November 2017

An accounting firm on a building’s top floor accused the roofing contractor of ruining its computer network equipment, even though the contractor wasn’t working on the building at the time. The contractor had finished replacing the roof in September.

Heavy snows fell that winter, and it started melting rapidly when March brought above-normal temperatures. The accounting firm’s systems support analyst came in to work on a Monday morning to find pools of water in the server room and the servers inoperable. Given that the first four months of the year are a somewhat busy time for accountants, the firm could not remain without its computer network for long.

It rush-ordered new servers, paid a premium for express shipping, then paid even more to have technicians remove the ruined servers, install the new ones, load the data from backup records kept off site, and perform network testing, all within a period of a few days. The cost to the firm was high, both in terms of repair and replacement costs and extra expenses for its accountants to access an alternative network. The firm sued the building owner and the roofing contractor to recover thousands of dollars in losses.

This is where the contractor’s Completed Operations Liability insurance coverage came in handy. This insurance covers the contractor’s legal liability for bodily injuries or property damage that his work causes after he has finished it. Before the insurance applies, however, the incident must meet several conditions:

• • The incident must be an “occurrence.” The policy defines this as an accident, but it can also be damage that happens over time because of harmful conditions. The roof suddenly letting melting snow gush all over the servers is an occurrence. So is the roof allowing melted snow to seep into the walls over a period of months, causing plywood and insulation to rot?

• • It must occur during the policy term. It is not necessary for the contractor’s mistake to happen during the policy term, but the injury or damage must occur then. The contractor finished the roof in September, his liability insurance policy renewed in January, and the damage to the servers occurred in March. The policy that took effect in January applied, not the one in effect in September.

• • It must occur away from the contractor’s own premises. Liability insurance does not apply to damage to premises the contractor owns or rents.

• • The injury or damage must arise from the contractor’s work. This means that the contractor’s portion of the job led to the injury or damage. The roof was supposed to keep water out of the building; water entering the building implicates the work done.

• • The contractor’s work must be completed or abandoned. It’s complete at the earliest of: When all the contract work is complete; when all the work at that job site is complete; or when the customer puts the work to its intended use. The contractor finished the roof in September and the building owner put it to immediate use, so the insurance company will consider it to be complete.

The insurance will not apply to bad work that did not cause damage to something else unless a subcontractor did the job for the contractor. If the building owner discovered the problem with the roof before the accountant’s servers took a shower, the insurance would not apply to fixing the roof. It also doesn’t cover liability for the building becoming unusable or less usable because it contains the contractor’s defective work. Work with one of our insurance agents to ensure that you have the proper coverage. Completed operations losses can be catastrophic; financial protection is essential!

As a contractor, your contractors pollution insurance covers any erosion you cause. You want to follow all federal, state and local erosion control guidelines, though, as you prevent runoff, protect ecosystems and avoid fines. Consider nine effective construction site erosion control techniques.

• • Reforestation

    Restore or restock woodlands around the property to increase soil retention and reduce degradation. Fairly simple to install, you only need seedlings or saplings, dibbers and measuring ropes.

• • Buffer Strip

    Narrow strps of permanent vegetation slow runoff and trap sediment. The root system controls soil erosion caused by winds and reduces landslide risk, too.

• • Geotextile Roll

    Made from coconut, straw or similar fibers and bound together with mesh rope, geotextile rolls cover newly graded soil and prevent bank erosion. Vegetation can be planted over the geotextile roll to increase stability. Over time, the materials will biodegrade and cause no harm to the environment. Easy to install and low maintenance, this erosion control technique is best for small streams and stable water levels.

• • Brush Mattress

    A system of branches and stakes, a brush mattress is often used on banks near perennial streams. This biodegradable erosion technique can be washed away in heavy rain, but it is easy to install and maintain.

• • Gabions

    Use gabions, cages or containers filled with  small rocks, on banks that are highly prone to erosion. While gabions aren’t always pretty, they are sturdy, easy to customize with rocks or concrete, and useful almost anywhere. Always ensure the supportive footing is secure and regularly inspect the gabions for mesh damage.

• • Riprap

    Rubble and rocks of all sizes and types form a riprap. It is an effective control erosion technique on embankments, bridge abutments, shorelines, streambeds and other seaside locations. Use a riprap on slopes with a rise that’s less than 2:1 or the riprap could become unstable and erode.

• • Rootwad Composites

    Stabilize stream banks, lower stream flow velocities and provide aquatic habitats for wildlife when you install rootwad composites. They incorporate interlocking tree material on the base of stream slopes. Complicated to install, this erosion control is cost effective.

