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How Agents Can Help Contractors Mitigate the Risks of Potential Exposures 

Many contractors are still unaware of the professional services and pollution risks associated with their construction work. Independent agents can help clients cover such risks.
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how agents can help contractors mitigate the risks of potential exposures 

We're living in a quick-service economy that expects nothing less than immediacy served with a side of excellence—a challenge that has become increasingly more intense for contractors working within the construction marketplace.

Across the U.S., a large problem for many contractors is that many are still unaware of the professional services and pollution risks associated with their construction work. The inherent nature of design and build methodologies can increase the liability of contractors because some builders offer their services with pre-construction, in-house design or in areas beyond their scope of expertise to try to stand out in a crowded marketplace.

As a result, independent agents have been constantly placed in the position of offering a service that educates their clients about potential exposures that are not typically covered by their standard general liability policies. This includes offering coverage such as contractors professional liability and contractors pollution liability.

Contractors professional liability is designed to protect insureds from the damages arising from the professional service acts, errors, and omissions performed by or on behalf of any construction firm. Contractors pollution liability is designed to help manage the expenses associated with pollution arising out of the contractor's operations or work, including the related cleanup and restoration costs. 

Agents and brokers must often help contractors sort through the maze of contractors professional liability and contractors pollution liability risk management programs available from more than 30 separate carriers. This means not only working with contractors to identify the project's specific exposures but also simplifying the complex coverages by culling through all the differing terms and conditions.

Questions commonly explore the project type, responsibilities of everyone involved and delivery methodology. Other considerations include analyzing the operation's management and oversight; products, procedures and techniques; and best practices for risk transfer through contractual language in respect to contractors professional liability or contractors pollution liability.

In some cases, this can also involve helping contractors decipher the varying forms of rectification or mitigation of loss coverage available, which can potentially pay the contractors' upfront first-party costs to mitigate or rectify professional liability failures before the claims are filed. Another benefit of successfully pairing rectification and mitigation coverage with a contractor is the potential to quickly get projects back on track by helping everyone involved overcome design challenges or field errors.

Further, recognizing the emergence of faulty workmanship coverage forms provided by professional liability carriers, which are designed to protect contractors from the “your work" claims triggered by project owners and other third parties not typically covered in standard commercial general liability policies, is yet another aspect of providing best-in-class service. This includes the contractor's workmanship as well as the equipment, parts and materials, such as steel beams, epoxy activators and anchor bolts incorporated in the construction work. 

Initially offered by only a single carrier, several insurers have recently entered the professional liability marketplace to cover the cost to repair or replace faulty work or the related material costs associated with the “self-performed work" of general and trade contractors. 

It's important to remember that it's always about the contractor's best interests. Knowing their needs and the available risk management tools is key to help construction firms manage liability in this highly litigious environment.

Hilton Jones is a consultant in RT Specialty's Environmental and Construction Professional Practice (RT ECP), a part of the RT Specialty division of RSG Specialty LLC.

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Monday, July 26, 2021
Builders Risk