a local independent agent to build your policy, make sure to ask these eight questions to help you decide which carrier is right for your business.

1. Are all of my drivers covered, even if they’re not listed on my policy? Ask your insurance company about their policy for covering employees who drive your business vehicles. Some vehicle insurers will only extend coverage to drivers who are specifically named on the policy. So, if you regularly employ temporary workers, you would need to call your insurer and add them to the policy each time or else they wouldn’t be covered in case of an accident.

While you should always list employees who always drive your vehicles, some insurers allow “permissive use,” which means that temporary drivers are covered as long as they have your permission to operate the vehicle

2. Are my employees’ personal vehicles covered if they get into an accident while running a business errand? What about rental cars? In many cases, rental cars and employee vehicles aren’t covered under a standard commercial auto insurance policy. And if one of those vehicles is damaged in an accident, you could be liable.

If your business often uses rental vehicles, or if you send employees on business errands in their personal vehicles, consider adding Hired Auto, Non-Owned Auto or Any Auto coverages to your policy.

3. I’m a seasonal business and don’t need full coverage in my off months. Can I move to a comprehensive-only policy in slow months? Absolutely. A comprehensive-only policy provides coverage for businesses that don’t need liability coverage during certain months, but want basic protection against incidents like vandalism, theft, falling tree branches and hail. This is ideal for vehicles that sit for long periods during off-season.

Plus, a comprehensive-only policy provides continuous insurance. If you were to drop your insurance completely, you might pay significantly more to get a new policy when your peak season rolls around because most insurance companies want to see proof of continuous coverage.

4. What kind of service can I expect if I have a claim? Find out how quickly your insurer resolves claims on average. The faster they take care of your claim, the faster you can get your vehicle back to work.

One thing that can affect turnaround time is whether your insurer uses full-time, part-time or contract claims adjusters. Some companies use part-time or contract adjusters to handle commercial vehicle claims, which can slow down the process.

5. When I have a claim, is there anything I can do to get my vehicle back on the road quickly? Even if the accident isn’t your fault, report the claim to your insurer as soon as possible. They can work with the at-fault driver’s insurer to help resolve the claim and get your vehicles repaired quickly.

Additionally, put an accident information kit in each of your vehicles to make it easy for your drivers to capture insurance, driver and witness information following an accident. Most fleet safety companies and local agents have these readily available.

6. Is 24/7 service included with all policies? Many insurance companies are only available during regular office hours, which can make filing a claim, adding a vehicle to your policy and paying bills inconvenient. Before you buy, check with your insurance company to make sure they’re available when you need them.

7. Will all agents shop my policy on a regular basis? Although it’s easier to stay with the same insurance company than shop around for new coverage, ask your agent to regularly quote your policy with other carriers to make sure that you’re getting the best deal.

In addition to vehicle insurance, you may need a wider range of additional coverages to protect your business, from general liability to workers’ compensation. While it might be easier to buy all of these products from the same company, you could save big bucks by buying your policies from separate providers.

8. What are my payment plan options? Do I have to pay my entire premium up front? Some insurers have significant finance charges associated with their bill plans, or don’t have flexibility in payment schedules. Look for companies that offer flexible pay plans, including low initial payments and no finance charges.

Have a few questions of your own? Talk to a local independent agent. He or she can answer them and help you determine which insurer and coverages are right for your business. 

July 9, 2014

By Brian Pratt

Many roofing professionals are impacted with an increase in automobile insurance costs due to a substantial rise in frequency and severity of auto claims. Severe auto losses can expose the assets of a roofing company if they are not properly managed. It is becoming more common to see relatively low-impact auto claims reach six and even seven figure ranges. A severe auto accident could possibly exceed the roofing company’s insurance policy limits. It can also have a dramatic effect on the company’s workers’ compensation budget for years to come.

Some of the factors that can increase exposure to loss include:

• Fleet safety management programs that are loosely enforced

• Driver qualification standards

• Personal use of company vehicles

• Personal vehicles being utilized for company business

• Electronic device usage policy

• Accident investigation procedures

• Preventive maintenance programs

A formal, written and well-enforced fleet safety program is the cornerstone of an auto risk management program. Once fleet guidelines and procedures are implemented, it is important to communicate the fleet safety program to every employee. Each employee should review and acknowledge the company’s fleet insurance program and procedures. A solid fleet safety program typically defines proper vehicle use and driver criteria. It should also detail fleet safety rules, accident investigation procedures, vehicle maintenance requirements and place limitations on using electronic devices, such as smart phones.

There should be written driver qualification criteria. The driver criteria should define what an acceptable driving record is for driver eligibility. The majority of preventable automobile accidents correlate directly to the personal driving habits of the drivers. This is why it is extremely important to have a driver selection process and established monitoring procedures for existing drivers. The driver qualification typically contains written driver procedures for progressive disciplinary actions and terminations for not adhering to the corporate fleet standards.

The fleet safety program should contain driver eligibility for the personal use of company vehicles. Occasionally roofing professionals experience claims resulting from the use of company vehicles by drivers other than employees. We recommend a written policy that controls the use of company vehicles and communicates who is allowed to drive the company vehicle. It is highly recommended that only the employees have access to company vehicles. We also recommend that employees do not use company vehicles for their personal use to diminish the probability of an automobile loss during non-company business.

Another area of potential claim exposure is the use of personal vehicles that are being driven by employees for business purposes. A recommendation to control losses from employees driving their own vehicles for business purposes is to require these employees to maintain personal insurance policy limits of at least $100,000 per person and $300,000 per accident for bodily injury and property damage. If there is an automobile claim that results in damages above the employee’s personal insurance limits, the claimant’s attorney will often seek additional insurance coverage limits by taking legal action against the roofing contractor. A copy of the insurance card for these employees should be kept on file to track and ensure coverage and limits are adequate. Your insurance advisor should be able to identify policy exclusions or coverage limitations with the personal auto policy of the employee that may limit availability of insurance coverage extended to the roofing company. The roofing contractor can contain the exposure if the company adds certain coverage to its fleet insurance program (hired auto and non-owned automobile liability coverage). 

