Posts Tagged ‘insurance’

Risk Management Means Innovating Beyond Checklists

December 21, 2011

A recent report from McGraw-Hill (also discussed here) outlined the results of a survey of owners, architects and general contractors examines the ways in which project teams on $100 million projects handle risk management. The report suggests that formal risk control processes “beyond simple checklists”  are necessary for these projects to sufficiently mitigate their overall project risk.

The costs of risk in these projects are staggering. For example the average size of a post-construction disputes is $3 million dollars. But what’s striking to me is how common it is for these projects to be dealt a blow from risk related issues. Consider these statistics:

  • Almost a quarter of projects are hit with schedule delays.
  • Close to 20% of projects are over budget.
  • About 10% of projects experience disputes.

And these are the big boys. The best-in-class, technology savvy, resource-rich organizations that one would expect to have their act together. But even the best and brightest are subject to the ill effects of overruns, scope creep and safety and site conditions.  As a matter of fact, “unforeseen site conditions” was listed as one of the most difficult risks to quantify. It’s nice of the MH folks to formally recognize something we all know to be true; once you break ground, you never know what can happen next.

Site conditions change, often unpredictably so. However, as I’ve discussed before, unforeseen conditions present a challenge in dealing with the risk of the past where costs pile up as those charged with investigating, analyzing and negotiating a resolution struggle to recreate the conditions on the site at the time in question.  Capturing this critical information doesn’t happen by accident. If the principles of major projects are going to take a dent out of risk-related costs, it’s going to take organization-wide efforts to make recording site conditions a mandatory (and routine) practice.  Current methods rely on individual project managers to establish their own systems for recording information, leading to a different system for every project and predictably inconsistent results.

4 Steps To Maximize Insurance Coverage for Construction Defects

April 15, 2009

From this month’s Construction Executive Magazine (Sorry, no online copy for this article, authored by Chris Mosley at Sherman & Howard LLC)

  1. Purchase the Right insurance – Review your policy limits to confirm the existence of completed operations coverage. Typical general liability policies limit coverage to $1 million, which is wholly inadequate for construction companies.   Also, liability policies limit their coverage for defects claimed during a single policy year ( i.e. you can’t file a claim for work that was done several years ago.)  Consider excess insurance including completed operations coverage.
  2. Procure the appropriate additional insured endorsements from subcontractors – GC’s should required Subcontractors to maintain their own completed operations coverage. Also, GC’s should review each Sub’s  additional insured endorsements.  If the Sub has not obtained  a completed operations additional insured endorsement, the GC is liable for that Sub’s defects.
  3. Hire a Qualified Insurance Broker – Make sure the broker as claims experience. Also, you should have confidence in your broker’s ability to review your risk exposure and the additional insured endorsements of your subcontractors.
  4. Engage a Personal Counsel Experienced in Insurance Issues – Doing so increases the probability that insurers will pay claims in full. It’s also best to find your attorney at the same time you are shopping for coverage, rather than doing so after a claim arises when you’re likely to have a few more things on your mind.

Who Benefits from Construction Verification? Vol. I – Dispute Resolution

November 27, 2007

This will be the first in an occasional series of posts discussing the benefits of Construction Verification for the construction industry.

What is Construction Verification?
Construction Verification is the process by which “As-Built” construction is confirmed to meet the specifications and intentions of the developer. While inspections serve to confirm adherence to various agency codes, construction verification encompasses a larger scope in order to confirm compliance with the vision of the developer.

There’s a reason why developers set aside as much as 17% of major construction project budgets for post construction claims, disputes and litigation. It’s because they’ll need it. When developers, contractors and other interested parties fall into dispute over the as-built condition of a project, a resolution can be a long time in coming.. continued