For the majority of construction companies, Workers Compensation, General Liability, Commercial Auto, and Umbrella Liability insurance policies are a must. Many contractors also carry commercial property policies to protect their computers, furniture, and valuable documents.
But that can still leave major gaps in protection that could bring business to a halt, stymie growth and leave contractual obligations unmet.
Here are three common gaps that we see in construction companies’ insurance programs.
Cyber liability insurance
Cyberattacks are more frequent, more sophisticated and have greater losses than ever before. The number one cause of loss – ransomware – averages $352,000 per incident. As for frequency, a recent survey found that most companies in the construction sector experienced a cyber incident in the past year. More technology use is leading to greater exposure.
Cyber liability insurance can recoup major losses if the policy is written properly. It’s important to look at possible gaps, like third-party coverage.
The mistake here is a belief that IT providers do not suffer data breaches. This is far from the truth. Even companies with the best security systems are just one human error away from a cyber-attack. A breach at a third-party service provider (say your web hosting service), could shut down your system. In this case, insurance can cover your business interruption losses.
As for rates, here’s a word to the wise: historically, cyber liability was priced based on company revenues. But that’s not the case moving forward. We’re going to be seeing an application-based market, so construction firms need to start shoring up their IT infrastructures now.
How? The first step is to review your portals and make multi-factor authentication a standard. Building out your general firewall security is another important step. When companies deploy these methods, we’re seeing a significant decrease in cyber-crime success.
A final word: The carriers often provide a suite of services with your policy such as dark web monitoring and phishing email training. And if you are attacked, they’re the first phone call to make because they know the right steps to take to minimize losses and recover as quickly as possible.
Geographic exclusions
Looking to do business in New York? We’re seeing construction companies bid on jobs there using their standard insurance rates, only to find out after-the-fact that New York is in a different stratosphere. Or, that coverage isn’t even available.
The gap in this scenario is a broker who doesn’t understand your business plan. They should be asking about your current geographic footprint and your thoughts about expansion.
It’s quite possible that you’ll want to choose a carrier that covers exposures outside of your normal operating radius.
Unusual contract provisions
Does your insurance match the requirements of every contract? To be compliant, you might need a type of coverage you haven’t carried before or that you’re unfamiliar with.
For example, every New Jersey Department of Transportation contract requires a pollution liability policy. This started with their year 2019 contracts. The requirement is project specific, meaning that every single project needs a separate policy.
Another type of atypical coverage is railroad liability which is required for a project within 50 feet of a railroad.
At MRG, we look at contracts before a client submits a bid and notify them of any additional coverage that may be required. This is key to clients’ profitability, efficiency in obtaining certificates of insurance to enter the job site and avoidance of uncovered claims.