February 01, 2013

Construction Risk Management: Loss Control for Liability Exposures

Every year the landscape for the construction industry becomes more complicated. Contractual requirements and litigation are primary challenges that today’s contractors face with more regularity, making risk management a part of doing business.

When it comes to the construction industry, there are many areas in which to effectively manage risk exposures. Two primary areas are: transferring risk to a responsible third party such as a subcontractor, and reducing loss though activities such as controlling job-site hazards.

Implementing risk management practices helps general contractors to:

  • Control insurance costs
  • Protect their assets
  • Reduce protracted legal disputes
  • Preserve current limits of insurance

General contractors can better protect themselves by transferring risk to subcontractors they use on projects, by including indemnification and hold harmless provisions, as well as enforcing additional insured requirements in their construction contracts.

Written contracts promote quality control, and the agreement between the general contractor and the subcontractor becomes a critical document. It should be reflective of the GC’s own construction standards, as well as the construction standards that the general contractor has agreed to with the owner and each of the subcontractor’s warranties.

Since liability exposures are present both during the construction process and for a considerable time after, the specialty home builder must also reduce potential liability losses by controlling construction job-site hazard exposures.

Construction site safety practices should include, but are not limited to:

  • Perimeter security fencing and warning signs
  • Limiting job-site visitors to authorized persons only
  • Properly assembled scaffolding
  • Implementing hazard communication standards
  • Designate delivery areas and require delivery personnel to follow safety practices
  • Implementing slip and fall protection standards
  • Controlled entry log for arrival and departure of vehicles

At ProSight Specialty, we understand the specific challenges facing today’s home builder, and tailor our risk management solutions to suit the luxury home builder’s unique circumstances and risk exposures