Construction Firm Tips for Avoiding Insurance Disasters

When you're in the construction industry you already have lots to worry about: Keeping your workers safe in one of the most dangerous industries, uninsured or underinsured subcontractors, and finding experienced employees from a shrinking pool of talent.

Not only that, but lawsuits lurk in any project, exposing you to serious losses that can threaten the survival of your business. For these reasons, it's important that you understand your insurance coverages and that you know how to address any deficiencies that may exist in your risk management strategy.

To make sure that you are not left exposed, we recommend the following:

Choose the right insurance company

We can help you find an insurance company with the experience in writing policies in your industry and the resources to tailor coverage to your needs. Remember, some large projects and lenders require that you are covered by only an A-rated insurer.

Don't buy the cheapest policy 

If the policy price is significantly lower than other insurers, that may be a red flag. Make sure the insurer will be covering what the project owner, your lenders and other stakeholders require. If you find out your policy is deficient after you've purchased it, you'll have to cancel it and buy a new one. There go your profits.

Understand your policy 

All policies have exclusions and you should understand what the insurance company will cover and what it won't. We can sit down with you and review every line of your policy, including any additional insured endorsements or exclusions, so you know exactly what's covered and what isn't.

Don't buy insurance you don't need 

We can do a thorough review of your business and its risks with your help. It's important your coverage meets your needs and that you don't carry coverage for risks you're unlikely to face.

Use the correct class codes 

It's easy to misclassify certain employees, and if you err it can come back to haunt you. When it's time for renewal, go through your books and make sure you have job descriptions for all of your employees. Keep track of your staff so that you get it right the first time.

Also, keep track of new employees that you hire (or let go) during the course of the year, so that adjustments can be made to your policy.

Avoid the independent contractor trap 

During the last few years, the IRS, the Department of Labor and a number of state agencies across the country have been cracking down on the practice of worker misclassification.

There are many implications for classifying someone who is an employee as a contractor, and all of them are costly. You could be looking at back taxes, owing additional workers' comp premiums, lawsuits, and more.

Don't understate payroll 

If your insurer audits your business and they find that your numbers just don't add up, you could end up having to pay additional premium or risk policy cancellation.

Understand how 'claims-made' coverage works 

"Claims-made" policies have lower up-front and ongoing costs and they only let you make a claim during the policy year during which a project is being built.

The biggest drawback of these policies is that if you have to file a claim years after the project is completed, you may be out of luck, especially if you've switched insurance companies.

Check your subs' insurance certificates 

Know whether or not your policy will cover subcontractors or if they need to carry their own liability coverage. Verify that any subcontractors you use have valid and current certificates of insurance.

Keep your policies current and up to date 
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Many factors should prompt you to revisit your insurance policy: Hiring new employees, buying new equipment or vehicles, or opening a new office. These types of changes should prompt you to review your coverage with us to ensure you stay fully protected.

As more Americans work from home than ever before, many employers are wondering about their obligations under OSHA as well as how to reduce the chances that workers may be injured while telecommuting.

Obviously, the chances of an injury when working from home are small. The most common issue that is likely to arise is long-term injuries from poor workstation design, which can result in carpal tunnel syndrome and other stress and ergonomic injuries that develop over time.

For the most part, employers should approach workplace safety for telecommuting workers as they would safety for office workers, particularly workstation design and arrangement (ergonomics) as well as work scheduling and distribution.

Duties under OSHA

OSHA's General Duty Clause applies to any place an employer has staff working, be that at the company's facilities or worksites, at a customer's worksite, or even if they work from home.

Under the clause, employers have a general duty to "furnish to each of his employee's employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees."

Fortunately, most workplace safety specialists say that employers have little responsibility in ensuring a safe workplace. In fact, OSHA has issued guidance stating that it:

• Won't inspect employee's home offices
• Won't hold employers responsible for safety in home offices, and
• Does not expect employers to inspect home offices.

Workers' comp still in play

While that is good news, employers are still responsible for any injuries an employee suffers while working from home under workers' compensation laws.
For an injury to be considered work-related it must:

• Have happened while the employee is on the clock, and
• Occur while the worker is performing their work tasks.

With that in mind, employers do have an obligation to ensure that a home worksite is safe in order to prevent injuries, even if OSHA does not require it.

The international law firm of Foley & Lardner, LLP recommends that employers:

• Provide assistance and guidance to employees regarding the setup of the home worksite. Consider developing a YouTube video or written handout giving instructions pertaining to the setting up of equipment in an ergonomic fashion, electrical setup (i.e., only plug in two electrical devices in an outlet, etc.).
• Establish a hotline or other communication mechanism for remote employees to call if in need of assistance.
• Develop a checklist addressing safety and productivity issues and have employees complete the checklist every six months or so.
• Train employees on a recurring basis (such as annually) as to remote employees' obligations to report alleged work injuries and/or illnesses, and how to report such injuries and/or illnesses.

