With economic recovery in much of the construction industry slow to take hold, more small and midsize contractors are trying to stay above water by pursuing work that goes well beyond their field of expertise - making it harder for them to get the insurance they need.
To maintain operating capital and/or avoid laying off workers, these businesses are bidding –often at rates far lower than normal on new types of projects - assuming more contractual obligations, and expanding the tasks they perform on site. Although these decisions might mean the difference between solvency and bankruptcy for contractors, they also expose their businesses to serious legal and financial dangers.
Profit margins for some contractors have eroded so far that there's no longer any room for errors in bidding, which has resulted in more and more surety bond failures and subcontractor default claims.
The turnaround in the economy has kick-started growth in some construction markets, ranging from civil infrastructure and health care facilities to schools and rental apartment buildings. This has led to more contractors with expertise in other fields (such as commercial office space, large-scale retail, and specialty trades) bidding on these projects - often without knowledge of the special risks involved. For example, a paving company that expands from parking lots to bid on surfacing a highway would have to consider such factors as workforce size, night work, and the flow and proximity of moving traffic.
Many middle market general contractors are performing operations usually done by subcontractors - such as site preparation, steel erection, and pouring concrete - that can create worker safety and product defect liability issues. More and more of these contractors are having their on-site safety managers supervise safety protocols among the subcontractors' workers, as well as their own workers.
Before you seek out new types of businesses that might expose you to unfamiliar risks, check with us on the most cost-effective way to provide the insurance protection you need.