Evolution of Exterior Insulation and Finish Systems in California

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

Exterior Insulation and Finish Systems (EIFS) has been around since 1969 and has grown in demand for new construction in California with a constant push to get closer to “net-zero” buildings. With our strong niche in plastering, drywall and painting contractors in California, one of the most frequently asked questions by insurance carrier underwriters pertains to whether a contractor self-performs or subcontracts out EIFS work. This has become a significant concern for insurers, particularly when it comes to the proper installation of drainage systems over wood-framed buildings and/or the use of inferior materials. Over the past decade, there have been significant strides to insulate contractors from claims arising from EIFS.

The major turning point for EIFS occurred during the 1995 hurricane season in North Carolina, when an increase in insurance claims highlighted the risks associated with improper drainage systems in EIFS installations (i.e. walls and ceilings). These claims prompted a dramatic shift in the way EIFS systems were installed and regulated moving forward. In response to these challenges, the industry made considerable strides to enhance moisture control, seismic resilience, and the use of materials that are better suited to California’s diverse climates—ranging from dry desert conditions to coastal, humid areas.

California’s building energy efficiency standards continue to evolve. As these standards become more rigorous, it is expected that EIFS will play an even larger role in meeting the energy demands of new buildings. The insulation provided by EIFS systems makes them a critical component of energy-efficient design, helping buildings achieve net-zero energy performance while still having curb appeal.

It is likely that EIFS will become a requirement for most, if not all, new construction projects in California in the near future. However, despite the system’s growing importance, many insurance carriers still view EIFS installations with caution, due to the historical challenges and claims associated with improper installation techniques. As a result, some insurers continue to treat EIFS as a “high-risk” exposure and require stand-alone policies to cover the potential risks.

Currently, there are approximately 7,660 plastering professionals employed in California, according to the most recent data from the Bureau of Labor Statistics (BLS.gov). However, only a small fraction of these employees are actively involved with EIFS installations. This limited exposure has contributed to a gap in the insurance market, with many carriers potentially lacking a deep understanding of the evolving EIFS industry and its improvements.

For plastering contractors in California, working with a knowledgeable broker is crucial to navigating the complexities of insuring EIFS work. Each company’s exposure to EIFS risk is unique, and it is essential to have a broker who understands these nuances. A specialized broker can help secure the most competitive pricing available and ensure that they are paired with insurance carriers that are not only familiar with the latest industry advancements but are also willing to offer comprehensive coverage for EIFS-related risks.

While industry change can take time, it is vital to have a broker who actively advocates on your behalf, challenging insurers’ outdated guidelines and promoting an accurate understanding of the current EIFS landscape. By building strong relationships with insurers who understand the evolving nature of EIFS, contractors can improve their risk management profiles and position themselves for long-term success.

If you have any questions relating to EIFS or any other insurance needs you may have, do not hesitate to reach out to me directly at ccraig@ranchomesa.com or you can call (619) 251-8278.

Mitigating Inland Marine Losses

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

Inland marine insurance can sometimes be a forgotten line item in some construction companies’ insurance portfolio. This insurance covers your materials, equipment and tools once they are in the field or in transit. Sometimes insured’s feel they have coverage through their property insurance but once the equipment, materials or tools leave your premises, inland marine is the line of insurance that covers you.

Historically, inland marine coverage had fewer losses than other lines of coverage and this type of insurance had not seen a change in premium. However, this has changed in recent years with bolder criminals stealing larger equipment and materials from jobsites, breaking into work trucks to take higher valued tools and vandalism. What are some ways you can cut down on cost and help insulate yourself from losses?

By utilizing new technology to track where you are storing your materials and equipment overnight and investing in security measures, you can help prevent claims and reduce premiums. With theft on the rise, it is a good time to make sure you are storing your materials and equipment in the best way possible. Placing air tags or similar GPS tools on larger equipment is extremely helpful in recovering stolen items and tracking where they are being stored. If leaving equipment at jobsites, removing batteries is also helpful but if possible, try to not leave equipment at the jobsite. Train your employees to properly secure and store equipment if they are taking it home in their work truck. Most theft or vandalism are crimes that are a result of convenience or opportunistic. The harder it is to commit crime because of preventative measures, the less likely the crime will happen.

Ensure you have proper limits for your equipment and materials with your carrier. In reviewing and insuring your tools and equipment, it is important to understanding what is considered miscellaneous tools. Typically, this might be tools with a value less than $2,500, thus necessitating the need to “schedule” equipment above that value. Often times, we see insureds who have aggregate miscellaneous tools limits much higher than needed and then also including those tools or equipment on the scheduled equipment list.

When insuring the materials that will be used on a job, it is important to distinguish between a transit, jobsite and temporary location limits. These limits should be specific to your actual needs and not necessarily always the same values, that is another common mistake we see in auditing insurance portfolios. These vital discussions can help you save on premiums and ensure you are properly insulated from exposures.

While inland marine insurance isn’t typically one of your largest expenses in your insurance portfolio, it is something you need to monitor so costs do not creep up over time from frequency of losses. With rising costs in both auto and property insurance, it is becoming more important to make sure you are insulating your company from risk as much as possible to keep your controllable exposures down.

Discussing your inland marine coverage with your insurance broker regularly can help keep premiums and losses down. If you have questions relating to inland marine or any other of your insurance coverage, please reach out to me at ccraig@ranchomesa.com or (619)438-6900.