Specific tips

• The desk, chair, keyboard, mouse, terminal, and other accessories should all be at the appropriate heights to reduce strain on the eyes, neck, and wrists:
  • The keyboard and mouse should be at the right height where wrists are in a neutral position.
  • The chair should be at the right height to ensure the employee can type without strain on the wrists and so that they are looking directly straight ahead at the terminal.
  • The terminal should be placed at eye level.
  • The desk should be at the right height to ensure all of the above. A kitchen table or counter would usually not be suitable.
• Ensure that the equipment is sturdy. For example, the desk should be appropriate height and sturdy enough to handle the weight of any peripheral equipment that your work may place on it (e.g., computers, printers, fax machines, scanners, etc.).
• Ensure that lighting is properly arranged: there should not be reflections on or glare from the computer monitor.
• Make sure extension cords and cables are in good condition and do not present a tripping hazard.

The takeaway

While you as an employer are not required under OSHA regulations to inspect your workers' home's for compliance, it is a good idea to give them guidelines for how to set up their home office and also work with them to supply any needed furniture or accessories they would need to safely carry out their work tasks.
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You may also want to consider asking them to install a smoke alarm in their home and that they have a plan to evacuate in case of fire or other emergency. Also if they have a lot of electrical equipment, there should be sufficient ventilation.

As lawsuits against employers continue rising amid the coronavirus pandemic, some businesses are requiring workers to sign waivers absolving them of liability and responsibility should they contract the virus.

Eight percent of executives surveyed by law firm Blank Rome said they would require that their workers sign waivers of liability before returning to the workplace.
While employers are trying to protect themselves from a liability that didn't even exist a year ago, some human resources legal experts have expressed concerns that they may not be necessary and may be unenforceable.

The moves come as employers are wrestling with numerous risks that the pandemic has wrought, and with the U.S. Senate having proposed legislation that would limit the liability of employers for workers who become sick during the pandemic. A number of states have also enacted laws or emergency regulations that make it harder for employees to sue employers for negligence over COVID-19.

COVID-19-spurred employee lawsuits have mostly centered on employers not providing the proper protections for workers, discrimination or for being laid off for refusing to come to work.

Legal experts caution that employers cannot require workers to waive rights they may have, such as access to workers' compensation benefits or the right to file a complaint with OSHA.

They also say that some employers may consider waivers as a green light to not take precautions against COVID-19, but in such cases the waivers would likely not be legal.

If a worker claims they caught COVID-19 at work and the facts back that up, they would likely have access to workers' compensation benefits (some states even require it). But if the employer was negligent, the employee could have further legal avenues to pursue besides workers' compensation, rights that cannot legally be waived, lawyers say.

So even if an employee were to sign a document waiving their right to file a complaint if they feel their employer is being negligent, they may still have recourse.

Requiring workers to sign waivers could present a number of legal issues, according to the law website nolo.com, including:

• Courts in some states are reluctant to enforce liability waivers in the workplace because of the superior bargaining power of employers over their staff.
• Workplace morale could suffer if your employees think you are placing your own economic interests above workplace safety.
• Any waiver employees sign would not protect your firm from lawsuits filed by their families should they contract COVID-19 if staff are infected at work.
• A waiver might be unnecessary in states that have passed laws granting immunity to employers for claims made by workers infected with the virus.

 
Another option

While employees who refuse to sign a waiver of their company's liability may have grounds to challenge their employer, some liability lawyers say that employers instead of a waiver can ask their staff to sign a social contract that requires:

• The employer to follow Centers for Disease Control and Prevention guidelines and take all necessary precautions to prevent the spread of COVID-19 at work, and
• The workers to comply with their employer's requirements on mandates on wearing masks, social distancing and not coming to work if they have symptoms or of they think they have been exposed to someone with COVID-19. 

 
This type of agreement won't protect an employer from a lawsuit, but it does spell out that they are following authorities' recommendation for protecting employees.

While employees who refuse to sign a waiver of their company's liability could have grounds to sue, those who sign this type of acknowledgement of new workplace rules and government guidance are less likely to be successful if they are fired for not signing. This is because the acknowledgement is not forcing them to give up any of their rights and is rather for their and their co-workers' protection. 

These social contracts also would provide workers with a list of their responsibilities when working during the COVID-19 pandemic, and outline what their employer is doing to protect them.

​COVID-19 is forcing businesses to face a number of risks, liability and insurance implications.
Companies could seek coverage for a variety of claims stemming from the outbreak, including workers' compensation, business interruption, liability and more.
And, now that it is a pandemic, the economic fallout may be expansive - hitting your company's operations in the form of lower sales or supply chain disruptions.
Now is a good time to understand which of your insurance policies could come into play. 
 
Workers' compensation
Workers' compensation policies generally extend insurance benefits to employees for injuries and illnesses "arising out of or in the course of employment."
That wording makes it difficult for most workers to file a claim if they suspect that they got the coronavirus at work, presumably from another employee, customer or visitor to the workplace. But if an employer knows that the virus is in the workplace, coverage could apply.
Workers' compensation could come into play in the following instances:

• Health care personnel who work where there are patients being treated and tested for COVID-19 would have a strong claim if they contracted the virus.
• Employees who travel overseas for business and contract the illness.
• Employees who are exposed to the illness at work by an infected co-worker.
• Employees who are assigned to work in a location with infected parties.

