Construction

December 19, 2013

Contractors and Workers at Odds Over Scaffold Law

Source: New York Times Online, December 17, 2013
Posted on: http://fpn.advisen.com

In 1885, as new engineering inventions were ushering in the era of the skyscraper, lawmakers in New York State enacted a law intended to safeguard construction workers who were finding themselves facing increasing dangers while working at ever-greater heights.

That measure, which became known as the Scaffold Law, required employers on building sites to ensure the safety of laborers working above the ground. Since then, some form of the legislation has remained on the books despite repeated attempts to repeal it.

But a lobby of contractors, property owners and insurers has in recent months renewed a campaign against the law, arguing that no less than the future of the state’s construction industry is at stake.

They argue that the law is antiquated and prejudicial against contractors and property owners, and essentially absolves employees of responsibility for their own accidents, leading to huge settlements. The payouts, they contend, have in turn led to skyrocketing insurance premiums that are hampering construction and the state’s economic growth.

On Tuesday, a coalition of contractors, including a newly formed alliance of firms owned by women and minorities, announced the start of an advertising and lobbying blitz in Albany and New York City. But a counter-lobby of unions, workers’ advocates and trial lawyers is pushing back just as fiercely. The law, they argue, is essential to ensuring the safety of workers in some of the world’s most dangerous jobs, particularly those employed by shoddy contracting firms that cut corners to save money. The law, they say, holds developers and contractors accountable for keeping job sites safe.…

December 17, 2013

AIA contracts help effectively allocate risks and result in predictable interpretations

Source: http://www.lexology.com, December 6, 2013
By: Cade J. Laverty and C. Michael Shull III, Frost Brown Todd LLC

It is sometimes difficult to tell whose insurer will be liable for certain occurrences on a construction project. The whole purpose of contracting is to allocate risk—hopefully to the party that is better situated to deal with that risk. In allocating that risk, all parties need to know which party is ultimately responsible for insuring against certain risks. While some court opinions can leave a reader unsure of the ultimate holding and its application, the Indiana Court of Appeals recently issued a clear and concise opinion regarding issues of insurer liability in the context of interpreting an American Institute of Architects (AIA) standard form agreement.

In Allen Cnty. Pub. Library v. Shambaugh & Son, L.P., the court considered issues of liability related to environmental remediation costs incurred as a result of a diesel spill under a standard AIA contract form. The spill was allegedly caused when a line connecting a back-up generator tank to its generator was struck by a certain contractor involved in the renovation of a library. The resultant leak allowed approximately 3,000 gallons of fuel to leak into the ground under the library. This ground was not a part of the scope of Work as defined in the contract. This was a key fact in the Court’s decision.

Both the library and the contractors on the job obtained multiple insurance policies. The library obtained a builders risk policy which contained a specific “coverage extension” for environmental remediation. When the library sued to recover the costs it incurred in cleaning up the diesel spill, the defendant contractors asserted that the library had waived its ability to seek compensation due to one of the provisions contained in the AIA agreement which provides for a waiver of subrogation, as well as the library having obtained its own pollution cleanup insurance.…

December 17, 2013

Marsh: Coverage rates continue to rise for U.S. construction firms

Source: http://ifawebnews.com, December 13, 2013

U.S. construction firms on average paid more for their insurance in the first half of 2013 as underwriters continue to seek price increases across the breadth of their contractor portfolios, according to a report published by Marsh.

Pricing for contractors general liability, project-specific general liability, umbrella and excess liability, workers’ compensation, and residential construction insurance was up between 3% and 7% on average during the first half of the year, according to Marsh’s Construction Market Update—First Half 2013. Construction firms with poor loss histories were more likely in general to have seen double-digit rate increases.

Pricing for non-residential construction, and contractors and architects and engineers professional liability insurance also was up on average during the first half of the year, but to a lesser degree.

“U.S. construction firms are grappling with a firming insurance market, especially when it comes to liability insurance where underwriters continue to tighten coverage terms and seek rate increases to make up for reduced investment income,” said Michael Anderson, leader of Marsh’s U.S. construction practice. “With a zero interest rate environment, there is no cushion against a poor underwriting decision.”

