Insurance Basics for Construction Professionals

If you are a construction professional, you are at risk, and every step of every job presents risk that has the potential to bring harm—be it financial or bodily—to yourself, your loved ones, your staff, your clients, and the public. Insurance can cover this risk, but you must not do this alone. If you don’t consider your insurance broker a key advisor, read this article and then go shopping for an insurance broker who can help you understand what you need to do to protect yourself and your business.

For the last 20 years, my company—a construction services firm conducting traditional building inspection and testing, estimating, quality assurance, and construction management services—has worked on hundreds of building claims and litigation matters, including expert witness testimony. We have been hired to analyze the liability of thousands of project players.

These are examples of some cases we have worked on:A general contractor performed a whole-house interior and exterior remodel, using more than a dozen subcontractors. The owners were dissatisfied and refused to make the final payment, so the general contractor sued the owners. In response, the owners hired a lawyer and a team of experts to examine the project and find every conceivable variation from perfection, and sued the general contractor for construction defects, claiming a cost to repair of more than 100% of the original contract price. The general contractor, in turn, sued every subcontractor who worked on the elements of work in the defect claim. We have worked on so many of these cases, the sequence of events is like a proverb.A condominium owner hired a general contractor for an interior remodel. The general contractor hired a plumbing subcontractor who was using a torch and lit the building on fire. The condominium association’s insurance company paid to make repairs to the common area, and then pursued both the general contractor and the plumbing subcontractor for reimbursement of the claim paid.An employee of a scaffolding sub-subcontractor, hired by the siding subcontractor, fell and was gravely injured. Since the employer had the required workers’ compensation insurance, the injured worker was unable to sue his employer, but he was not prohibited from suing the siding subcontractor who hired his company and the general contractor. The general contractor’s insurance company hired a lawyer, who hired us to investigate and explain the roles and responsibilities of the various parties, in sworn testimony.
Count yourself lucky if you haven’t been involved in a similar case. But even if you have escaped this misery, you need to ask yourself now, What would I do, if I were a player in one of these scenarios? More importantly, you need to be insured for any of these scenarios. It’s not a matter of “if” anymore, it’s “when.”

In this article, I’ll go over the basics so you have some background to ask the right questions when shopping for an insurance broker, as that’s what you need to do if you don’t already have one who is looking out for your interests.


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