By Samantha Wright
Contractors are the wild things of the labor force. In exchange for the safety net of working regularly for an employer, contractors have more control over their schedule and, to a large extent, set their own rules and rates.
While the term “independent contractor” is used to describe freelance jobs in virtually every field there is, “contractor” by itself generally refers to someone in construction. And there is no doubt about it – the U.S. construction and contracting industry has entered a new phase of growth.
According to the US Census Bureau, there are currently 477,950 specialty trade contractors working in the booming construction industry, with annual business valued at $722 billion.
Construction and contract work encompass some of the most diverse occupations – from masonry to marine construction. With this diversity comes a number of risks, and an appetite for several key insurance products including General Liability, Workers Compensation, Auto, Surety, Builders Risk, Environmental Liability and Professional Liability.
“Contractors typically procure these coverages on a practice basis to cover exposure and liability resulting from all of their operations, or they purchase the coverages on a project specific basis to meet contractual requirements necessary to perform work at a job site,” said William P. Hazelton, Division President, ACE Construction & Environmental.
Loss exposures in the sector are highly dependent on the type of work contractors are performing.
“For example, a plumbing contractor would have significantly different exposures from a street and road contractor,” Hazelton explained. “This is why the selection of an insurance carrier that can tailor coverages and services such as loss control and risk assessment specific to the needs of individual contractors is important.”
As the construction industry has evolved over time, so has the appetite among contractors for emerging insurance products. Hazelton has recently observed increased demand for General Liability-only wrap-up coverage for contractors engaged in project-specific work, as well as insurance for contractors engaged in P3 (Public, Private Partnerships) work for large infrastructure projects and other construction work in health care and education arenas.
Contractors are also showing more interest in the combined pollution-professional liability coverages as well as coverage for Privacy or Cyber exposures.
“They are asking more questions about the coverages and services carriers can provide in the cyber and privacy areas, and how their day-to day operations could be impacted by these exposures,” Hazelton said.
Sparked by fear of litigation, increasing contractual limit demands pertaining to contractors pollution liability are driving additional demand in the sector, said Garick Zillgitt, Senior Vice President Environmental at Rockhill Insurance Group of Kansas City.
“Contracts are causing insureds to carry higher and higher limits – $10 million or $20 million is not unusual, and even higher limits are occasionally required,” Zillgitt said. “General contractors and owners pay attention to what their peers are requiring in regard to CPL limits. We are seeing a trend in both the limits of insurance required, as well as specificity in the type of insurance required.”
Ultimately, Zillgitt said, project owners who require the higher limits end up paying the price for them, because the additional insurance costs are generally built into the bids by the contractors doing the work.
