Thought leaders in the surety, insurance and legal professions heard from experts and engaged with each other at last week’s 2018 AGC Surety Bonding and Risk Management Conference, Jan. 28-31, 2018.
Oswald’s Design and Construction team joined Risk Managers, Chief Financial Officers and General Counsels from the largest contracting firms, Chief Executive Officers of leading construction industry insurers and brokers specializing in the construction industry, to attend plenary sessions and workshops led by experts in the fields of risk management, law and vendors specializing in the industry.
Throughout the four days, noteworthy developments in six major topics emerged as elements to watch in the industry.
- Data Security
The session, “Who would benefit from having access to detailed blueprints of a VA hospital, University, or Amazon Facility?” discussed the hottest topic in risk management. Developments include:
- Data (blueprints, elevator systems, employee information) is an asset and quickly becoming the target of cyber-attacks.
- Even as building technology continues to evolve, temperature controls, elevator controls, medication management, access control are all areas of interest to hacker’s ransomware.
- The average cost of reported cyber breach currently sits at $750,000.
- 2017 $5Billion Paid in Ransonware.
- Most breaches go unreported, according to the FBI.
- Department of Energy has proven the US power grid is susceptible to attach.
- The legal environment:
o Regulatory: Any work funded with Federal monies is subject to FISMA requirements.
o Contract: Owners are incorporating cyber provisions into confidentiality agreements.
o Common Law: Courts continue to rule on the “standard of care” for protecting information.
- Labor Shortage
The workforce continues to be an issue for construction and design. To address the labor needs that will grow in the next five years, contractors must find ways to:
- Attract and retain a more diverse workforce, including emerging generations of talent.
- Understand and be prepared for Immigration reform.
Even as the construction industry continues to lead the country in lost time injuries with over 100,000 recorded lost time accidents/year, advances in technology are having a positive impact on subcontractor safety and improved project outcomes.
- Technology companies continue to develop jobsite safety solutions, including wearables, to allow contractors to identify hazards, mitigate risk, respond more quickly and when needed, evacuate faster.
- Triax’s Spot-r technology provides real-time site monitoring solutions allowing contractors to immediately capture critical incident information and act faster.
- Equipment tags are being incorporated on sites to track usage, safety protocols, and location.
- Additional Insured
Court cases continue to impact owners and general contractors’ rights to coverage under Additional Insured Endorsements.
- Privity Matters – Two or three words in the additional insured endorsement can change coverage rights for owners and general contractors.
- Priority of Coverage – Not all jurisdictions recognize or apply primary and non-contributory language according to the contract intent.
- Right to Independent Counsel – Owners and contractors should request rights to their own counsel when they are provided Additional Insured (AI) defense under a reservation of rights. Address conflict of interest matters early.
- Causation Matters – Including “arising out of” and “caused in whole or part” wording in the additional insured endorsement can mean the difference between acceptance or denial of coverage.
- Subcontractor Default
New ways of mitigating default risk are bringing added protection for contractors.
- Surety bond companies are developing bond forms to address the contractors need for “self-help” provisions when dealing with subcontractor defaults.
- SDI (Subcontractor Default Insurance) users are using personal guarantees in conjunction with SDI enrollment to mitigate default risk.
- This is noticeable movement toward third party pre-qualification tools continue to gain adoption among the industry leaders.
- Builder Risk
It is well known that not all coverage policies are created equally. To maximize risk management for builders:
- Paying more to critical sublimits is a must.
- Understand the differences between owner-supplied builders risk forms and contractors’ policies, which tend to have broader coverage.
- Watch the “Sue and Labor” clause to include both imminent and actual loss sustained. The recent hurricanes illustrated the importance of insuring the costs to protect property (which can be in the millions) even if an insured loss is not sustained on the project.
- Property Damage Claims under the Commercial General Liability Coverage Form
- Key Provisions:
- Exclusions J5/J6 – Ongoing Operations
- Exclusions L/M – Completed Operations
- When submitting claims, it’s critical to establish the fact pattern as an “Occurrence”.
Oswald professionals are already addressing these timely topics and would be pleased to share our knowledge and our proactive solutions.
Contact Dale Kaprosy to learn more about the trends that are impacting the construction and design industry:
Dale A. Kaprosy
Senior Vice President
Connect with Dale on LinkedIn.