School of Civil Engineering

Division of Construction Engineering and Management

Company Construction Management

Risk Management II
 Management
Construction Business
CE 521
Property Insurance for Company’s Property (Cont’d)

• Property Insurance
– Provides coverage due to physical damage to property
– Includes buildings and personal property
– Includes property of others in company’s custody
– May cover named perils or all risk with exclusions
– May provide specific values or provide blanket
coverage
• Equipment Floater Insurance
– Also type of inland marine coverage
– Covers loss due to: Equipment; Temporary Structures,
and Materials not incorporated in the project
– No reference to specific locations. Why?

2
 Management
Construction Business
CE 521
Property Insurance for Company’s Property (Cont’d)

• Equipment Floater Insurance (Cont’d)

– May not cover insurance to rented equipment
– Specific perils or all risk with exclusions
– Exclusion could include equipment overload
– Coverage amounts: Specific or blanket
• Transportation Floater Insurance
– Covers property transported by public carrier
– Purchased per trip or on annual basis
– May not be needed if equipment is covered by
Equipment Floater Insurance
– Materials in transit covered by builder’s risk insurance

3
 Management
Construction Business
CE 521
Property Insurance for Company’s Property (Cont’d)

• Automobile Insurance
– Covers:
• Financial loss due to physical damage to vehicles (Repairing
damaged vehicles)
• Liability for bodily injury and damage to property
– Property damage coverage includes: Collision, Specific
perils, and comprehensive
– Typically does not cover items transported by company
vehicles
– Does not cover liability from operating mobile
equipment
• Floating Marine Equipment Insurance
– Similar to Automobile bit for floating equipment

4
 Management
Construction Business
CE 521
Liability Insurance

• Legal liabilities carried by construction

companies:
– Personal injury or physical damage to property
– Acts of persons for whom it is responsible
– Latent defects in completed projects
– Resulting from design or professional service
– Employees injured on the job
– Action take by company employees
• Liabilities not covered by a single insurance
policy

5
CE 521
6

Construction Business
Management
Liability Insurance (Cont’d)
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)
• Commercial General Liability Insurance:
– Protect insured against injury or property loss sustained by
others
– Injury/loss caused by accident or exposure to harmful
condition
– Does not protect insured against their losses
– Policies include three types of agreements:
• Premises and operations coverage, which covers claims
associated with the company’s property or construction operations
• Independent contractor coverage, which covers claims that result
from indemnity agreements contained in most construction
contracts
• Completed operations coverage, which covers claims for damage
or injury that results from the completed project years after its
completion

7
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)
• Commercial General Liability Insurance (Cont’d):
– Typical Exclusions from coverage include:
• Liability from operating owned, rented, or leased automobiles
and equipment
• Liability from damages caused by employees
• Liability for injury to company’s employees
• Damage by employees to company property
• Liability from Pollution caused by operations
• Liability for operations within 50ft from railroad property
• Liability for property in care, custody, or control of company
– Two types of policies:
• Occurrence-base policy
• Claim based policy
– Cost of defense

8
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)

• Umbrella Excess Liability Insurance:

– Designed to provide company with excess limits of
coverage
– Intended to provide additional coverage for
catastrophic loss
– No standard form for umbrella insurance
• Railroad Liability Insurance
– Covers work within 50ft from railroads
– Not provided by general liability insurance
– Needed because railroads require company to hold
them harmless

9
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)

• Errors and Omissions Insurance:

– Professional liability insurance
– Covers professional negligence of design professionals
– Some owners require construction managers to carry
such insurance
– Policies cover legal defense costs, incurred costs, and
judgment
– Don’t cover failure to complete drawings
– Written on claims-made basis
– Should include services performed by subcontractors

10
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)

• Pollution Liability Insurance

– Provides coverage for legal liability relating to pollution
conditions
– Typically excluded from commercial general liability
– Coverage divided into two basic parts:
• Claims against insured by third party on, under, or beyond
property
• Clean-up of pollution condition discovered on insured’s
property
– Typically written on a claims-made basis
– Punitive damages, civil fines, or penalties are excluded

11
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)

• Employment Practices Liability Insurance:

– Provides protection against claims made by
employees, former employees, or potential employees
– Claims relating to:
• Discrimination
• Wrongful termination
• Sexual harassment
– Includes duty to defend and claim settlement
– Cost of coverage depends on number of employees

12
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)

• Directors and Officers Liability Insurance

– Provide directors and officer protection from personal
liability
– Protects from financial loss out of acts committed in
their capacity as directors or officers
– Provides indemnification any legal liability as a result of
action, suit, or proceeding, related to job performance
– Mostly written on a claims-made basis

13
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)
• Worker’s Compensation Insurance:
– No fault insurance mandated by state law
– Employer cannot deny claim by insured employee based
on employee negligence
– Employee cannot sue employer based on negligence
– Dollar value established by statute
– Benefits provided include:
• Medical benefits
• Loss of earnings
• Retraining employee if employee unable to perform duties
– Worker’s compensation premium calculated based on
company’s payroll
– Premiums differ for each work classification base on
degree of injury risk

14
 Management
Construction Business
CE 521
Liability Insurance (Cont’d)
• Worker’s Compensation Insurance (Con’td):

– Premium has two components

– Premiums could also be calculated on a retrospective basis

15
 Management
Construction Business
CE 521
Business Insurance

• Key-Person Insurance
– Life insurance obtained on company principles
– Provides protection against financial loss resulting from
“untimely” (in my opinion sudden) death
– Benefits are used to finance buy/sell agreements made
with the company
– Used as part of the company’s succession planning

16
 Management
Construction Business
CE 521
Subcontractor Insurance

• Subcontractors typically required to

provide/maintain insurance coverage
• Coverage limits are similar to required by general
contractor
• General contractors request to be included as co-
insured in the policy

17