Construction Insurance and Real Estate
Timely articles covering the most pressing issues facing construction firms in the Midwest

Insurance Risk Management: Minimizing Your Risk
By David Seitter

Increasing general liability insurance premiums and rising construction defect claims has led many construction owners to re-evaluate not only their insurance coverage but also their risk management practices.

When it comes to construction insurance coverage, one of the best things you can do for yourself is practice risk management. Risk management is a critical element of a construction owner’s survival in today’s marketplace.

Forms of Risk Management

Risk management is not one thing or another, but rather a combination of many different elements. Among the more common forms of risk management include the following:

 - Subcontracting – Subcontracting can shift the risk you might otherwise assume to others, and is a common choice for many construction owners.
 - Contract modifications – Contract modifications may help you evaluate any potential high risk activities and establish wording that protects you in the event of unforeseen accidents or defects.
 - Extreme risk avoidance – Simply stated, this is the practice of avoiding those construction projects which assume the most risk. Generally these types of projects also insure the largest insurance coverage costs, some of which may not be recouped.

Insurance Coverage for Risk Management

The primary form of insurance most contractors consider is general liability. This is often very expensive however and contains many exclusions. Of course you will need some sort of general liability coverage, however there are numerous other types of insurance you can purchase to round out your coverage and ensure the best possible risk management. Commercial general liability coverage will cover things including omitted details, leaks, and other damage that might result from defective work.

Among the more common types of insurance used by construction owners including builders risk coverage, worker’s compensation and design-build coverage.

You’ll want to be sure you consider all your potential hazards when seeking risk management coverage including flaws in design or construction and project management problems that can contribute to construction defects during the building phase. By keeping abreast of all the potential issues, you are less likely to encounter them and more likely to deal with them successfully in the event future problems arise.