According to Marsh’s report, not all construction lines are experiencing rate increases. Premium rates for builders’ risk insurance generally remained flat during the first half of the year despite more demand for coverage. Similarly, contractors’ pollution liability rates remained generally flat to down 5%.

“While underwriters are attempting to gain rate increases, the market is awash in capital and new entrants are helping to maintain competition. The good news for well-managed construction firms is they can still generally find competitive pricing and terms,” Anderson said.

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November 26, 2013

Settlement reached in Keslinger Road bridge lawsuit

Source: http://www.daily-chronicle.com, November 15, 2013
By: Jillian Duchnowski

Planning is underway to replace the Keslinger Road bridge that collapsed in August 2008, thanks to a recent $900,000 settlement with Enbridge Energy.

The lawsuit filed in October 2011 was dismissed Thursday after DeKalb County and Afton Township officials reached an agreement that will allow crews to fix the bridge without any cost to local government, DeKalb County State’s Attorney Richard Schmack said in a news release.

“We wanted to get a bridge to the citizens of Afton Township as quickly as we could,” said Assistant State’s Attorney Stephanie Klein, who has been working on the case for about a year. “We wanted to get one as quickly and at as little cost as possible to the citizens.”

In the lawsuit, local officials claimed Welded Construction trucks carrying more than the legal weight limit of about 36 1/2 tons damaged the bridge on their way to an oil pipeline construction project for Enbridge Energy.

The bridge, which crossed the Kishwaukee River between First Street and Anderland Road south of DeKalb, saw about 100 vehicles per day before construction traffic increased in June 2008. On Aug. 19, 2008, the bridge’s eight timber piles buckled, and the concrete deck split in two and plunged into the Kishwaukee River.

Litigation was complicated because Enbridge Electric and Welded Construction representatives argued they should be responsible for the depreciated value of the bridge built in 1975, not the replacement cost, according to Schmack’s news release.

November 25, 2013

Construction records key to defending defect claims

Source: http://www.businessinsurance.com, November 20, 2013
By: Matt Dunning

Although most contractors acknowledge that maintaining thorough contractual and operation records can greatly reduce the severity of construction defect claims, insurance experts said Wednesday that lack of documentation among their clients remains a pervasive issue.

In 2012, in four out of five construction defect disputes involving Hartford, Conn.-based Travelers Cos. Inc.’s construction clients nationwide, vital documents and photos detailing change orders, inspections and approvals of onsite work were unavailable, said Robert Kreuzer, Travelers’ second vice president of construction risk control, during a presentation at the International Risk Management Institute Inc.’s 33rd annual Construction Risk Conference in San Diego.

“Whenever we have an allegation of construction defect on a project that was completed some time ago, we typically struggle to find the documents that we need to understand what exactly happened and why it happened,” Mr. Kreuzer said. “Eighty percent of the time, the documents are either not there, or they’re inaccurate, or we can’t find them. Sometimes it’s as simple as one piece of paper, but it comes down to one piece of paper filed somewhere in one of dozens of boxes, so it becomes quite a daunting task.”

On average, Travelers’ experts said construction defect claims — claims made against a general or specialty contractor alleging the failure of a building component or system based on defective design specifications or building materials, faulty installation or improper maintenance of a project post-completion — take an average of seven years from the initial allegation for contractors to notify their insurers of a defect claim, and many more to litigate in cases where documentation is either incomplete or missing.

“Lack of documentation is a common theme in the litigation process as well,” said Michael Koppang, Hartford-based director of construction claims at Travelers. “When you wait to collect evidence of a possible defect, and then someone on-site goes and tries to fix it, you lose the opportunity to document the as-built conditions.”

“If you can do those things ahead of time, you have a better chance of getting yourself out of the dispute, and avoiding that 11-year headache,” he added. In order to improve the quality and maintenance of their construction records, Mr. Kreuzer said many contractors have begun assembling in-house or third-party assessment teams to review and organize their contracts, project designs and material orders.

