How to Help Protect your Business Through Risk Management and Loss Control Procedures

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Selection of Contractors

Select subcontractors who agree to:

  • Sign a written Subcontractor Agreement which contains hold harmless/indemnity provisions, insurance requirements, a waiver of subrogation, and an arbitration agreement.

  • Provide valid certificates of insurance and license requirements

  • Follow all contract specifications using quality construction techniques and materials

  • Fully implement all recommendations of the builder

  • Maintain a minimum of $500,000 of insurance limits

Utilize an Insured Third-Party Warranty

  • A third-party written warranty outlines the builder’s legal warranty obligations as to coverage and length of time

  • The written warranty should include one year workmanship, two year systems, and ten-year structural coverage

  • A written warranty should transfer to subsequent homeowners thereby protecting the builder for a full ten years

  • A written warranty should contain a waiver of the builder’s liability for non-warranty claims for construction defects

  • The waiver helps minimize the chance of the homeowner pursuing the builder under state implied warranty laws

Site Conditions and Preparation

  • Most general liability policies do not provide coverage for defects related to soil movement

  • Careful pre-acquisition due diligence can reveal significant future problems such as geotechnical (expansive, collapsible, sulfites), noise (traffic, airports, and other sources) and use of adjacent parcels

  • Documentation related to soil testing is invaluable in the defense of subsidence claims and litigation

  • Insured warranties may offer the only insurance against structural claims related to soil movement

Jobsite Reviews

  • Selection, training, retaining, and managing supervisors is critical to risk management and loss control

  • The general role of the supervisor is as follows:

     - Oversee and manage the builder’s job-site risk management program

     - Oversee construction quality in terms of materials and workmanship and confirm that both are in accordance with the original construction plans

     - Conduct regular quality and loss control jobsite inspections using checklists

     - Maintain records for all change orders, requests, completions, and complaints

Jobsite Safety and Security

Jobsite safety and security is an essential part of Risk Management. Hopefully, you have measures in place to handle these procedures. We could write a novel on this module but the most general and critical management techniques are:

Proper Selection and Training of Workers – Most claims are due to faulty workmanship and/or negligence of the worker. It is imperative that your employees be selected with care as to their abilities and training for each job.

Proper handling of materials – Building materials can be cumbersome, delicate, and often dangerous at the same time. Make sure your employees understand the proper handling of materials and equipment. Training sessions should be a regular part of your business operations.

Safe and secure working conditions – Often times building operations can be just plain hazardous by nature. Make sure your employees know this and take preventive measures to avoid accidents, injury, and damage. Make sure employees are not overly tired, stressed, or exposed. A weak employee will make twice as many mistakes.

Make sure your jobsites are properly secured from theft, weather, fire, etc. – Many claims are filed due to damage due to weather and improper security of materials or building operations. Motion lights, fencing, and on-site security are valuable to risk management.

Know Your High Risks!

One of the key risk management techniques is to know where your high risks and exposures are. Every business and operation is a little different, but the insurance industry has noted certain key risks and exposures you should be aware of:

Work Related Injury – This may be the highest, which is why worker's comp is typically a high premium. Make sure to have a key point person in your operation in charge of this. Proper documentation of all work-related injuries is critical in this area.

Theft and Damage to Equipment & Materials – This is not covered under your General Liability policy, so make sure you have proper insurance for this and take cautious measures to prevent these losses.

Other High Risks Include:

  • Excavation, Grading, Foundations — Speaks for itself!

  • Framing Operations — Improper materials, poor foundations

  • Roofing Operations — Leaks, open roof, and weather conditions

  • Plumbing Operations — Leaks, movement, and improper materials

  • Painting Operations — Overspray

If you have any questions about Risk Management, please contact us today!



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