Accident Investigations

It is vital to have procedures in place for employees to conduct after an automobile accident. Employees involved in an accident should know company procedures. The procedures should include:

• What to do with the vehicle (i.e., turn on flashers, pull to side of road, etc.).

• Call the police.

• Exchange insurance information, but under no circumstance should the employee make comments on assuming liability.

• Obtain names and addresses of all witnesses (if available).

• Complete an accident investigation report (kept in all vehicles).

• Report the accident to the insurance carrier.

• Obtain a copy of the police report including case number and officer name.

• Immediately after the automobile accident, draw a sketch of the accident identifying location, impact area, conditions at the time of accident, etc.

According to National Highway Traffic Safety Administration (NHTSA), distracted driving crashes caused 3,328 deaths and 421,000 injuries in 2012. NHTSA determined texting and cell phone usage were the leading causes of these accidents. To protect the assets of the roofing company, we recommend a formal written electronic device use policy that is communicated and acknowledged by all employees. Because phone and text records are easily obtainable and can be tied back to electronic device usage, we recommend a zero tolerance policy for electronic devices while driving a vehicle for company business.

Some other items to consider in an effective fleet management safety program are:

• Installing GPS monitoring or some other type of tracking system in the vehicle to capture speed, location, etc.

• Annual training for drivers, including defensive driver courses and review of the fleet management safety program.

• Third-party monitoring (“How’s My Driving” stickers) and a fleet accountability program, which might tie driver status and vehicle losses to bonuses.

Being proactive and managing your insurance budget (typically the No. 3 expense item on a roofing professional’s balance sheet) will help protect profit margins and create an advantage in a very competitive environment.

October 27, 2022

By Mary Stiglic

Design on a Dime, Property Brothers, Man Cave, This Old House, Flip or Flop — These popular TV shows draw millions of viewers with stories featuring renovations of run-down or dated homes.

Television producers don’t tell you that the contractor and property owner all face risks in the renovation process — risks that are distinct from those typically covered under a homeowners policy. If a fixer-upper show episode covered insurance, it would prominently feature builders risk coverage.

A builders risk policy, also known as course-of-construction insurance, insures a person’s or organization’s insurable interest in materials, fixtures and/or equipment being installed during construction or renovation should those items sustain physical loss or damage from a covered cause. Builders risk policies provide distinct coverages for new construction and remodeling that are not always found in a standard homeowners or permanent property policy.

Here are three common questions insurance agents ask me about builders risk.

1. Who buys builders risk coverage?

Depending on the terms of the construction contract, the individual or organization with the insurable interest in the project may be required to purchase builders risk coverage. This can include personal or commercial lines clients, such as contractors, developers, business owners, homeowners, house flippers, or even financial institutions.

From a project standpoint, it might be the contractors or developers building new structures or renovating existing residential or commercial property. It could even be a homeowner having a new house built or undergoing a sizable renovation project.

When it’s a homeowner or property owner, many agents smartly ask: Does the property owner need to purchase builders risk insurance if their contractor is willing to buy it? The answer: It depends on whether or not the owner wants to personally manage their insurance coverage, essentially controlling the policy.

It’s common for the contractor to purchase the policy in their name. However, if they are taking an unreasonable amount of time to complete the project, leave mid-way through the job or have financial issues interfering with completion, then the homeowner could be in a pickle. Few contractors want to pick up a project that’s partly done, and some carriers won’t provide coverage past a certain point of completion. This means it’s up to the agent to do what’s best for their customer, and that may well include selling a builders risk policy to a property owner so they have control over the policy for the entire length of the project — no matter who the contractor is.

How is the project value determined for a builders risk policy?

Builders risk coverage is based on the project’s total completed value (TCV). The best way to identify the total completed value or project cost is to review the construction agreement that was established between the property owner and contractor.

“Total estimated completed value” can often be described as all the costs associated with the building and designing of the covered property including labor, “overhead” and materials and, if included, “profit.”

Examples of covered TCV costs include but are not limited to:

• Materials such as windows, landscaping and pools.

• Design expenses like architect fees, site lighting, existing facilities analysis and zoning modifications.

• Overhead payments such as payroll, utilities and administrative charges.

Changes to the completed value commonly occur during the course of construction. Because coverage is based on total completed value, any changes that occur to increase the value of the structure should be reported to the carrier. Also, the policy should be endorsed to reflect the correct value, which will help ensure proper coverage for upgrades and other structural enhancements to reduce co-insurance penalties and errors and omissions claims by your client.

Schedule a checkpoint with your client during the policy term to ensure the total completed value is still correct. Rise in material costs or contract change orders are just two factors that could alter the project value.

1. When should the policy be purchased?

Most policies are purchased prior to or on the start of construction when the contract is finalized, which means you’ll need to act promptly when your client requests coverage. You want to make sure coverage is secured before materials are delivered to the job site.

In the event your client begins construction without securing builders risk coverage, you will need to not only provide the percentage of construction completed during the application process but have access to a carrier willing to insure a project that is already underway.

Agents who thoughtfully help their clients insure against the pitfalls of construction could star in their own TV series. We’ll call it Construction Risk: The Challenge.

July 3, 2006

By Brad Gibson

As the construction industry in the United States continues to rise at a rapid pace, artisan contractors increasingly represent a vital part of this industry’s growth. However, due to the fact that most artisans are self-employed, finding adequate insurance at an affordable price can be difficult, especially in the current market. Whether insurance is purchased by the building owner, general contractor or directly by the artisan, understanding the exposures is essential in determining what lines need to be purchased.

