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Insurances

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Contractors Insurance (Line item from Estimate Template)

  1. General Liability [CIP or traditional]

    1. What is it?    General Liability covers Bodily injury and Property Damage to third parties as a result of our negligence, it also covers resultant damage from construction defects, Provides defense from claims - we buy this coverage for 10 yrs which is the FL statutory period where someone can sue us for latent defects. Give examples – Injury – Property damage
    2. Traditional – Projects less than 18 mil, if borderline let’s have a discussion about the project and CFO can have our Ins professionals make a determination.  (Loggerhead example)
    3. Traditional does not cost less – use 1.2%
    4. Kast and all Subs are required to meet project Ins requirements

    5. CCIP – Contractor Controlled Insurance Program

      1. This is only General Liability Insurance and it only covers on-site GL insurance.
      2. Cost varies based on Project type and Location, for all non-Condo projects we are able to buy adequate coverage for about 1.0%-1.2%, this would include some layer of excess and the admin fees
      3. GL typically gets bought with a primary layer of 2 mil. We use the same carrier for this 2  mil on all projects. Next we buy Excess layers – VERY IMPORTANT – we need to know what the project requirements are some projects require 10 mil in excess others can be 50 or 100mil. We have to pay for every layer up to the project requirements so this can get very expensive. When it is up to us we typically would require excess to be approximately one half of the project value. 50 mil project = 25 mil in excess coverage.
      4. We are buying GL Insurance for the entire project including all Subs – this protects us, Subs and the Owner for 10 yrs. We will have the Subs give us credits for their typical cost for GL insurance ( they include the cost of Insurance in their bid). This is Kast Standard – we will run across Owners that want Subs to bid without Insurance and no credits transferred. Subs go out of business or buy poor insurance coverage. Explain Credit process here.

    6. OCIP - Owner Controlled Insurance Program

 Same as CCIP except the Owner is the Sponsor of the program – they pay for it and we make them responsible for Deductibles, they usually get most of the benefit for the credits.

  1. What OCIP doesn’t cover – Off Site GL and all coverages listed below.
  2. We push Deductibles to Owner on OCIP Projects.

 

  1. Other Insurances needed for Projects under the Contractor’s Insurance line item

    1. Contractor’s Equipment – PROPERTY COVERAGE – This covers rented equipment like Trailers, Bobcats etc.. can also cover large items like tower cranes and buckhoists
    2. Auto
    3. Professional Liability – 5 mil coverage w 50K deductible – covers our professional decision making – VE – design build trades
    4. Pollution Liability - 5 mil coverage w 50K deductible – Typically covers mold or pollutants brought to the site. Arsenic, radon, etc can be covered, but not if onsite prior or construction.
    5. Offsite coverage – Scope in the “project” outside of the property line will be covered as long as we let CFO know so they can inform carrier.

Labor insurance

  1. Workers Comp – Covers injuries to employees on Site – most important for Subs – with a waiver of Subrogation. Wrap only makes sense on workers comp over $100M project value.

Builders Risk

  1. Property coverage for the “work” on the project – only covers damaged work. Standard deductible is $25-50k. Usually larger Deductibles for Water Damage (100-250K) – Hurricane/Named Storm 3-5% of Value in place.

Subcontractor Risk Mitigation (Bonds & SDI)

  1. P&P Bonds – Surety (Large Insurance Company) basically Standing behind the Sub, the Surety is supposed to react when the Principle (Sub) defaults or is defaulting – the Surety is supposed to come in to help solve the problem. What I see these days is that instead they hire a lawyer to dispute the reasons for default and try to blame us or the Owner. 2 year limit on condos.

    1. If hard bid and trying to be competitive, we should bond over $200k and major subs and bldg. envelope.

  2. SDI (Subcontractor Default Insurance) – All Subcontractors (Div 2-35 on a specific project) are automatically in SDI unless bonded – unlike CCIP/OCIP where the Sub enrolls and gives a credit.

    1. SDI is used instead of a Sub bond.

    2. Pros and cons to using on projects under $10M. Not clear cut.

    3. Advantages –

      1. SDI reacts as soon as a default occurs, with traditional bonds we end up having to sue the surety to recover.

      2. If project is managed well and no default we have an opportunity to enhance our fee (Confidential)

      3. 5 year tail standard, 10 year is extra. Condo tail is 2 years max.

    4. Disadvantages

      1. Large Deductible – Over 1 mil per occurrence, can record small defaults to chew up aggregate deductible.

    5. Process

      1. Notify CFO

      2. Track all costs related to default. Accounting will normally handle this