The statistics paint a picture of opportunities ahead for road contractors. For example, the average American travels 15,191 miles by personal vehicle each year, according to the American Road & Transportation Builders Association (ARTBA). That adds up to 4.6 trillion miles, a number that continues to grow as the country’s population expands and more drivers get behind the wheel.
ARTBA also reports an average of 8,015 miles of new road were built each year between 1997 and 2006. When widening existing roads is added, the road system grew by 20,233 lane-milesper year.
This represents a growth in road capacity of less than one quarter of 1 percent. However, each year during the same time span, the nation’s population grew 1 percent, the number of licensed drivers increased 1.2 percent and the number of vehicle miles traveled rose 1.8 percent.
Add in the fact that about one-third of the existing four million miles of road are gravel or unpaved, and it becomes clear that one of the challenges road contractors face is keeping up with America’s drivers. That challenge is small, however, compared to the need to cope with the new and growing liabilities the industry faces when performing work in heavy traffic areas.
Plus, as funds from the American Recovery and Reinvestment Act make their way to state and local governments for new roadwork, contractors could see an increase in job opportunities, which also means an increased exposure to risk.
Staying on Top of Liability
A motorist drives through a road construction project, fails to see the flagman and runs into a bulldozer. A car traveling at high speed rolls and hits a tree after the driver misses warning signs and barriers blocking an unpaved section of road. Years after a project is complete, a lawsuit is filed claiming that improper grading resulted in an accumulation of water that caused a car to hydroplane into another vehicle.
These stories are all too familiar to road contractors. Construction, an industry with a higher than average rate of jobsite injuries and accidents, becomes even more dangerous when workers and heavy equipment mix with ongoing traffic.
What is changing, however, is the severity of losses. Consider a contractor that fails to adequately secure sewer covers it replaced during the course of a job. A truck drives over a loose cover, which pops up and hits the car traveling behind, resulting in life-threatening injuries to the driver and passengers.
Such an incident is a human tragedy as well as an example of a liability claim that could easily reach several millions of dollars. With the increased cost of medical care, car repairs and litigation expenses, cases that previously generated settlements of hundreds of thousands of dollars cost millions of dollars today. In fact, vehicle accidents are one of the top causes of increased casualty costs in the country.
In addition to needing higher limits to cover increased claim costs, road contractors must consider their expanding scope of potential liability. Chemical spills, ruptured underground pipelines, silt runoff into waterways and other potential pollution incidents are gaining more attention and scrutiny than ever before. Regulatory agencies may impose hefty fines and require expensive mitigation that could cut into profit margins if a contractor’s insurance coverage is not adequate.
Similarly, a contractor that takes on design-build responsibility might lack the necessary professional liability coverage.
The bottom line: As the industry changes, road contractors need to ensure their insurance coverage and service keep pace.
Finding the Right Fit
Because road contractors face unique situations, it makes sense to work with independent insurance agents and insurance carriers with proven experience and broad knowledge of the construction industry. Look at three factors to determine the best partnership for insurance protection.
- Demonstrated capability. An insurance carrier should have a high rating for financial stability, as well as a track record of providing construction services and products. The insurer should be large enough to offer the diversity of products necessary to cover all the exposures a road contractor faces. Keeping all insurance coverage with a single insurer is a good way to avoid coverage gaps.
- Risk control specialization. Insurers that work extensively with an industry are in a good position to identify best practices for managing risk. Look for an insurer that shares its knowledge through risk-control assessment and specialized services, such as workzone safety training, flagman certification training, jobsite pre-planning and heavy equipment safety.
- Claims services. Insurers that offer claims specialists dedicated to the construction industry can provide knowledge and experience at the moment contractors need assistance the most.
Road contractors have made great strides toward safer operations, but they still work in a tough industry that exposes them to risks and expensive claims. Planning ahead by partnering with an experienced insurance agent and carrier is the smartest route a company can take to develop a comprehensive risk management program.
![]()
Friday, September 3, 2010