Construction Claims and Insurance Risk Management consists of
A construction contractor’s insurance premiums can increase substantially from year to year. A substantial increase is usually caused by an insurance company paying a large settlement in a construction defect case.
Savvy construction contractors have their own private attorney monitoring the insurance defense attorney to insure the insurance defense attorney gets the best result for the construction contractor. The best result usually means a lower settlement. A lower settlement will lessen the probability for a substantial increase in a construction contractor’s premium each year.
The first step in limiting liability is to insure that a proper general liability insurance policy is purchased. This is done during the renewal process. The construction contractor consults with the construction attorney and negotiates with the insurance broker for the desired coverage. Too often a construction contractor purchases insurance that does not cover the work that the construction contractor is performing.
A classic example is when a construction contractor, who is working on condominium project, unknowingly purchases an insurance policy with a condominium exclusion. This exclusion means that the construction contractor is uninsured for all work performed on condominium projects. (Our law firm sees this issue multiple times a year.)
Today’s construction contractors are being required to pay higher and higher out-of-pocket expenses. Construction contractors can limit their out-of-pocket expenses by first knowing the maximum amount of out-of-pocket expenses for each project and then minimizing those out-of-pocket expenses.
Deductible – A deductible is a specific sum that a construction contractor must pay its insurance company at the end of a lawsuit.
Self-Insured-Retention (SIR) A self insured retention is a specific sum a construction contractor must pay prior to the insurance company paying for the defense of a lawsuit. Most construction contractors underestimate this expense.
WRAP/OCIP – A WRAP insurance policy also known as An Owner Controlled Insurance Program (OCIP) or “Wrap-Up Program” is an Insurance policy that covers the general contractor and the subcontractors for a specific project. The subcontractor will be required to pay a deductible or an SIR.
Insurance companies have a pool of attorneys from which they hire to defend construction contractors who trigger their insurance policies. These insurance defense attorneys have competing interests as they are hired to represent the construction contractor all the while wanting to insure that they continue to receive future work from the insurance company. Thus, the “best” settlement is usually one that is in the best interest of the insurance company. The best analogy is a wolf being hired to guard the hen house.
Construction contractors can ensure that their interests are protected by hiring private counsel. Private counsel will manage the insurance company’s defense attorney and insure that a settlement is in the best interest of the construction contractor and not the insurance company.
Plumtree & Associates has a proven track record of helping construction contractors minimize their insurance liabilities and expenses.
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