Builders risk and installation
When considering what risks need to be covered and who is responsible for covering those risks, artisans must consider several issues that are generally outlined contractually. Insurance coverage is one of the most common ways to transfer risk, and the artisan must establish who is contractually obligated to covering what exposures. In some cases, the building owner may agree to cover certain risks. In other cases, the general contractor may provide coverage. Regardless, the artisan must understand what is an insurable versus an “un” insurable exposure.

The only safe way to manage the insurable risk is to obtain a full copy of the project specifications and any insurance policies written to protect the project. By doing so, an artisan will be able to determine what is covered, what is excluded, deductibles and any other financial obligation the artisan will be responsible for under each policy.

Construction projects are very complex with varying exposures. An area that all subcontractors, such as artisans, should seriously consider is obtaining an installation floater or a builders risk policy. That type of coverage is generally written on a “blanket” basis to protect the named insured for the cost to replace materials damaged or stolen from job sites and temporary storage locations. The coverage acts as a “back-stop” for use when there is no master builders risk coverage in force on a project and coverage is normally written either on a flat charge basis or a reporting form, subject to a rate per $100 of gross receipts. Both builders risk and installation floater policies are not standardized, so it is important to closely review the policy’s insuring agreement, exclusions, terms and conditions. Flood and earthquake perils also should be included in the policy.

Theft and the impact on cost of risk
The most tangible risk involved in artisan construction is materials used to complete a project. Often times, materials used in the course of building and installation need to be shipped to a construction site. If materials are shipped to a “Freight on Board” shipping point, they are covered by a builders risk policy from the time they are shipped until their installation work is accepted and paid for by the owner or general contractor. However, some builders risk policies exclude materials on job sites unless they are installed, so it is important to make sure materials stored on site are covered.

With rapidly rising costs for building materials, new strategies have emerged to lock in materials cost. Materials such as copper wire are being purchased well in advance of the need at the job site, and stored on or away from the project site. This can create a significant exposure to loss that needs to be insured. Artisans need to work closely with their insurance agent or broker if this is an issue.

Copper theft increasing
Copper is one of the main materials used in many artisan contractor projects. An unfortunate result of a recent rise in the cost of copper is that wiring is being stolen both while it is awaiting installation and after it has been installed in a building. To prevent theft, artisans can take several steps to make sure their inventory is measured and tracked.

Using a reliable marking system, a complete inventory of all equipment and belongings should be done for each project. In addition, all jobs should include adequate lighting and signage indicating “No Trespassing” or video surveillance to deter would-be thieves. While chain-link fences can be breeched, perimeters are established and, in most states, allow law enforcement to challenge or arrest trespassers on a job site. Hiring private security to monitor a job site after hours and using the best hardware, such as locks and containers, are other ways of protecting assets.

In addition to tangible security measures, artisans and contractors should meet with the local law enforcement agency prior to construction to provide them with details about each project, including the type of construction, work schedules and estimated time of completion. Providing those officials, as well as members of the business community and neighbors, with names of key contact personnel for the project can serve as a critical source of information should materials disappear from a job site. A system should also be in place to discuss theft prevention policies with all on-site workers on a regular basis.

Ultimately, theft of materials makes construction projects more expensive. These costs are passed on to the end user in the form of increased pricing. If artisans can control those costs through loss prevention, they will not only be able to control expenses, but they may also have an effective competitive advantage.

It is important to remember that there are experts who can help. Insurance advisors should be included from the beginning of the process. Once a contractor’s plans, budgets and insurance policies have been reviewed, artisans can have a better understanding of the hazards, security and responsibilities to determine the correct coverage needed on a particular project.

September 6, 2010

By Curtis M. Pearsall

Risks to Consider When Working With Contractors

If you are running an agency, there is a pretty good chance you insure a contractor or two – whether they are your traditional artisan contractors or a class of contractors that falls outside the artisan definition. While the economy has probably taken its toll on the number of contractors, suffice it to say, there is a still a significant number of contractors doing business.

Whether you currently write a few of these accounts or are faced with insuring your first one, using one of the industry exposure analysis checklists is a great tool. Effective use of this tool will provide your staff with a solid handle on this class of business, along with the pertinent questions that should be asked of the account. This could prove difficult, though, as many of these contractors – more so the smaller ones – work many hours and may be tough to sit down with a face-to-face. Bottom line: you must understand the risk completely.

Dealing with carriers that understand the contracting business is important. Fortunately, many companies have custom-designed, quality insurance programs for you to offer smaller contractors. Some of the typical coverages you want to consider, with their corresponding errors and omissions (E&O) issues, include the following.

Property – Other Than Tools and Equipment

Some of these accounts may have a warehouse or storage for supplies, etc. Identify whether this exposure exists and check the quality of the premises to avoid writing a risk that the carrier, after inspecting, asks to get off of. Determining the proper value, taking into consideration co-insurance issues, should be handled carefully.

General Liability

Does the contractor subcontract any work? Is there a need for owners and contractors protective liability coverage? What about products and completed operations? These are just some of the issues you will need to uncover. This class of business generates a significant number of requests for certificates of insurance, with one of the more common issues involving additional insureds. Not all carriers handle such requests the same, so check this area carefully. Plus, if you are using the excess and surplus lines market to insure your contractors, carefully review the forms as there will definitely be differences. In fact, with some of their exclusions, you have to wonder what coverage they are really providing.

Inland Marine – Tools and Equipment

This will be a significant issue with most risks. Discuss this with the contractor to see if they desire coverage. If they do not want this coverage, confirm it in writing.

