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 Construction is on the upswing again. ConstructConnect estimates that total nonresidential construction in the U.S. will grow 3.9 percent in 2018, while Statista projects construction spending to exceed $1.42 trillion in 2021. 

However, the recent increase in building opportunities has accompanied a growing spectrum of claims. These concerns have risen in concert with questions such as “What is the efficacy and longevity of the market’s latest and greatest new sustainable and recyclable building products”? “Who is responsible if a building fails to achieve the desired level of LEED certification”? “Who is ultimately liable for the delays and costs associated with design errors and omissions”? 

To help developers, owners and contractors alike navigate the complex commercial insurance marketplace, RT New Day annually polls its experts to identify the optimal environmental and construction-related risk management solutions needed to protect against the lengthy and costly delays that can financially cripple businesses. Released earlier this year, the 2018 Market Update cited a generally stable, but competitive commercial insurance marketplace with many carriers including new entries vying for increased market share. For instance, the underwriting trend of new Pollution Legal Liability business continues to evolve with markets monitoring their offerings for various risk types. As a result, PLL will remain a key risk management tool for facilitating contaminated property transactions as well as buoying the balance sheets for large real estate assets. It is also ideal for covering on and offsite clean-up/remediation expenses, third-party bodily injury, property damage and defense expenses.

In addition, the report predicts that Contractor’s Professional Liability coverage forms will continue to expand into 2018 with competitive rates. Although the frequency of CPrL claims are expected to rise in the coming year, this should not be a surprise since the number of buyers has also risen. However, the greater concern is the severity of the claims in the areas of civil, healthcare, commercial building and habitational projects, where it is not uncommon to see eight-figure claims. 

These same trends hold true for the Contractor’s Pollution Liability marketplace with offerings remaining abundant with expanding terms. This includes stable premiums among small to mid-market businesses and softer rates for larger enterprises. The leading motivator will be the continued inclusion of pollution insurance requirements with higher limits among contract specifications. 

Furthermore, the 2018 Market Update states that Owners Protective Professional insurance is gaining popularity and increasingly becoming a preferred method for insuring against loss from catastrophic design errors. Design professionals often carry low limits of professional liability insurance that are shared among all services performed on every project in which they are involved. Owners and developers that recognize these limitations are looking to further protect assets and are finding OPPI an effective and economical alternative to financing professional liability claims. Project-specific Professional Liability was the historical insurance method, but the cost and limitations of PSPL as a primary coverage now makes OPPI the preferred cost-effective alternative when looking to insure the owner’s risk. 

Of particular interest is also the gradual change in buying habits by design firms, who are increasingly turning to architects and engineers policies to protect themselves from errors and omissions as well as the economic damages resulting from design mistakes and project delays. Firms specializing in structural or geotechnical engineering as well as organizations working on multi-unit residential or condominium projects can expect stiffer renewal terms and conditions due to the heightened exposure. Some carriers are even experiencing an uptick in claims connected to highway designs. Overall, however, these firms are likely to find alternate renewal options due to the sheer number of carriers participating in the A&E PL market. 

Other problems explored by the update include late reporting of claims and the delays caused by insureds who: 

  •  do not fully understand the range of coverage terms in place to insure against incidents and claims;
  •  do not understand the importance of formally reporting errors and omissions or documenting all the information related to the incident; and
  •  apply the “we screwed up, we should fix it” mentality, not reporting to the carrier and assuming liability without the carrier’s consent. 

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