CONTRACTORS

Rough Notes, Jan 2005 by France, Larry G

Nail down a market

"General contractors subbing out the majority of their work are in a crisis mode. They find it very difficult to locate carriers willing to quote."

Robert A. Schneider Agency, MGA/E&S Broker,

Minnetonka, Minnesota

"We continue to see a large influx of residential builders. Rates remain firm but are higher for attached housing builders."

The Jack Nebel Companies, MGA,

Palatine, Illinois

"Pricing is still high but leveling off. New York is tough for residential contractors."

Buckingham Badler Associates, MGA/E&S Broker,

Staten Island, New York

These are just a few of the comments that were received in response to Rough Notes' survey of contractors markets. They indicate that there is some stabilization in rates but that paper contractors remain a problem. Is the glass half full or half empty? The contractor market is never what one would call "easy"! Many factors enter into that assessment. Recent concerns such as mold, construction defects, and the up-and-down availability of viable markets keep this class of business in some degree of flux.

California contractor markets seem to have gained some ground in solving past problems. Construction wrap-up liability, which includes liability and workers compensation for the operation of the general contractor and subcontractors on large projects, can be obtained by general contractors. This coverage brings all insurance costs into one policy, eliminating gaps in protection and non-concurrence of limits and policy language. Coverage is written in California and surrounding states.

Crouse & Associates of San Francisco is offering a residential wrap-up policy. The nonadmitted market is rated A with limits of $1 million/$2 million/$ million and $2 million/$2 million/$2 million with a minimum SIR of $50,000. Greg T. Crouse, president, says that this addition comes at a time when coverage for projects such as condominiums and single-family dwellings is limited.

In an effort to provide value-added service and guidance to its clients, Victor O. Schinnerer, Chevy Chase, Maryland, is publishing a risk management guide for contractors.

"Contractors often don't see the need for professional liability for design-related claims," explains Schinnerer's Joe Jones. "They think that their GL coverage will take care of any professional claims, or that they are not at risk." To explain those risks and to provide sample language to help contractors avoid common pitfalls, Schinnerer has published the Contractors Design Liability Contract Guide. The booklet covers two types of contractual agreements that the contractor can encounter: agreements with clients and agreements with design professionals.

"Today's contractors face numerous environmental risk uncertainties simply by stepping into their customer's facility to perform their work," observes Karim Jaroudi of The Wholesale Insurance Group (TWIG) of Canada. "Environmentally specialized contractors face a fairly obvious risk. Operators such as mold, asbestos, lead soil and groundwater remediation contractors handle sensitive materials. Any accidental spill, handling or abatement could cause a release of these contaminants into the soil and/or groundwater. The result could be costly cleanup, devastating bodily injury or property damage," says Jaroudi, pointing out that a common misconception is that general contractors do not have a significant environmental risk exposure because they do not perform sensitive environmental operations at a third-party site. "The reality is that general contractors face real environmental risks. They bring their equipment and workers to a customer's site." An example is bringing a refueling tanker to a remote site and accidentally causing a release of chemicals/fuel into the soil and groundwater. TWIG provides environmental impairment liability to address the exposures of general and environmental contractors and contractors pollution liability on an occurrence or claims-made basis for both general and environmental contractors. E&O can be stand-alone or in a combined form for environmental consultants.

The market for contractors appears to be stabilizing on most fronts, with the introduction of new products serving as a positive sign. Success in placing contractors will hinge on the agent/broker's ability to point out all possible exposures to clients and provide appropriate coverage solutions.

Refer to The Insurance Marketplace Directory (hardcopy shipped with the December issue of Rough Notes magazine or online at www. insur ancemarketplace. com) for the specific type of contractor risk and coverage.

Specialty Lines subjects in the coming months are Watercraft in February, Specialty Lines Annual in March, and Hospitality in April.

The following facilities have responded to our survey and have indicated that they are a market for certain coverages and classes of contractors.

Aberdeen Insurance Group

1364 Welsh Rd., Ste. E2

North Wales, PA 19454

Contact: Tom Downie

Phone: (800) 845-4150

Fax: (215) 641-1456

E-mail: aberdeeninsgrp@hotmail.com