Issues to consider are: 1) What perils are covered? With the recent flood activity, many contractors probably found out that flood was excluded. 2) Is coverage on a per-item or blanket basis? 3) Is there coverage for newly acquired tools and equipment? What is the limit?

Installation Floater

Is the contractor liable for loss to materials after they have installed or is the customer liable?

Auto

Get a list of all the vehicles and all the drivers. Plus, get the auto coverage listed on the umbrella policy.

Umbrella

Offer various limits of umbrella coverage and let the customer decide what is best for them. Don’t make this decision for them!

Workers’ Compensation

Based on the type of contractor, this may or may not be easy to secure. Some sole proprietors may choose not to carry it – if they don’t, confirm this with them in writing. A common issue that has significant E&O potential involves knowing where your contractor is doing business and making sure you handle the coverage accordingly. As you will note by the following claim, a mistake can be costly.

An agency’s client was an employee-leasing company that leased workers to construction contractors. Although the client conducted most of its business in one state, the client contracted for a job in another state, and needed workers’ compensation coverage for the employees working for a sub-contractor in the second state. The workers’ comp coverage was to be placed through an assigned risk pool in that second state. The carrier that wrote the workers’ comp in the original state for the client was through the voluntary market, and it was intended for that same carrier to pick up coverage in the second state under the assigned risk workers’ comp pool.

The agent spoke to the carrier’s underwriter and was told to submit certain forms to put the workers’ comp coverage in place for the second state. The agency said it completed and sent the forms to the carrier via fax. The carrier denied receiving the fax. The agency kept no record of sent faxes that would indicate the fax had, in fact, been sent and received. In addition, the carrier stated the forms the agency intended to send were the wrong forms.

A workers’ comp loss occurred and the carrier denied coverage, forcing the general contractor who hired the client’s customer to pick up the workers’ comp costs. The agency’s client’s customer was then fired by the general contractor for not having workers’ comp coverage in place. The customer stopped using the client’s services. Suit ensued against both the agent and the carrier. The carrier was dismissed based on the fact that a policy was never issued. The agency’s client claimed a huge loss of profits resulting from the lack of workers’ comp on that particular job, as their customer stopped using them. The claim against the agency was eventually settled for $350,000.

Insuring contractors is not as easy as you may think. There are a significant number of exposures and each account is unique. Take the time to understand the account and request that the client takes the time to understand their insurance. As with any customer interaction, document the discussions and final resolution. It takes time, but the time you spend now could save you later if you are hit with an E&O claim.

January 22, 2024

By Beehive News

As we step into 2024, the property insurance market in Utah is encountering significant challenges and trends that are reshaping the industry. Business owners and homeowners are facing a complex landscape, dealing with issues ranging from an increased threat of wildfires to a surge in nuclear verdicts in litigation.

Tackling the Challenge of Wildfires and Insurability

Wildfires have emerged as a pressing concern for insurers in Utah, creating pressure on insurance providers. Increasing frequency and severity, coupled with rising firefighting costs, are the main reasons for concern. The fallout from major fires in California has triggered an insurance crisis, influencing other western states, including Utah. Consequently, insurance carriers are reevaluating their underwriting practices, leading to higher premiums and stricter coverage terms.

Insurance companies utilize wildfire risk scoring systems to assess danger based on things like past fire incidents, fuel loads, and local fire department response capabilities. These systems utilize proprietary algorithms to determine premiums or declinations for coverage.

When considering a new location or building in mountainous or rural areas, plan months in advance. Wildfire rating systems and protection classifications on the cost of insurance for these properties may ultimately deter you from the purchase.

The Influence of Rising Property Values and Inflation

Utah has also seen a substantial increase in property values in recent years. As property values soar, insurance carriers face heightened potential payouts in the event of a loss, resulting in increased premiums for higher-value homes and commercial properties.

While inflation has eased since its peak in 2021, high building material costs and wage growth in the construction industry have contributed to increased claims expenses. This has raised concerns about underinsurance, as outdated property valuations can lead to reduced claim payouts and potential coinsurance penalties.

To counter these challenges, property owners need to regularly reassess their property values for adequate coverage. Accurate valuations are essential based on current construction and rebuilding costs, property appraisals, adjusted fixed-asset records, and benchmarking tools. Working closely with insurance agents and underwriters can ensure that coverage aligns with true property values.

Reinsurance Capacity Concerns

Reinsurance provides insurers with financial protection against catastrophic events. However, concerns about reinsurance capacity have impacted the availability and affordability of coverage. Many reinsurers have limited the total insurable value they are willing to accept per account, posing challenges for larger properties.

Property owners should anticipate more stringent property inspections and insurance requirements. Owners should implement measures to mitigate risk such as annual safety inspections for older buildings which focus on electrical systems, plumbing, HVAC, and roofing.

The Rise of Nuclear Verdicts and Increased Litigation

The property insurance industry is witnessing a worrying increase in nuclear verdicts, which are jury awards exceeding $10 million. They have a detrimental impact on both insurers and consumers. The surge means insurers should be prepared for the potential impact on their bottom line.

Property owners need to work closely with insurance agents and legal counsel to develop risk management strategies. This may involve proactive measures such as maintaining properties in optimal condition and implementing disaster mitigation and response plans to potentially reduce the likelihood of litigation and any financial consequences.

August 1, 2024

By Susanne Sclafane

When actuary Greg Fears attended a Western Region Captive Insurance Conference in April, he expected to learn and share information about emerging uses of captives for commercial risks, including trucking captives—a recent focus of his attention.

But during the last session of the conference, Fears, a director and consulting actuary for Pinnacle Actuarial Resources, heard something he hadn’t heard in his 20-plus years of captive advisory work. When Utah’s representative spoke up at that final panel, consisting of a group of regulators reporting new developments in their state, Utah’s captive director said his state passed legislation to allow homeowners associations to form captives in Utah.

