In recent years, the construction industry has seen a surge in production as cities are growing at an alarming rate. Surrounding areas are literally growing up as tall buildings replace sprawling suburban areas, bringing people in from the outskirts back inside city limits.
In a recent survey from Associated General Contractors of America, results showed that Georgia-based construction companies are seeing exponential growth in everything from increasing headcount (36% plan to increase between 11 and 25 percent) to taking on larger-scale projects. But places like New York City, San Jose, Austin and Reno are just some of the metropolises seeing this boom firsthand. But while this is good news for local economies and the overall outlook on the country in terms of growth, those in the construction industry should know that this advancement also poses a major risk in terms of coverage.
With more building projects comes more and more liabilities on every beam and every job site, especially when it comes to hiring laborers that lack the needed skills, an area of opportunity pointed out in the survey.
This is where construction companies need to be hands-on when it comes to investing in the right insurance coverage programs. Staying in the know of the crucial insurance programs construction companies need as well as trends in the markets will keep them out of harm’s way when it comes to legal issues.
Contractor Liability Insurance
Building liability coverage can protect against injuries on a job site as well as accidents or property damage suffered during a project. This also protects against workers’ mishandling of materials that results in damage during remodeling. A liability policy can be used to protect against injury claims, paying for medical expenses, funeral, and court-awarded compensations.
Another part covered by liability insurance are damage claims, protecting a company against damages that occur against a client’s property. Also, product claims can be covered with this program, covering claims related to damages caused by equipment installed by a construction company.
The outline of this kind of coverage is in its name. Construction wrap-up insurance is a liability policy that acts as a blanket-style program that protects all contractors and subcontractors during a project. Typically, this kind of coverage is geared toward bigger projects tilting past the $10 million mark. There are usually two main types of wrap-up insurance including Owner Controlled Insurance Programs and Contractor Controlled Insurance Programs. The choice comes down to whether or not the builder or contractor want to cover all listed contractors (OCIP) or extend coverage to all contractors and subcontractors (CCIP).
The Limited World of Condos
Insurance for general contractors working on large residential projects, such as condos, is becoming more difficult to lock down. Carriers are becoming more reluctant to give out insurance to builders because of a limited market. While apartment complexes are booming throughout the country, the market for condos and townhomes is thin.
Currently, the legal environment for condo construction places an immense amount of liability on builders and developers, making it more costly to bring this kind of housing to market. When it comes to apartments, renting is much more attractive and a less risky investment for developers. But the lack of new condos could be detrimental. The reason being that not only can condos provide affordable housing options for people across all economic segments, they also encourage development in urban areas and reduce urban sprawl.
If a construction company fails to complete a job to the satisfaction of their client, this can land them in legal trouble. A prformance bond is a guarantee for the completion of a project and will require having collateral property or investment to support the requirements of the surety agency.
A performance bond is typically given out by a bank or an insurance company and protects the owner against possible losses in case a contractor fails to perform or is unable to deliver the project as per established. If a contractor fails to complete a job because of bankruptcy or default, the surety is responsible for compensating the owner for the losses.
A bid bond is a type of construction bond that protects the owner or developer in a construction bidding process. It acts as a guarantee that the bidder provides a promise that they will ensure that if they fail to honor the terms of a bid, the owner will be compensated. This kind of bond is obtained through a surety agency (i.e. insurance agency or bank) and offers peace of mind that a contractor is financially able and has the right resources to take on and finish a project.
This kind of coverage serves as a guarantee that the contractor who wins the bid will honor the terms of the bid following the signing of a contract.
About Genesee General
At Genesee, we strive to provide quality insurance solutions for the Commercial E & S sector. Our longstanding expertise has allowed us to successfully serve your clients for over three decades. Our specialized products include coverages for Transportation, Garage, P & C, Professional, Brokerage Property, Specialty Programs and many more. For more information about our products, we invite you to contact us today at (800) 282- 8755.