How Increased Material Costs Leave Contractors Underinsured

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Over the last 15 months, COVID-19 has brought numerous challenges to the construction industry. Second to only the labor shortage, the most pressing challenge faced by contractors is the spike in material costs which can leave them underinsured if a proper installation floater is not updated.

Lumber, steel, copper, and other building material costs rose anywhere from 100% to 500% between April 2020 and May 2021, depending on the material. Since most projects are bid 6 to 18 months prior to the start of construction, many suppliers and subcontractors were caught off guard and did not reflect these increases in their initial bids.  

Most contractors will purchase an inland marine policy that provides coverage for their miscellaneous tools, scheduled equipment, rented or leased equipment as well as an installation floater. It is important for contractors to understand the installation floater and how the increase in material costs could leave a contractor underinsured in the event of a loss.

An installation floater policy provides protection for direct physical loss or damage to materials, as well as supplies and labor costs for property being installed at jobsites. Materials are also covered while in transit and stored at temporary locations. The floater also extends coverage to the property until the installation work is accepted by the purchaser or when the insured's interest in the installed property ceases.

So, in the event of a covered loss, which includes fire, theft, explosions, transit-related damage and vandalism, a contractor’s installation floater will respond with coverage.

Proactive contractors should rely on their insurance advisor to discuss and design a program that addresses these unforeseen material and labor increases. In advance, consider the amount of product stored at any jobsite at one time, the amount of product that can be at risk in transit, the value of product stored offsite (i.e., storage units) and the protections in place that secure your product.

To discuss how an installation floater can protect your company, contact me at (619) 937-0167 or sclayton@ranchomesa.com.

2020 Promises Growth for Contractors but With a Twist

Author, Kevin Howard, C.R.I.S., Account Executive, Rancho Mesa Insurance Services, Inc.

Based on a recently published survey from the Associated General Contractors of America, 80% of contractors predict growth in 2020…but there is a twist. There is a major labor shortage.

The current California Unemployment Rate, is a staggeringly low 3.9% compared to an unbearable 12% during the 2008 recession. As Californians, this statistic is music to our ears. However, for construction owners, the demand to hire skilled workers from an extremely shallow workforce pool has created a need for Best Practices hiring strategies paired with enhanced methods of retaining employees.

As a 13-consecutive year Best Practices Agency, Rancho Mesa provides resources to equip our clients with strategies and methods to enhance human resources strategies. These efforts lead to broader protection from insurable risk.

We are excited to partner with Equal Parts Consulting on February 6, 2020 for a seminar that will equip businesses with the needed methods for this economic environment. Attendees can look forward to the following topics and discussions below:

• Strategies and best practices to create an easy to implement hiring process that aligns with your company’s culture.

• Effective ways to assess and evaluate talent to ensure they are aligned with your company purpose, values, and culture.

• Uncover some of the most important things your business can do to attract and retain the right talent for your culture.

Our goal is to help our contractor clients map out a game plan that will help retain talent, search for needed key employees and create a successful 2020 and beyond. Please feel free to contact me with any questions, at (619) 438-6874.

Mitigating Risk at Height

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Industry Numbers

Falls from elevated heights are the single most hazardous injury within the construction industry; representing 38% of all construction fatalities (NSC construction & utilities). That is a scary fact if you are a painting contractor that works off the ground. In years past, it was common to see painters working on multi-story scaffolding with few controls in place, or working from ladders on top of trucks to get those extra couple feet needed to finish a project. Workers compensation underwriters have difficulty with risks that work over 30 feet. Why is this 30 foot threshold so critical to insurance companies who write workers compensation?

• Across the entire Construction industry, 16% of all fatal falls happened from above 30 feet (NSC Construction & Utilities). 

• In 2016, there were estimated to have been over 35,000 painters working in California and in total there were only 3 fatal falls (Bureau of Labor Statistics).

• That accounts for less than 5% of falls, slips, or trips leading to fatality in all of California.

Mitigating Exposures: Personal Protective Equipment (PPE) and Ladder/Scaffolding Safety

As with any business that is assessing risk, start by acknowledging the potential exposures of working outside. Besides utilizing appropriate Personal Protective Equipment (PPE) for work at height, the single largest exposure for any contractor is heat exhaustion. Making sure your employees are properly hydrated and shaded is easy to overlook and can have serious consequences. Fainting at height is a serious concern and any measures that can be taken to prevent this are essential. Requiring mandatory water breaks, encouraging employees to wear loose-fitting clothes, and offering shade and protection from the sun represents tangible measures that reduce the chances of an employee suffering from heat exhaustion.

Safety equipment has become more comfortable, lighter, and easier to store and transport. Working in the heat of summer makes it difficult for employees to wear heavy equipment. This can cause them to make numerous adjustments when they are in dangerous situations. Make sure employees have light weight harnesses and are wearing them as instructed. The best PPE in the world is useless if the employees refuse to wear them properly. Similarly, it is very important to test equipment one to two times a day to ensure it is functioning properly.

Proper ladder erection and maintenance is critical for working safely at height. The recommended angle a ladder should be erected is 75 degrees. New applications such as Niosh Ladder Safety or Angel Inclination can be utilized to ensure measurements are accurate. Regular jobsite walkthroughs and inspections are also important for scaffolding. It can be fairly common that other trade contractors move or alter existing scaffolding. From day to day, objects such as connections, planks, and railing can be moved by unknown jobsite visitors and can create new fall exposures. How your safety coordinator and/or superintendents inspect and re-inspect scaffolding can literally save lives.

Turning Safe Practices into Savings

We have shared a few key tips on managing risk at height. As you design (or re-design) your fall protection program, consider how effectively your insurance broker is translating this information to the underwriters involved with your account’s renewal.

• Are they clearly translating how your company mitigates risk at height? 

• Are they sharing key details that might separate you from another competitor?

• Are they using this information to leverage competitive pricing with multiple insurance companies?

• What does their information actually look like when it is sent out to an underwriter?

If these questions and this information are new to your organization, consider Rancho Mesa as an alternative. We can provide resources that can fully develop Fall Protection programs, training that can make your program actionable, and a partnership that ultimately builds the lowest cost of risk possible.

For additional information, please contact Rancho Mesa Insurance Services, Inc. at (619) 937-0164.