What are the biggest challenges construction firms face when it comes to buying insurance?
In construction, the biggest challenge in the industry right now is that there is not enough work. As a result, contractors are bidding on jobs very aggressively – sometimes at cost or even below cost. Unfortunately, they sometimes are not sure what costs really are, or they bid on a project without any contingencies for unforeseen conditions. That puts pressure on everybody when it comes to insurance coverage.
What mistakes do contractors need to avoid to be sure their business is protected?
There is a “cat and mouse game” played from a contractual liability standpoint. A contractor may try to pass liability down the supplier chain to subcontractors with “hold harmless” agreements and additional insured requirements.
Contractors really need to understand what it means to be an additional insured on an insurance policy as well as what the terms and conditions of that coverage are. It can be very limited. You may be the additional insured but for very limited circumstances. As an example, many contractors during the economic downturn bought policies without contractual liability coverage or limited forms of this coverage, which virtually eliminated the risk transfer.
It is really important to understand the nature of what the contractual liability covers and to make sure the other contractors you work with have their own qualified insurance program. You really can’t rely on someone else’s insurance to pay your losses.
To learn about Meeker Sharkey & Hurley insurance coverage for construction companies and find out if you have the coverage you need if you work with subcontractors, contact Rich Skorupski.