Philip was driving to pick up a tool rental for a construction job his company was working on when another driver rear ended his car causing Philip to sustain serious back injuries. Ultimately the workers compensation insurance policy purchased by the construction company Philip was working for paid the hospital bills and lost wages. Since the bill was north of $100,000 the effect on the construction company’s workers compensation experience modification factor was significant. It doubled both their direct and indirect workers compensation costs which impaired their future bids. Further it drove their mod well past 1.2 precluding them from bidding Federal & State work which carries a requirement that all bidders achieve an experience modification factor of 1.2 or lower.
Not only is this not fair, but it’s also quite common. The problem is 4 fold:
In motor vehicle accidents like above workers compensation may be primary when an employee is injured in the course of employment.
If a third party is clearly negligent, even a little bit, you (and/or) your workers’ compensation insurance carrier can subrogate to recover the funds.
Few clients, and even fewer insurance brokers, track the progress of subrogation and make sure that the carrier or plaintiff does not compromise the client’s workers compensation policy.
When the carrier does receive subrogation funds reimbursing them for the client’s claims costs no one notifies the state workers’ compensation board to make sure the experience modification factor gets re-calculated in the client’s favor. In situations like these, we may have the ability to go back 5 years contingent on the date of claim and state. What’s a potential 10% credit on your workers’ compensation premium each year for 5 years’ worth?
The net result is the business owner or client ends up with an artificially high experience modification factor which not only significantly impacts their unit cost structure, but it may also impact their ability to bid new work as the artificially high workers compensation experience modification factor will knock them out of contention.
It’s no secret keeping your experience modification factor low is a solid strategy to better position your firm to compete harder in a challenging business environment. Owners know that when folks are reviewing RFP’s they are looking at this critical business statistic. Your experience modification factor not only distinguishes you from your competition it also is a major cost driver.
We suggest the client looks for a Risk Advisor or broker that employs a claims advocate that works on behalf of the client who will track all workers’ compensation claims until they are closed. By simply following up every few months and asking the right questions you can have a material and substantive impact on lowering claims and ultimately your costs. This is especially true when there are other negligent third parties involved that could contribute to or for the claim in it’s entirety.
A wise friend once told me sunshine is the best antiseptic, with respect to workers compensation claims clearly this is wise advice and protocol.
For more info on lowering your workers comp experience mod, CLICK HERE.
With the economy being at an all-time low, residential builders may be facing hard times. However, whether you have no work, or are building 5 homes a year, it is still important to know about risk management. NY builders, you work hard for your money and you deserve to keep your earnings. However, without NY risk insurance, you could lose hundreds or even thousands if something were to go wrong on the job-site.
Here are a few scenarios to show you what we mean:
#1: One of your newest builders is not familiar with a nail-gun but decides to give it a go. Ten minutes later he is on the way to the hospital due to a nail through his hand.
#2: Your roofers have been working hard in the sun all day. One of them suddenly gets dizzy and falls off the roof. Oh no!
#3: One of the home owners comes by the site to check out your progress. Dressed in heels, she slips over an extension cord and hit her head…hard.
Believe it or not, these types of scenarios are not as rare as you may think. It is important that you go over safety guidelines with your employees and anyone else who is going to be around the job-site. It is also important to go over risk management. NY insurance agents will be happy to speak with you about the right policies for your business. Most essential policies include general liability, workers comp, builders risk insurance and even commercial vehicle insurance. No matter what policies you choose, you will be taking a huge step towards safety and protecting your company. At Metropolitan Risk, we hope you never have to deal with a lawsuit or expensive medical costs. Take our advice and look into risk management today before an accident puts a dent in your business.
For those of you late to the dance, this is part 3 of the issue. We suggest you click on the two previous posts to understand exactly what the issue is. This latest post is our potential solution:
As stated previously we believe the intent of the new rule being imposed
by the New York City Buildings Department was to be certain there was a
vertical pool of insured capital (NY Construction General Liability
Insurance ) to pay for catastrophic property and injury losses on all
permitted New York City Construction sites requiring certain permits. We
get it, this rule change was born from the two crane collapses in
Manhattan that were woefully under insured. Not only is the Buildings
Department increasing the limit of insurance on the job sites, they are
dictating to the building & insurance community the mechanism for how that is
delivered without understanding the full impact on the market.