Fears checked the law after the session. As of May 1, 2024, Utah Code Section 31A-37-202 states that “if approved by the commissioner….an association captive insurance company that satisfies the requirements of this chapter may provide homeowners insurance.”

“This is a monumental change in the captive insurance market,” Fears wrote in a blog post on the Pinnacle website that he penned after the captive conference to deliver the game-changing news. Noting that there are 30 or 40 states that have captive legislation, “what hasn’t been included in the past in that captive legislation is allowing personal lines type insurance,” he told Carrier Management during a recent interview.

There’s only one exception that’s come close previously—laws allowing tenant legal liability insurance for captives owned by landlords—”but typically it’s a fronted program with an A-rated carrier, and the captive is assuming part of the risk,” Fears said.

Utah is different. Utah is allowing captives in response to the current struggles of homeowners in any catastrophe-prone states where traditional residential insurance coverage is becoming increasingly unaffordable—and unavailable. “You are seeing traditional insurance companies pull out of Florida, pull out of California, or send nonrenewal notices to reduce the writings in those states. Some customers are going bare with their insurance,” Fears said.

The director of Utah’s Captive Insurance Division, Travis Wegkamp, who spoke at the captive conference, confirmed to Carrier Management that this opens up opportunities for HOAs in wildfire-exposed areas of California as well as Utah, and even those located in hurricane-exposed regions of Florida. “The captive itself would be a Utah entity but the parent company or the association can be from anywhere in the world really,” Wegkamp said.

Fears, stopping short of predicting that HOA captives will be the next big trend in the captive insurance market, said that availability and affordability issues have spurred the development of commercial property and commercial auto captives in recent years. “If we continue to see the traditional insurance companies pulling out of states where there are those catastrophe exposures or they’re writing exclusions on all that cat exposure, you could see captives starting to step in to fill that insurance need for homeowners,” he said.

William Wilt, president of Assured Research, took a bolder stance after reading about the Utah law change, ironically, in the blog item posted by Fears. “If other states follow Utah’s lead, it could represent an existential threat to homeowners insurers,” Wilt wrote in a research report he published in June. “If you need to prove to a bank that you have homeowners insurance (or simply want to protect your most significant asset), what other options do you have?” he asked.

What does the regulator that prompted the predictions think?

“I see where they’re coming from. At this point. I wouldn’t agree that it’s an existential threat,” said Wegkamp. “However, you could say it’s a crack in the door. It’s slightly open now.”

“That said,” he continued, “it’s certainly not a free for all. It’s limited to associations, and we’re going to take a close look at what the proposal is and make sure that we’re comfortable with it,” Wegkamp said.

Utah Responds to a Need

Providing some of the backstory of the revision in Utah’s insurance code, Wegkamp said the department was aware of the hard homeowners insurance market that developed over the last several years. “And certainly, in the last year, we’ve heard a lot of horror stories of people not getting renewals for their homeowners policies or just exorbitant rate hikes. A lot of those stories [are] coming out of Florida in the coastal areas, as well as California, [growing] with the fire dangers and what appears to be a rise in the amount and severity of those fires happening, particularly during the summer months.”

“Utah has seen some of that as well in those high-threat fire areas,” he said.

Comparatively, CoreLogic, a risk modeling firm estimated in its “2023 Wildfire Risk Report” that Utah ranks ninth among 14 wildfire-exposed states with 68,135 homes at risk for a total reconstruction cost value of $32.8 billion. California, ranked first, has almost 1.3 million homes exposed with a total reconstruction cost value of $760.8 billion.

Travis Wegkamp, Utah Captive Division

Members of the Utah Captive Insurance Association were among those sharing concerns about homeowners availability. “We got to thinking about whether there was something maybe captives could do out here in Utah to help alleviate that, [to] provide an alternative,” Wegkamp recalled, noting that he proposed the idea to the commissioner. The regulators ultimately decided to “start slowly” with an enabling rule for association captives.

That means “everybody involved has some skin in the game,” he said, explaining the limitation to association captives. “Each member has some say or some ownership in the association that they’re getting the insurance from,” he said, contrasting the association structure to “a pure captive arrangement where they’re insuring their own risks.”

The law, however, is not explicitly limited to HOAs, he stressed, explaining that the decision not to be that specific allows “other communities or other like-minded individuals to get together to form an association to insure their risks.”

What Wegkamp describes as having “skin in the game,” in Fears’ view, could translate into the HOAs requiring homeowners to engage in loss mitigation activities—a potentially big benefit of getting insurance through a captive. “There are various risk mitigation techniques that could be required if you’re a homeowner,” Fears said, referring to activities such as trimming vegetation around the house or having a special coating applied to the roof of each house in wildfire-exposed communities. “If everyone in your neighborhood is doing that, it should cut down on the risk if there is a wildfire event—prevent it from spreading as dramatically as it might had you not done those things.”

There are also disadvantages for homeowners considering participating in association captives, Fears noted. “In the traditional insurance market, insurers are protected by guaranty funds. So if the traditional insurer goes insolvent and can’t pay claims, there’s a backstop.” In the captive space, “it’s the money that you have in the captive from capital, from surplus, from premium—that’s what pays claims. And if you run out of money, you can’t pay claims….”

That’s a risk that, until now, most states haven’t put in the hands of insurance buyers who are not managers of sophisticated commercial enterprises. Wegkamp explained the reluctance: “We don’t want captives involved with general public risk, partly because they’re not regulated as heavily as a commercial carrier, don’t have those accreditation standards when it comes to doing those reviews, don’t have the admitted assets to make sure that they’re really conservative in their financial approach. We don’t look at RBC [risk-based capital] and certain ratios nearly as much.”

