Risk Management Seminar

On June 17 the Greater Kansas City Chapter of the Risk and Insurance Management Society, Inc. will be holding its annual Education Day 2005 at the Marriott in downtown Kansas City. Please call Laura Vunovich at HNTB Corporation (816-527-2515) to register. Yours truly will be using the "Jeopardy" game show format to talk about Contractual Risk issues....prizes to be awarded!!

Default insurance vs Surety Bonds

A recent development outlined in the April 2005 edition of Construction Magazine at page 50 points out the benefits of Default Insurance. The differences between this insurance and the traditional bonds:(1) the general contractor is responsible for resolving a subcontractors default issue, (2) the period of coverage can be up to 10 years after a project is completed while most bonds expire as soon as a year or more after the project is completed, (3) general contractors obtain annual coverage on  all jobs regardless of volume work when they buy a default policy, and (4) default policy covers the amount of the claim, regardless of the contract amount while the bond covers 100% of the contract price. I sense some real life experience will determine whether or not default policies will be the preferred alternative for general contractors. 

Project Final Meeting

In a follow up to the prior two notes, again I would refer you to the CFMA magazine "Building Profits", the January \February edition. The author points out on page 70 that in closing out a project one should review the insurance policies to be sure to transfer the coverage to the owner, the job costs should be recorded, all injuries and claims should be reviewed to determine if any damages could be mitigated and a project history should be developed to plan for the future. How many contractors keep a closing list of such topics and are there any lessons learned from doing so that will benefit the contractor? Perhaps something the insurance representative would like to accomplish, but will how often do these types of meetings take place?

Insurance and Project Monthly Meetings

In an article in the January\February addition of "Building Profits" by CFMA, the author at page 69 indicates at monthly project meetings the project team should undertake a compliance review of policies , down chain compliance reviews, injury\claim review, project charges and needs assessments in the context of insurance policies and coverages. Is this typically done even at the end of the project? 

Targeting Contractor Insurance

I borrowed heavily from the January\February issue of CFMA magazine entitled "Building Profits" in putting together these thoughts on insurance. The article dealing with insurance on a construction job is found at page 65. The author points out that at a Project Star-Up Meeting review the committee should review Project Objectives (Objectives, Scope and Schedule\duration), Contract Review (payment provisions, definitions, indemnities and insurance and "flow-down" clauses) and Procedural Considerations (chart of accounts, chain of custody of documents, "down-chain" contract provisions, and safety issues). Insurance policies and provisions to be reviewed in light of these considerations...including coverage limits, the need to add additional insureds, indemnities, stored materials, deductibles, builder's risk coverage, owner controlled insurance programs (OCIP), contractor controlled insurance programs (CCIP), change orders, costing allocations. How often does this occur on a project by project basis?

Now Is The Time To Find Out Who Has Proper Coverage

"A recent case points out to me the number of construction jobs at risk for a lack of adequate insurance coverage. At a minimum, it is best to determine who has and who does not have general liability coverage or builders risk, workman's comp., etc.... on any job, and in what amounts. While you may not be able to force another contractor on the job to buy insurance, at least you might be better able to negotiate the risk up front or evaluate options should a calamity occur during construction if you know the extent and amount of all the players have assets to deal with such issues."

Risk Shifting In Construction Contracts

"At a recent CFMA breakfast meeting Bill McDermott of  MWC Construction and I debated the risk shifting that goes on in negotiating construction contracts. It brought out a significant amount of interest, according to those attended and another seminar is on the way...geez, what the contractor goes through everyday should be such a focal point of interest? How about a new reality show dealing with a construction project???"