CHBA Builder Breakfast Session

“LOSS PREVENTION”Creating a relationship between your project

and your insurer

BFL CANADA INSURANCE SERVICES INC.200, 1167 KENSINGTON CRESCENT NWCALGARY, AB T2N 1X7

(403) 451-4132 MAIN

adonald@bflcanada.ca

www.BFLCANADA.ca

Presenter: Ann Donald, FCIP, CRMVice President – Account Executive

Session Overview-Overview of various Insurance policies generally used in the construction industry.-Matching the insurance policy to what happens in the field.-Claims examples.-What you can do to help keep the insurance budget in check.

What Do You See?

• Opportunity• A vision for the future• A new community• A job• A career• Organization & Logistics • Headaches•Creating something that lasts• Growth•Professional pride•Risks•Hazards•Being smart about what you do

What does the insurer see?

• Risks associated with operations hazards of their policyholders •Risks to the “insured” (you)•Risks to the “public” (third parties)•Loss Prevention•Claims Management•Rates & Pricing Relative to the risks•Industry statistics•Individual insured’s statistics•Business retention•Client relations•Overall ‘ROI’ – the business of insurance

Construction Risks

Examples of Owned PropertyBuildingsContents of the business (office

contents, computers, manufacturing equipment, inventory, work in progress)

Equipment & Tools used in the field

Automobiles Buildings under constructionShow Homes & Show Home

Contents

Exposures

-Relating to Owned Property-Relating to Third Parties

Construction Risks

Examples of Third Party Risks

Damage to property of othersBodily Injury or Death Personal Injury (libel & slander)Indirect & Consequential LossesDamage to Completed Projects

(completed operations exposures – beyond warranty)

PollutionErrors & Omissions

Exposures

-Relating to Owned Property-Relating to Third Parties

Owned Property various insurance policies available

Some Examples of Insurance Coverage Available:

• Building Insurance• Contents Insurance (vrs. forms)• Equipment Breakdown• Business Interruption (vrs. Forms)• Employee Dishonesty & Crime• Equipment & Tools• Builders Risk (for Home Builders &

General Contractors)• Installation Floater (for Sub

Contractors)• Automobile Insurance• Cargo Insurance/Property in Transit

The Purpose of Insurance• Insurance is a mechanism to provide

reimbursement for an insured loss that an insured “person” may suffer.

Insurable Risks• Risk – Means the chance of loss• Pure Risk – There is a chance of loss, but

there is no chance of profit. (an automobile collision)

• Speculative Risk – There is either a chance of loss or a chance of profit. (a business operation)

• Insurable Risks – Insurance provides protection again pure risk.

Property InsuranceExamples of Losses

• Theft of tools or equipment from a jobsite• Break-in at office or yard• Damage by wind or hail to owned property• Vandalism of a construction site• Fire• Damage by lightning• Flood or earthquake

Third Party Risks

Some Examples of Insurance Coverage Available:

Commercial General Liability InsuranceUmbrella or Excess Liability Insurance Automobile Insurance (Section A- Third

Party Liability)Pollution LiabilityErrors & Omissions LiabilityDirectors & Officers Insurance

Liability Insurance • Responds to cases arising

from the civil justice system which impose responsibility on all citizens.

• Liability Insurance provides compensation from wrongs by transfer of funds from one party to another.

Liability Insurance Examples of Losses

• Injury to Members of the Public – e.g. a tool falls from a construction site and hits a passerby.

• Injury to Employees of Other Contractors – e.g. a consultant trips on an extension cord. If they are not covered by worker’s compensation, then you would be liable for the loss.

• Damage to the Property of Others – e.g. damage to adjacent property due to a fire on your site; your equipment pulls up a utility line.

• Release of pollutants (e.g. hydraulic line fails on a piece of contractor equipment)

What To Watch Out ForThe insurance policy is the instrument that evidences the contract between

the insured and the insurer. In most cases you will find five main sections to the policy.