He reiterated that the Utah department alleviated those concerns by experimenting with association-type captives first. “We can’t force everybody to know exactly what they’re doing when they get involved with the captives, but hopefully by being an association member, they’re privy to that information and they can go into it with their eyes open and know what they’re potentially getting into.”

Fears believes HOAs have the sophistication needed to build captives. “It’s a natural progression because you already have a board, you’re already setting rules, regulations, guidelines for all the association members. You’re collecting dues, you’re dealing with budgets, you’re managing the property, you’re managing service providers for the property”—all providing a solid basis to running a captive insurance business, he said.

The minimum capital requirement for association captives in Utah is $750,000, which Wegkamp confirmed is a level of capitalization that makes the most sense for wealthy homeowners. “That was initially what we envisioned this to be—for high net worth individuals that likely don’t have a mortgage and can go out and do things like this….However, giving it some thought, we decided that in the code we’re not going to limit it. We’ll go ahead and leave it open so potentially other communities where most people do have a mortgage could do this as well.”

Wegkamp offered advice for those in the second group. “You don’t want to go down the path of spending all this money and expense in developing a business plan and getting a feasibility study just to find out that the bank, the mortgage holder, isn’t going to accept paper from a captive. They need to be aware of that and get all their ducks in a row before they pursue an association captive,” Wegkamp said.

He added that in these circumstances, Utah regulators will “do a deep-dive review,” probably making sure that some captive members have gotten OKs from mortgage lenders. “Maybe not all of them. Who knows how many will be out there in a certain community. But we’re going to look into that and make sure that those things were clarified and gotten approval for—and just make sure that everybody’s quite aware of the captive situation.”

“We’re going to do our due diligence with those that don’t have mortgages as well….But there would definitely be less concern,” he said, noting that Utah is already engaged in discussions and fielding proposals, without disclosing which types of homeowners are involved.

Pinnacle Actuarial Resources, which provides feasibility studies, funding studies, reserving analysis and statements of actuarial opinion for captives, has seen interest building on the high-end of the spectrum. While Fears couldn’t disclose much information because of confidentiality agreements, he said one client is a group with multimillion dollar houses in California.

“We’re looking at both the traditional way insurers would rate homeowners insurance with the HO3 insurance, and then also looking at the catastrophe risk, looking at cat models for wildfire risk specifically in this area of the country, to blend that with commercial insurer rates” for pricing indications, he reported.

As Carrier Management has reported separately, California currently doesn’t allow traditional insurers to use catastrophe models in ratemaking—a restriction that is set to change under California Commissioner Ricardo Lara’s Sustainable Insurance Strategy. (Related article, ‘Sorry, Wrong ZIP Code: Regulators Move Forward With California Reforms“)

Utah would be the primary regulator for any groups of California homeowners that set up Utah captives, Wegkamp confirmed, but he could not speak with certainty to the question of whether California regulators would maintain oversight into the use of models in ratemaking. “I just don’t know. [But] that might be another reason why they’d want to limit this to individuals that don’t have mortgages. Presumably, [if] they want to get insurance from a captive, there wouldn’t be any sort of regulation in that regard because they’re not protecting a mortgage lender if it’s just their own coverage,” Wegkamp speculated.

Beyond High Net Worth: $40B+ Premiums

Carrier Management asked Fears how the economics of traditional insurance coverage stacks up against those of a captive. Comparing premiums paid to traditional carriers with the capital, fees and costs of services that go into setting up a captive, does the tradeoff make sense?

“They were looking at starting their own E&S carrier before,” said Fears, referring to his current client looking to insure multimillion dollar homes. “I don’t know that cash is an issue. They just want insurance.”

Speaking more generally, Fears said that the biggest cost difference lies in the expense loads that go into the premium calculations. In the traditional market, profit contingency margins and overhead expenses can account for 30 percent of the premium—a much higher expense load than a captive load, even after adding the cost of reinsurance, he indicated.

Greg Fears, Pinnacle Actuarial Resources

Also, “in the traditional market, the majority of the time, you’re rated on the carrier’s book of business. What do their losses look like? Maybe it’s tailored specifically to your industry, to your geographic location, or how expensive your house is. But ultimately it’s what is in their book—what losses they have sustained as a whole goes into what you pay in premium.”

In the captive scenario, actuaries will look at what the traditional market is charging for insurance, but they can also look at a group’s actual claims experience history. “You can really tailor the premium more to your loss experience rather than Allstate’s experience or The Hartford’s or State Farm’s….If you have favorable claims experience, you could pay less in premium.”

“Ultimately that premium is your dollars paying the premium for your claims,” Fears said.

Although Wegkamp and Fears both thought that communities of high-net worth homeowners were most likely to consider the captive alternative, Wilt at Assured Research sees reasons for the movement to spread further. “It feels to us like the public backlash against homeowners insurers (over high prices and availability shortfalls) is growing,” he wrote, suggesting that’s why homeowners might opt to control their own insurance destiny.

Wilt’s report tallied up estimates of the number of people living in homes governed by HOAs—roughly 76 million, or 23 percent of the population (based on data from a realtor website, checked against data from the Census Bureau’s American Housing Survey). He intersected that data with insurance data to conclude that $40 billion homeowners premiums—or more—”could, in theory, be subject to disintermediation.”

“We don’t like to engage in hyperbole and recognize that a lot has to happen before homeowners insurers face meaningful risk of disintermediation from captive HOAs, even if other states follow Utah’s lead,” Wilt wrote, noting that there are operational issues that argue against this, such as captive capital requirements and insufficient spread of risk. “We’re inclined to think, however, that there could be cadres of (re)insurance and brokerage professionals sufficiently intrigued by this development to invest time contemplating ways to tap into this potentially large addressable market,” he wrote.

