Protect Against Wood-Frame Construction Hazards With CPL Insurance

Contractors face a learning curve to overcome the safety, project management, structural, moisture and design challenges that can impact wood-frame projects. As a result, many use insurance forms to control wide-ranging pollution problems.
By Drew Rothman
May 14, 2019

Low cost and availability have combined in recent years to make wood-frame construction extremely popular for building everything from apartment complexes to mixed use facilities. In addition to conforming easily to the designs of most structures, cedar, pine and other types of softwood are currently meeting the growing demands of owners and developers for green building and sustainability products.

However, a learning curve does exist in the United States for wood-frame contractors looking to overcome the safety, project management, structural, moisture and design challenges that can plague these projects—many of which can result in pollution conditions. This includes the implementation of risk management strategies such as the adoption of insurance forms to control wide-ranging pollution problems and better schedule planning to avoid the adverse effects of seasonal weather conditions. Other strategies entail the negotiation of contract terms that protect against delayed claims; combating mold through procedures that ensure the building’s dryness; and protecting against moisture problems during the wood’s transport and storage.

Although it’s not the only method for addressing potential liability, contractor’s pollution liability (CPL) policies are key for insuring against the problems confronting this highly litigious environment and reducing the costs associated with unmanaged risks. This includes challenges such as mold, which is an extremely prominent pollutant in this space and often differentiated from bacteria by carriers in most contractor’s pollution liability programs.

As a result, the definition of a pollutant is critical for assessing if the appropriate coverage is in place when claims arise. For instance, policies containing claims-made terms differ dramatically as opposed to occurrence-based mold coverage types. In a claims-made program, the policy is triggered when the claim is made and reported to the provider during the policy period. Claims made after the policy’s expiration will then not be covered.

With an occurrence policy, if the pollution condition occurs during the policy period but the condition is not discovered until the policy has expired, the resulting claim will be covered by the provider under the original, occurrence-based policy (when the condition occurred). This is a distinct advantage to most contractors since pollution conditions are often not discovered until after the time limit of the original policy expires and the unused coverage is no longer available.

Carriers may also treat contractors engaging in wood-frame construction differently than other risks by protecting themselves with carrier-friendly terms that include sublimits and higher self-insured retentions or deductibles. For example, a contractor purchasing CPL coverage may anticipate their $1,000,000 per claim policy would apply to all coverage parts. However, the carrier may seek to lower potential exposure by sublimiting mold coverage to only $250,000 per claim for a contractor engaging in wood-frame construction, making this policy less desirable. Additionally, a contractor purchasing pollution coverage to protect against the high costs associated with claims is unlikely to find a $100,000 deductible desirable, although this may be what a carrier offers to limit its exposure.

Another consideration is the carrier’s appetite and underwriter’s comfort level with wood-frame construction techniques and applications, which include everything from the contractor’s individual contracts and work history to the firm’s project experience. Subsequently, it is critical for the insured to not only assess the full extent of the coverage but also whether the policy satisfactorily covers their wood-frame construction activities, as CPL forms are not standardized like ISO-based, commercial general liability forms.

All contractors must also thoroughly understand the factors determining favorable coverage terms and conditions. This means fully completing applications and paying attention to the criteria used by carriers to write policies, the scope of coverage and definitions used to highlight their services. Common questions include:

  • Is the carrier offering claims-made or occurrence coverage?
  • What are the policy limits and self-insured retentions/deductibles?
  • Is this the optimal insurance solution for the work we perform?
  • Is my business covered for wide-ranging wood-frame liability issues?

Unfortunately, there’s no going back once things go wrong. But growing the business with wood-frame construction projects does not mean paying unnecessary premiums for the appropriate coverage. Always work with brokers and carriers to supply as much detail as possible about the business and/or specific project. The benefits will often not only include better coverage and protection in times of need, but also coverage rates, terms and conditions that favor the bottom line.

by Drew Rothman
Drew Rothman is a consultant within R-T Specialty, LLC’s National Environmental and Construction Professional Practice. RT New Day is a specialty intermediary for insurance agents and brokers with expertise in environmental insurance, environmental risk management and construction related professional liability. His email is [email protected].

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