Confusing Insurance Regulations Test Construction Sector’s Resilience
Date Posted: November 23, 2015
Posted In: Ideas,
From Business Insurance: Ongoing confusion about the reliability of risk transfer agreements and an unskilled and aging workforce are the major risks facing the construction sector, but cyber liability is gaining prominence.
Contractual risk transfer and additional insured agreements for subcontractors are a continuing risk management concern, experts said at the International Risk Management Institute Inc.’s Construction Risk Conference in Las Vegas this month.
General contractors rely heavily on agreements that transfer risks to their subcontractors, but these are “not foolproof,” said Michael Campo, senior vice president and team leader, construction and design group, Lockton Cos. L.L.C. in Kansas City, Missouri. The uncertainty arises from the more than 300 additional insured forms providing varying degrees of coverage to general contractors, he said.
“If there was a panacea solution out there, we would have found it by now because someone could make some money on it,” Mr. Campo said.
States are passing anti-indemnification and additional insured statutes and are likely to continue, adding to the confusion, experts said. An indemnity agreement promises to shelter the indemnified party against existing or future loss, damage or injury liability. In the construction context, that often means the entire risk of loss is transferred to the subcontractor. The contracts governing construction projects may even require subcontractors to purchase insurance naming owners and general contractors as an additional insured. But these clauses are viewed by some stakeholders as onerous, and states have moved to ban or significantly limit them, experts said.