 
However, workers' comp insurance would likely not cover employees who are working on assignment abroad for more than a short time.
 
Business interruption
One major fallout from the spread of COVID-19 is that it has cut into global supply chains, forcing manufacturers around the world to suspend production. This has been especially true for companies that rely on China for their parts and materials.
But now that the virus has exploded in a number of countries, the threat to supply chains will only increase. This has already started affecting companies in the United States. If your company's operations are affected or stopped due to the virus, you may be wondering if the business interruption coverage in your property policy or business owner policy may pay out.
Business interruption coverage replaces income that was lost due to a disaster, such as a fire on the premises of the company or one of its suppliers, or a hurricane that hinders a company from operating.
However, any hit to your income from coronavirus would not be physical damage, which is a prerequisite for this coverage. Viruses and disease are typically not an insured peril unless added by endorsement. In many cases, the policy may specifically exclude coverage for viruses and disease.
There is potential coverage through communicable disease coverage under proprietary insurance carrier forms if the insured is closed by a "public health authority" order for closure, decontamination, etc. But it's worth noting that these usually require the order to happen, so the insured cannot voluntarily decide to close and then claim coverage.       
 
General liability
In terms of liability, a third party - customer, vendor or guest - could claim they were sickened on your property and sue your business for negligence for failing to provide a clean facility, which could trigger your commercial general liability policy.
Any company that deals with the public or customers, like a retailer, restaurant, hotel, daycare center or a gym, would be at greatest risk for this type of action.
While the chances of them winning such a case would be small, you could still face legal bills, which your CGL policy would typically cover. If there is coverage, it would come under the policy's "bodily injury" portion.
Some CGL policies exclude claims arising from a pandemic, virus or bacteria, so read your policy carefully. Many insurers also include broadly worded pollution exclusions that could preclude or limit coverage.
 
Business travel accident insurance
This insurance could cover employees who travel on business domestically or internationally, foreign employees of U.S.-based businesses and U.S. employees on offshore assignments. The insurance provides:

• Traditional accidental death & dismemberment coverage.
• Emergency evacuation, repatriation, and out-of-country medical benefits that cover costs for the treatment and transportation of sick or injured employees.
• Optional coverage for unexpected medical expenses.

​One of the keys to managing risks when you first start a business is getting the right insurance to cover your operations, property and potential liabilities.
Unfortunately, many business owners fail to update their policies and just renew them year after year even if the company has grown, expanded operations and facilities, and added new equipment and property. If this is the case, the old coverage would be insufficient.

Business owners should review their policies every year to catch any omissions and make sure they are not underinsured. It is common for smaller businesses to secure a basic business owner's policy (BOP) and workers' comp when they first get started. A BOP includes:

• Property insurance for buildings and contents owned by the company.
• Business interruption insurance, which covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business.
• Liability protection, which covers your company's legal responsibility for the harm it may cause to others. This harm is a result of things that you and your employees do or fail to do in your business operations that may cause bodily injury or property damage due to defective products, faulty installations and errors in services provided.

 
Outgrowing BOP coverage
As your business expands, you may outgrow the BOP and need additional coverage to manage your risks. Some examples include the following:

• Workers' comp. While you likely added a workers' comp policy when you made your first hire, you will need to update it as you add more staff. If you don't, when your insurer audits you, you may face a hefty bill for additional premium. Be diligent about your policy and inform your insurer as you grow.
• Excess umbrella or liability coverage. You should consider this insurance to cover claims that exceed your BOP's limit, providing you with an added layer of protection to protect your assets.
• Professional liability insurance. These policies provide coverage for mistakes for any professional services you provide. This used to be mainly for doctors, attorneys and accountants, but as our service sector has expanded it includes services provided by coders and software developers, appraisers, consultants, real estate brokers, graphic designers and home inspectors, among others.
• Auto, non-owned and hired coverage. This protects business owners if an employee has an accident while driving a rental or personal vehicle on the job. 
• Employment practices liability insurance. This covers human resources issues related to discrimination, harassment and termination.
• Commercial auto insurance. This coverage protects autos that are not under a personal policy.
• Directors and officers liability coverage. This protects officers and directors in the event they are sued for wrongful acts while on duty.

 
Depending on the business, some or most of these insurance options may be required for adequate protection. Annual reviews with us are ideal for discussing your options. Make sure these elements are considered:

• If computers, equipment or other types of property have been added, this would be reason to increase policy limits.
• While revenue is an important consideration, it is also important to remember that it is a potential liability. 
• A general liability or BOP may be affected if the owner has moved, added or closed locations.
• Hired and non-hired auto insurance is necessary if workers are driving frequently in rented vehicles. 
• For specific types of work and services, employers may need additional endorsements for their general liability policies.
• People who are serving new industries or clients may have problems with their professional liability coverage if they have large amounts of high-risk industries or customers.
• If you experience an increase in the number of workers you have, or there is a higher turnover rate, it is important to think about employment practices liability coverage. And as mentioned, your workers' comp policy should be updated to reflect any staffing changes and that you categorize your workers properly.