Consumers are projected to spend approximately $317 billion on home improvements this year. In addition, an increase of approximately 6.5% has been predicted for commercial construction in 2017. An increase in improvements, means a greater need for artisan contractors.
After speaking with Jessalynn Suda, corporate associate vice president at Burns & Wilcox
, and Tyson Peek, national property & casualty manager at Burns & Wilcox Canada
, it is evident that while many brokers and agents find writing these policies straightforward, there are three key concepts that may assist in better preparing for the process of placing an artisan contractor policy.
The nature of the work of an artisan contractor can vary from one specialty to another and be based on contractual agreements. Due to this, insurance carriers require a supplemental application.
“The supplemental application aides brokers in distinguishing what kind of business the carrier is insuring and understanding the nature of the exposures faced,” says Suda.
A painter, for example, can have different class codes for different types of painting, including residential homes, automotive painting, or bridge and high-rise painting.
“Although the specialty is the same, the contractor’s responsibility and nature of the work could vary greatly,” says Peel.
Suda suggests that aiding a client in understanding the significance of artisan contractor class variation is key to properly insuring them – all of which is achieved by completing the supplemental application. To be prepared to fill this out, brokers and agents should know a client’s work history, including insurance history, loss history and experience.
“One of the most frequent questions received from brokers is on the coverage form,” says Suda. “General liability coverage does not cover faulty work, and there is a fine line between what would fall under a faulty work exclusion and what is actually covered.”
It is helpful to aid clients in understanding those differences upfront as it lays the groundwork for smoother claims handling if the issue of faulty work should arise. While faulty work is not generally covered, Suda says that “brokers can instruct clients to purchase voluntary property damage extensions – or care, custody and control – which is a sublimit offered to cover damage to items in a contractor’s care, custody, and control. However, this is not offered through many carriers and may not be available to all contractors.”
Changes in Business
“I would advise brokers and agents to keep in constant contact with their clients on a regular basis in an effort to stay abreast of potential changes in their clients’ business,” says Peel. “There are quite a few circumstances that could change the status of a client’s coverage.”
Scaling or expanding services can almost completely change coverage needed for a client.
“As an example, if a roofing client has historically provided shingle roofing services and later decides to expand their services to include hot-tar roofing without notifying their broker, they may face non-renewal or termination of the policy,” says Peel.
Brokers should ask about the possibility of changes in business up front and check in with clients throughout the duration of the coverage to ensure they are properly covered.
“Clients have also been known to change the name of their business in an attempt to hide past claims or lawsuits to gain a more favorable premium,” said Peel. “It is important for brokers and agents to gather the proper details from clients when writing new policies.”