Impact:
The impact by changing the mechanism of which type of insurance contract to
buy omitts the products & completed operation component of
past projects distorting their P&L by doubling if not tripling their insurance costs. Further Builders balance sheets are exposed as many will opt not to purchase insurance to cover the products & completed ops exposure, or warranty work, leaving them to retain the exposure and pay for future losses from either current cash flow or retained earnings. As written project
specific insurance liability contracts which are mandated to cover all
future jobs will not provide this critical coverage for past projects which is the gaping whole. Where will the completed ops coverage come from as it relates to past projects and at what cost if it’s available. This is a huge problem for the NY General Contracting / NY Development Community.
The bane of all NY General Contractors and NY Developers is punch list items that need
to be dealt with once the tenants, or end user begins to utilize the
building or structure. This too will not be provided coverage under the
project specific insurance policies once the building has been put to it’s intended use. The cost to deal with this exposure
increases the overall cost of the insurance NY General Contractors, NY
Builders, and NY Developers must pay, on top of the increased limits.
See where this is heading!?
NO Practice NY General Liability Insurance = No Products & Completed Operation Coverage AND No Warranty Work Coverage for Past Projects!! Builders must purchase this coverage separately (if available) at a substantial increased cost basis PLUSpurchase NY Project Specific Insurance w increased limits. Projected impact is at the very least doubling the insurance costs for small & mid sized builders.
Proposed Solution:
Understanding the New York City Building Department’s true intent which is to
increase and secure the insured pool of capital ( NY General Liability
Insurance); may we suggest another way to achieve the same goal without
having a major disruptive impact on a community of businesses already
reeling from slack product demand, tight financing , high land
costs, high labor costs, taxes, and arguably the highest
overall bureaucratic and administrative costs in the country.
Instead of mandating “NY Project Specific Construction General Liability
Insurance” , as the mechanism to deliver the insured pool of capital or
NY General, give the NY General Contractors, NY Builders, NY
Developers the choice to satisfy the requirement with either:
1) NY Construction Project Specific General Liability Insurance as is currently reflected in the rule.
OR
2) The ability maintain the same NY Construction General Liability Insurance Policy they have been purchasing for years Except for the Following: Add the following Endorsement: CG 25 03 03 97 or it’s equivalent
DESIGNATED CONSTRUCTION PROJECT(S) GENERAL AGGREGATE LIMIT
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
SCHEDULE
Designated Construction Projects:
(If
no entry appears above, information required to complete this
endorsement will be shown in the Declarations as applicable to this
endorsement.)
A. For all sums which the insured becomes legally obligated to pay as damages caused by “occurrences” under COVERAGE A (SECTION I), and for all medical expenses caused by accidents under COVERAGE C (SECTION I), which can be attributed only to ongoing operations at a single designated construction project shown in the Schedule above:
1. A
separate Designated Construction Project General Aggregate Limit
applies to each designated construction project, and that limit is equal
to the amount of the General Aggregate Limit shown in the Declarations.
2. The Designated Construction Project General Aggregate Limit is the most we will pay for the sum of all damages under COVERAGE A,
except damages because of “bodily injury” or “property damage” included
in the “products-completed operations hazard”, and for medical expenses
under COVERAGEC regardless of the number of:
a. Insureds;
b. Claims made or “suits” brought; or
c. Persons or organizations making claims or bringing “suits”.
3. Any payments made under COVERAGE A for damages or under COVERAGE C
for medical expenses shall reduce the Designated Construction Project
General Aggregate Limit for that designated construction project. Such
payments shall not reduce the General Aggregate Limit shown in this
Declarations nor shall they reduce any other Designated Construction
Project General Aggregate Limit for any other designated construction
project shown in the Schedule above.
4. The
limits shown in the Declarations for Each Occurrence, Fire Damage and
Medical Expense continue to apply. However, instead of being subject to
the General Aggregate Limit shown in the Declarations, such limits will
be subject to the applicable Designated Construction Project General
Aggregate Limit.
B. For all sums which the insured becomes legally obligated to pay as damages caused by “occurrences” under COVERAGE A (SECTION I), and for all medical expenses caused by accidents under COVERAGE C (SECTION I),
which cannot be attributed only to ongoing operations at a single
designated construction project shown in the Schedule above:
—Any payments made under COVERAGE A for damages or under COVERAGE C
for medical expenses shall reduce the amount available under the
General Aggregate Limit or the Products-Completed Operations Aggregate
Limit, whichever is applicable; and
2. Such payments shall not reduce any Designated Construction Project General Aggregate Limit.
C. When
coverage for liability arising out of the “products-completed
operations hazard” is provided, any payments for damages because of
“bodily injury” or “property damage” included in the “products-completed
operations hazard” will reduce the Products-Completed Operations
Aggregate Limit, and not reduce the General Aggregate Limit nor the
Designated Construction Project General Aggregate Limit.