When Carrier Management described the Utah law change to the leader of a traditional homeowners insurance organization, and shared Wilt’s supposition that it could be an existential threat to the industry, Bill Martin, president of Plymouth Rock Home Assurance, flagged insufficient spread of risk as a “fundamental problem” for captives. If a captive is created from a neighborhood in a wildfire zone, then “the sum of all the values in that neighborhood is the likely loss in a wildfire,” he said.

“That’s way more than you’re going to charge everybody…. You’ve concentrated the risk. All of it’s going to get hit by the same catastrophe if it gets hit, and immediately you’re going to be insolvent.”

“Financially,” Martin said, “I don’t understand how the local aggregation of risk could possibly be more affordable than the spread of risk that we provide in the regular industry where I can take one home in separately exposed neighborhoods and combine them together. My worst loss in any one event is one of those homes or two of those homes, not 50 of them.”

“The math gets really difficult,” he said. “My guess is they’re going to turn around and buy reinsurance and have somebody to manage those programs and end up being in the same economics that we are. That puts them at a disadvantage because there’s no scale and no buying power and no ability to retain some portion of the risk.”

Related article: Read about Martin’s innovations at Plymouth Rock Home Assurance in a profile soon to be published in the third-quarter print edition of Carrier Management.

“We’re likely going to want to see it be a large HOA that maybe has a pretty significant-sized community” to minimize the prospect of being wiped out by one single catastrophic event, said Wegkamp, responding to a question of whether groups of HOAs forming captives together might develop instead. “That’s a good question,” he said, pausing thoughtfully. “There may not be one single community that unless they’re very wealthy individuals [is] willing to reserve for the potential of a mass loss. It’s doable, but it’s more likely that you get maybe a homebuilder who brings together all their HOAs from around the state or other states that come together,” he said, reiterating that the law change does not restrict the captive option to HOAs.

William Wilt, Assured Research

“We want to allow these organizations to come together potentially and help diversify risk,” he said, noting that proposals bringing together Florida coastal communities with areas of California and those in the mountains of other westerns states have been talked about.

As for the appetite of the reinsurance market, Fears said the reinsurance and the excess markets have been challenging in the commercial property space. “It’s been getting better, but it definitely was in a hard market” making it difficult for commercial businesses to fill out their towers, he said.

Whether reinsurers will be willing to entertain “something new and different” in the form of homeowners captives is a big question, he agreed.

More Captive Mechanics

Asked about traditional insurance companies, Fears also agreed that carriers could take on the types of roles they play now in commercial insurance captive scenarios—providing paper in fronting arrangements (ceding the risks back to the captive), or providing claims handling services.

“It’s creative and it’s interesting,” said Martin, speaking generally about the Utah law change. “If [captives] get a regulatory advantage, my guess is that there will be some insurers jumping in to try and help people set these things up. It’ll be an ironic way for insurers to avoid the regulatory disadvantages of being a normal old mean ‘you-have-to-say-no insurer,” he said.

Bill Martin, Plymouth Rock Home Assurance

Asked about the idea that the ability to use cat models for pricing California risks might be a regulatory advantage, Martin noted that California will soon allow carriers to use them if they agree to write a certain share of risks in wildfire-distressed areas. “Cat models will enable the insurers to ask for more when there’s been a relatively calm cat period. Right now, [homeowners] just can’t get insurance, so they’re paying a lot just to get the rare one that’s available. And there’s no competition. It’s a competitive failure.”

“Once you have the competition back and you’re allowing models, your rates won’t go up and down with short-term events as often,” he said, offering the theory of California’s in-process regulatory change.

For associations that want to take advantage of Utah’s recent law change, Fears listed several questions to consider as they evaluate the idea of starting captives:

• How much capital will be required? Beyond the minimum capital requirement, HOAs will start by considering the total insurance values of each home, and any deductibles that might be applied.

• How much reinsurance is appropriate? How much risk does the homeowners association want to take on? How much risk do the policyholders want to take on? Does reinsurance need to be A-rated?

• What will be the adoption rate within the association? Do you need a certain percentage of your homeowners to say they’re going to contribute and purchase insurance from the captive? Does the association require everyone to join?

• Will everyone have to engage in risk mitigation techniques even if they don’t purchase insurance from the captive?

• Will the captive also cover communal properties—the club house, golf course, grounds, community pools, etc.—managed by the HOA?

In his blog post, Fears also added D&O insurance for the HOA board and workers compensation deductible reimbursement insurance for community staff as possible coverage options to consider adding to the captive.

Carrier Management asked Fears about the possibility of that a captive might provide wildfire-only coverage in situations where traditional carriers might provide homeowners insurance excluding wildfire. Fears said he’s seen that in the commercial lines market, where commercial property insurers are increasing wind hail deductibles or excluding wind hail, and insureds are looking to captives to take on those excluded claims. In the homeowners situation, however, there would be a challenge for coordinating the people who have that particular exclusion on their current policy or who are insured by a certain carrier that excludes wildfire, and then pricing the specific catastrophe risk, he said.

What about auto insurance?

While consumers are also facing affordability issues with auto insurance, Fears said that historically, captives fill a void when both affordability or availability issues exist together. For auto, “I don’t know that there’s an availability issue,” he said, pointing to the existence of nonstandard auto carriers.

For now, only Utah has opened the door for homeowners, but should the movement spread, there are other reasons to consider Utah, Wegkamp said when asked about the state’s captive environment. “We try to be a cost-effective state. One key benefit to having your captive in Utah is there are no state premium taxes. It’s just a flat license fee of $7,500,” he said, noting that the combination is appealing to small and large captives. “Without the state premium tax, there’s really no punishment for growing your program. You can do premium of a million or a hundred million, and you’re just going to pay that $7,500 fee,” he said.