• • A-Jacks

    Placed at the base of slopes, A-Jacks consist of interlocking cement stakes. They increase stability and are useful for high erosion areas. While they’re available in a variety of sizes, they do not biodegrade.

• • Tree Revetment

    Anchor wood to the bank with a tree revetment. It reduces water flow velocity but is not recommended for high erosion areas. This technique requires ongoing maintenance, too.

With these nine erosion control techniques, you protect your job site and the environment. Determine which technique is right for each individual project, and update your contractors pollution insurance policy regularly to protect your business

The weather outside is frightful, whether it’s January in Buffalo or July in Phoenix. Extreme weather conditions can be a major problem for construction workers, most of whom have to perform their tasks outdoors. During the summer, high temperatures and humidity can cause dehydration, heat stroke, cramping, exhaustion, and rashes. The need for workers to wear protective clothing, such as long denim pants and heavy boots, exacerbates the heat’s effects.

Those parts of the body not covered up become vulnerable to sunburns and skin cancers resulting from exposure to the sun’s rays. Summer lightning storms can cause fatal injuries to workers. During the winter, low temperatures and high winds can combine to make conditions bitterly cold. This can lead to hypothermia and frostbite, in addition to a greater potential for slip and fall accidents due to the presence of ice and snow.

For these reasons, all contractors should make protection against extreme weather conditions part of their regular safety procedures. Some regulations from the federal Occupational Safety and Health Administration require this. For example, one regulation requires employers to provide personal protective equipment and special training to workers if they will work under conditions so severe that they qualify as environmental hazards. Among the required protective equipment is clothing to cover an employee’s eyes, head, face, arms and legs. Another regulation requires employers to provide equipment protecting employees from over-exposure to the sun.

Some steps contractors can take to prevent illness or injury resulting from weather conditions are:

• Learning the signs that indicate the weather is making a worker ill
• Monitoring workers for signs of illness
• Training workers on how to protect themselves from the elements
• Setting an expectation that workers will dress appropriately for weather conditions
• Providing shade during hot weather and heated areas during cold weather in which workers can take breaks
• Scheduling work for cooler periods in the summer and warmer periods in the winter

Workers should dress in layers during the coldest weather and should, to the extent practical for the work, keep exposed skin covered with gloves, hats, and scarves to protect against frostbite. During hot, sunny weather, employees should wear wide-brimmed hats, long-sleeved shirts made of light material, and ultraviolet-resistant sunglasses. They should also apply sun block at regular intervals during the day.

In addition to higher Workers Compensation costs, employee injuries and illness rob a contractor of the productive services of good workers, divert management’s attention from the core business, and make the employer less attractive to good, skilled workers. Although contractors cannot completely protect their workers from the effects of extreme weather conditions, with some simple steps and training they can make losses from these conditions less likely and less severe.

In the construction industry, performance bonds serve as a guarantee that the contractor will finish the project correctly and satisfactorily. As a contractor, you must knozw the details about performance bonds as you protect your business.

What is a Performance Bond?

A performance bond is issued by your insurance company or a bank and guarantees to the project owner or manager that you will meet your contractual obligations. You’ll need to put up real estate or another investment as collateral.

After you purchase a performance bond, you’re ready to complete the construction project. If you don’t follow through on your commitment, the bond company pays out the bond, and you must repay the bond company.

Who Needs a Performance Bond?

Contractors who perform private sector or government work need a performance bond for each project. It ensures that contractors do the job right and don’t waste taxpayer money.

Documents Required to Request a Performance Bond

Insurance and bond companies require different types of paperwork depending on the cost of the project and its difficulty. In general, you will need to assemble the following documents before you request a performance bond.

• A copy of the contract
• Completed surety application
• Detailed CPA-prepared financial statements from the past two years

How Much Does a Performance Bond Cost?

Performance bonds cost a percentage of the contract value. For large projects, the percentage is usually one percent. Smaller contracts may require a bond of as much as three percent.

Your creditworthiness, type of job and state in which you live also affect the bond’s cost. You’ll add its total cost to your project bid.

What Happens After the Performance Bond is Cashed?  

When you don’t complete your contractual obligations, the project manager can file a claim against the performance bond. The bonding company will evaluate the claim. If it’s legitimate, the company will pay the bond amount to the project manager. Remember that the contract for each project must be specific. A vague contract with terms that are open to interpretation could void the performance bond.

The only person who can receive the performance bond payment is the property or project owner.  With that bond money, the project manager can pay to complete the project or hire a replacement contractor who will finish the job properly.

If the bond company pays out a claim, you are responsible to repay the debt. You can cover the cost with your collateral or another form of payment.

Performance bonds protect project owners and ensure they receive quality work as outlined in the contract. Before your next bid, be prepared with a performance bond.