D. If
the applicable designated construction project has been abandoned,
delayed, or abandoned and then restarted, or if the authorized
contracting parties deviate from plans, blueprints, designs,
specifications or timetables, the project will still be deemed to be the
same construction project.
E. The provisions of Limits Of Insurance (SECTION III) not otherwise modified by this endorsement shall continue to apply as stipulated.
The beauty of this endorsement is that it achieves the goal of the NYC Department of Buildings by creating a vertical pool of insured capital ( NY General Liability Insurance) , AND it can be added to the NY Construction General Liability Practice Policy, which contemplates both the warranty work we highlighted in the previous articles, as well as providing that critical Products & Completed Operations coverage the NY General Contractors, NY Developers need to cover events that may occur as it relates to alleged construction defect claims on past projects that were built. The NYC Buildings Department mandates that this coverage must be reflected on the Certificate of Insurance, which is then accompanied by the Notarized Certification By Broker.
This in our estimation is a home run as everyone wins. Yes there is an increased cost to adding this endorsement to both the underlying NY construction insurance policy as well as the NY Construction Excess Liability policy, or NY Construction Umbrella insurance, however the cost pales in comparison to the cost of trying to comply with the rule as currently written. In our estimation for a NY General Contractor the rule as presently written would more than double the overall insurance cost for NY Builders, NY Developers, & NY General Contractors to maintain the same or similar level of coverage.
In the several times I have met Robert Limandri and his staff at the NYC Buildings Department I have found them to be very open minded and receptive. It’s my hope that their wisdom will once again prevail serving both citizens and business alike. We shall see………
A cement truck driver fell and injured himself while climbing down from his truck after checking the cement to be delivered at the construction site. Although the man was one hundred feet away form the site, he was protected by the Labor Law. Ordinarily, the Labor Law does not protect workers from incidents that happen outside the construction site. However, the driver had been directed by the construction site to wait outside the entrance in a line of trucks, extending the construction site’s liability and putting the cement truck driver under the protection of the Labor Law.
The NY Labor is very specific, and quite ownerous to both New York property owners, NY Developers, and NY General Contracting firms. We specifically reference NY because it’s only in NY where this onerous responsibility occurs. I won’t get into the specifics of the Labor Law.
This case was critical for a myriad of reasons. There are a lot of construction projects in New York City that are insured under a project-specific general liability insurance policy OR are covered under a Wrap Insurance Program, (Owners Contractors Insurance Program) where there is a clear demarkation line geographically where coverage ceases and begins unlike a “Practice Policy” which insures the general contractor wherever he is working and is not specific to a project. An appellate division victory affirming the right of an employee of a “vendor” which typically does not have the same stringent coverage obligations as will your sub contractors pose a difficult task to insure risk transfer away from the NY Developer, NY General Contracting Firm, or NY Project owner.
Some Risk Management Tips To Mitigate This New Exposure:
Broaden the language in your contracts that impose defense and indemnification for both sub contractors & vendors/suppliers.
Include language defense & indemnity language within your purchase orders that you may lean on if this type of event happens on your project.
Broaden the language or defintions within the NY Project Specific Liability Policy that widens the coverage zone. (This is a frequent mistake by the NY Insurance Brokerage Community in that they take the geographic limitation of 50 feet the carrier intially offers and fail to negotiate a larger coverage zone).
Buy your supplies from reputable suppliers who have strong safety track records and a strong insurance program such as Casa Building Supplies . (Pardon this unabashed plug: under full disclosure, Jack Dragone is a good personal friend of mine, and I like his employer.)
To find out other startegic ways to reduce the high cost of insurance claims to your New York Construction business or information about New York General Liability Insurance and New York Workers Comp Insurance, speak to a Risk Advisor @ Metropolitan Risk Advisory . If you want to buy brick, call Jack (718) 842-8650. Tell him Mike Stoop told you to call.
Very few purchasers of Builder’s Risk insurance are aware that coverage ceases in two ways and not just at policy expiration. At expiration as everyone is aware , coverage also ceases when a project, recently completed is awarded it’s Certificate of
Occupancy by the municipality it is located in. Rather than write the article again here, I just thought I would provide the link.
Do You Know When Your Builders Risk Policy Expires??
Hopefully you are reading this prior to your loss!