November 13, 2017

By Jenni Bergal

As the threat from hackers and cybercriminals intensifies, a growing number of states are buying cyber insurance to protect themselves — and taxpayers.

“It’s expensive. It’s a big budget item for us. But it’s absolutely worth it,” said Michael Hussey, Utah’s chief information officer. “You’re seeing breaches now that cost companies and states millions and millions of dollars.”

More than a dozen states now have cyber insurance policies.

Hussey said Utah first bought a policy in 2015, three years after a data breach of a Department of Health server exposed 780,000 residents’ personal information to hackers. The state wound up spending millions of dollars to deal with the aftermath, including paying for credit monitoring and legal fees and conducting a security assessment of all state servers.

Utah now pays $230,000 a year for $10 million in cyber coverage and has a $1 million deductible. The policy covers every agency in the executive branch.

So far, the state hasn’t had any big data breaches that would require filing a claim, but that doesn’t mean it won’t happen in the future, Hussey said.

“We check what we’re supposed to be checking,” he said. “But with cyber, if one little thing is overlooked or you have bad luck and leave something undone, you’d hate to be left holding the bag to cover that.”

A Growing Market

In the wake of massive data breaches like those involving Yahoo last year and Anthem the year before, many businesses have scrambled to buy cyber insurance. Last year, insurers wrote $1.35 billion in premiums, a 35 percent jump from 2015, according to Fitch Ratings.

States have been following in their footsteps. In a survey of state CIOs this year, 38 percent reported having some type of cyber insurance, compared to 20 percent in 2015.

Even some small cities, such as Cody, Wyoming, have purchased cyber coverage this year.

Hackers and cybercriminals in recent years have taken aim at state and local government networks, which contain information such as Social Security, bank account and credit card numbers on millions of people and businesses. And online activists have hijacked government computer systems, defaced websites, and hacked into data or email and released it online.

In 2016, state information technology officers ranked cybersecurity as their top priority for the third year in a row.

James Lynch, chief actuary for the Insurance Information Institute, an industry trade group, said selling cyber insurance to states is especially challenging.

“What states do is so diffuse and sprawling, and they deal with so many types of people and circumstances that it’s difficult for an insurance company to fully get a grasp on what those risks are and underwrite them all,” he said.

It can be equally challenging for those purchasing cyber insurance, he added.

“When you buy an auto policy, you have a pretty good idea what’s in it. The terminology is highly standardized. It’s been vetted through the courts,” Lynch said. “You don’t have that in cyber because the product is so new. The actual things being covered also vary greatly from policy to policy.”

And government agencies sometimes don’t understand the risks or what kind of coverage they’ll need, cyber experts say.

“Some states and local governments don’t even know where their data is or what they’ve got,” said Dan Lohrmann, chief security officer for Security Mentor, a national security training firm that works with states. “So when you start having to give the insurer a list of how many servers you have and what systems are included, it gets pretty complicated.”

Lohrmann said many state IT security officials initially were wary of cyber insurance, figuring they’d rather spend their limited resources on prevention. But many now take a different view, he said, because they realize that having the insurance will ensure that they are keeping their security programs up to snuff. Insurers won’t sell states policies unless they meet certain standards, including regularly training staff, encrypting sensitive data and updating servers.

In Georgia, Chief Technology Officer Steve Nichols said he was skeptical about cyber insurance at first, but when he saw how many giant companies had breaches and the financial impact, he changed his mind.

In July, Georgia bought comprehensive cyber insurance, which covers about a hundred state agencies, he said.

Nichols said he thinks Georgia has the largest amount of cyber coverage of any state — $100 million. It pays a $1.8 million-a-year premium and has a $250,000 deductible per incident.

The state relied on a broker to guide it through the “very confusing and complicated” process and put together a deal with a consortium of insurers, he said.

Using Cyber Insurance

Montana was the first state to get cyber insurance, in 2011, said Lynne Pizzini, chief IT security officer. And it’s glad it did.

Three years later, hackers gained access to a server that contained Department of Public Health and Human Services data, including clients’ names and Social Security numbers and some health information. The state mailed letters about the incident to more than a million people who could have been affected.

Pizzini said the insurance company helped with the mailings, set up a call center, and provided forensic investigation, legal and communications assistance, and credit monitoring.

“We used all of the services in our insurance policy,” she said. “It would have cost us a ton more than the premium we pay.”

The state has a $2 million policy, which covers all agencies, including the university system, she said. It pays an $88,200 annual premium and has a $100,000 deductible per incident and a 10 percent copayment for credit monitoring.

But Pizzini and IT officials in other states caution that having cyber insurance shouldn’t make states complacent and view it as a substitute for a comprehensive security program. While the coverage can be a big help after the fact, they say, states need to invest in security, keep their technology updated, and be prepared for hackers and cybercriminals.

“It’s like brushing your teeth,” Georgia’s Nichols said. “You need to do it every day.”

May 6, 2015

By Insurance Journal

Utah’s Workers Compensation Fund has declared a $12 million dividend that will be distributed to a majority of policyholders this month. Policyholders can expect to receive a dividend equal to 6 percent of their 2014 premium.

More than 19,000 businesses in Utah will receive a portion of the $12 million policyholder dividend.

“Policyholders are receiving a dividend because we had better than expected investment and underwriting results in 2014,” WCF CEO and President Ray Pickup said in a statement. “Severe injuries declined, the overall number of claims decreased, and the amount of payroll insured by WCF increased because of Utah’s robust economy. And when we as a company do well, we share the results with our policyholders.”

With this distribution, WCF will have returned more than $382 million in dividends to its policyholders since 1992, according to the organization.

Salt Lake City-based WCF is owned by its policyholders and governed by a board of directors. WCF is rated A (Excellent) by the A.M. Best Co.