“We’ve also heard about lot of contractors doing things during construction operations, like conducting jobsite walkthroughs, change order and RFI reviews, and going back over their project diaries to look at any onsite issues or problems that came up on a given day and how those issues were resolved,” Mr. Kreuzer said.

November 14, 2013

ACE Releases Advisory Examining Environmental Risks Related to Healthcare Construction Projects

Source: http://online.wsj.com, November 4, 2013

The ACE Group today announced the release of a new advisory entitled, “Healthcare Construction: Managing the Environmental Risks.” The advisory discusses the potential risks and considerations healthcare organizations should identify during new construction or renovation projects. The advisory also examines opportunities to help mitigate the risks of potential pollutant exposures and describes how healthcare organizations can meet higher standards of care and take a proactive approach to risk management to help minimize the potentially harmful effects of pollutants during construction.

“To keep pace with the advances in medical technology and the advent of healthcare reform, healthcare organizations have begun to upgrade their facilities or build new ones to better serve their patients,” said Craig Richardson, Senior Vice President, ACE Environmental Risk. “During new healthcare construction or renovation projects, environmental risks can be a challenge because of the hazards the work poses to patients, staff and visitors. ACE’s Environmental Risk Practice understands these risks and has developed this advisory to provide useful information to help healthcare facilities better mitigate future pollution risks.”

The ACE Environmental Advisory was authored by Gerry Rojewski, Vice President and North America Product Line Manager for the ACE Environmental Contractor Program. The advisory is part of a larger series of papers that ACE produces, which are designed to provide useful information on current industry topics faced by risk managers.…

October 21, 2013

The Right Way to Write Builders Risk Insurance

Source: http://www.constructionexec.com, October 2013
By: Jeff Cavignac

An effective construction insurance program requires the dovetailing of several different policies in order to protect each project stakeholder. General liability and workers’ compensation are critical elements of insuring a construction project, but the keystone is builders risk coverage.

Builders risk, often called “course of construction,” is a first party property coverage designed to insure the real property under construction. The coverage is purchased by one party, but the policy ideally will extend protection to all parties that may have an insurable interest in the real property.

Standardized builders risk policies are the exception; most insurance companies choose to create their own manuscripted forms and coverage varies greatly. Because no two construction projects are the same, it is important to analyze what could go wrong and then tailor the builders risk coverage to match those exposures.

The key to an effective builders risk policy is understanding the contract’s insurance requirements and indemnity sections. The insurance section specifies who is responsible for buying the builders risk insurance and exactly what coverage it includes. The indemnity section of the contract establishes the party that will be responsible for various losses that could occur during the course of construction, and under what circumstances the parties to the contract have waived their recovery rights against one another. It is also helpful to review the project’s financing documents to determine the coverage the lender requires.…

September 10, 2013

Medical Center Facility Renovation and Expansion

Single prime design delivery system for the renovation and expansion of a public medical center facility. Due to multiple conflicts between the structural, MEP and architectural drawings, and the submission of several hundred requests for information (“RFIs”) by the contractor, the project was delayed more than one year and experienced substantial budgetary overruns. Owner claim against the design team exceeded the available design professional insurance.

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September 6, 2013

Highway Expansion Project

State Transportation Authority sued the geotechnical engineer, project engineer and construction manager on a $250,000,000 highway expansion project, following a catastrophic failure of a section of one of the bridges.  Authority alleges that the pre-construction sub-surface geotechnical investigation was insufficient, and that the construction manager was negligent in its construction oversight duties.  Asserted damages of $150,000,000 substantially exceed the available design professional insurance.

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September 6, 2013

Bridge Construction Project

State Transportation Department sued the project engineer on a new bridge construction project after an expansion deck failure led to cost overruns and re-design costs.  $2,000,000 claim amount exceeded civil engineer’s available professional liability coverage, which had been depleted by other claims.  Matter settled for $1,000,000 above the design professional insurance.

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