• Introduction or Preamble – identifies the parties to the contract• Insuring Agreements – provides details on the subject matter insured

including perils insured against, exclusions and circumstances under which an insured will receive the insurance proceeds.

• Statutory Conditions – Printed on each policy and are governed by Government statutes.

• Policy Conditions – Relate to specific conditions to the particular coverage and further define the insuring agreements.

• Signature Clause – Policy is signed by the insurer and countersigned by a licensed agent/broker in the province.

Beware of Policy Warranties!

Policy Warranties Continued

The Builders Risk Policy often contains warranty clauses in the wording. These are intended to help reduce the risk and compel safe work practices. If a warranty is breached, the insurer has the right to deny coverage in the event of a claim.

Common Warranties:• Tarring & Torch-On Membrane Operations • Hot Works Operation Warranty• Soldering Warranty• Open Flame Heating Warranty• Refuse Warranty• Fencing Warranty• Site Lighting Warranty • Sub-Contractors CGL Warranty

Site Fencing Examples - Here is a Multi Family Site where there is a fence at the front of the project, but it can be easily accessed from the sides. This project would fail the “Fencing Warranty”.

Site Fencing ExampleThis Entire School Site is Fenced. There is a gate that allows access during hours of construction activity and then is locked at night.

Slip and Fall Hazard

Slip and Fall HazardThis is in an existing neighborhood. The original sidewalk was paved, but there was still some uneven ground surrounding the sidewalk and garage driveway. You can see the barricades and lighting used to warn the public of this exposure.

Use of Fall ProtectionIt was great to see that these roofers were using fall protection equipment while working.

Use of Metal Bins for Construction WasteHere is an example of a very clean site – there was a bin for every 4 units.

Exposures to the publicThis construction site used a roadway as their site office and staging area. During the daytime, the drivers would probably avoid this risk, but on a dark night a driver unfamiliar to the area could easily run into the site.

Proximity to Other BuildingsInsurers are always conscious of the quick spread of fire. Multi-Family sites such as this are at risk of losing more than one structure in the event of a fire. It is important to ensure easy access of emergency vehicles to the site and to keep the site clear of debris.

As a side note – this site has a fence at the front, but is wide open on all other sides, making it an easy target for arson, vandalism, or injuries to the public who “just want to take a look”.

Pollution LiabilityThis drain was completely clogged with mud, rocks and other debris. The erosion protection has long failed.

If you are responsible for ensuring the protection of the environment from runoff, then set aside some time to inspect your erosion control protection to make sure it is still working for you.

Hidden Costs of Claims

• Delays in completing the project• May be unable to replace specialized equipment in a

timely manner• Added construction and overhead costs• Increased administration requirements• Missed opportunities• Injury to valuable employees• Strained relationships with owners• Higher insurance costs• Limited insurance options

What can be done to prevent losses?

• Follow your Safety Program and reinforce it at every opportunity.

• Strong supervision skills.

• Use qualified sub-contractors who will follow your safety program guidelines.

• Protect the public from work site risks.

• Follow proper procedures for all excavation operations.

• Hazardous Operations - ensure proper procedures are being followed. Have your sub-contractors provided proof of insurance?

• Use signage, fencing, and security to prevent trespassing. This is especially important when there is a potential for children to come onto the site.

• Adequate barricades and warning lights to protect excavations, road construction operations, working machinery and other hazards. These should not be removed until the hazard is completely eliminated

What you can do to keep your insurance budget in check

• Practice Loss Prevention• Commit to your Safety Program• Keep your job site clean• Monitor driving habits of employees & set guidelines for what is

acceptable• Review construction practices and implement best practices

procedures• Review your risk retention appetite and self insure for losses within

your comfort zone• Work with insurance professionals who understand your business• The difference between an excellent risk / a good risk / or a poor risk

can mean as much as 30% variation in your insurance costs. Where would you like to spend your money?

The Goal

You are all committed to creating wonderful communities where people can live and enjoy their lives.

You are doing a great job and keep on getting better at what you do!

Thank you for your time.

Ann Donald