Title:
Construction insurance, bonding and risk management
Personal Author:
Publication Information:
New York : McGraw-Hill, 1996
ISBN:
9780070485945
Subject Term:
Available:*
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Summary
Summary
Publisher's Note: Products purchased from Third Party sellers are not guaranteed by the publisher for quality, authenticity, or access to any online entitlements included with the product.
Protect your business from all types of risks--insure your projects with advice from the experts
Here you'll find the answers to your questions about insurance, bonding, and risk management for all of your construction projects. This much-needed book helps you assess your requirements for insurance coverage, evaluate policies, find the fairest rates, obtain bonding, and manage risks professionally and confidently. Written by the foremsot experts at Ernst & Young LLP and Willis Corroon Construction, this authoritative guide gives you the information and methods you need to simplify and systematize your project insurance bonding, and risk management issues, and protect your business from all types of liabilities: You'll learn how to: establish your requirements for various types of insurance; determine how to get the insurance you need at the best rate; read and evaluate insurance contracts; secure bonds for both contractors and subcontractors; obtain workers compensation coverage; evaluate environmental issues; understand the role of sureties in litigation. Construction contractors and subcontractors, CPAs, law firms, and insurance and bonding agents will all welcome this comprehensive guide and the authoritative help it gives in ensuring successful outcomes for construction projects of every kind.
Table of Contents
Contributors | p. xi |
Series Introduction | p. xv |
Preface | p. xvii |
Chapter 1. Construction Insurance, Bonding, and Risk Management | p. 1 |
1.1 Introduction | p. 1 |
1.2 Program Design | p. 2 |
1.3 Information Systems | p. 3 |
1.4 Brokerage | p. 3 |
1.5 Risk Financing | p. 4 |
1.6 Safety Management | p. 4 |
1.7 Claims Management | p. 5 |
1.8 Risk Management | p. 5 |
Chapter 2. Understanding Construction Risks | p. 9 |
2.1 What Is Risk? | p. 10 |
2.2 Pitfalls in Construction | p. 10 |
2.2.1 Failure to Fund | p. 10 |
2.2.2 Owner-Furnished Materials | p. 11 |
2.2.3 Major Scope Changes | p. 11 |
2.2.4 Defective Plans and Specs | p. 12 |
2.2.5 Slow to Mobilize | p. 12 |
2.2.6 Failure to Allocate Resources | p. 12 |
2.2.7 Inadequate Project Management Controls | p. 12 |
2.2.8 Insufficient Work Definition | p. 13 |
2.2.9 Unrealistic Schedules and Underestimated Costs | p. 13 |
2.2.10 Inadequate Cost Control and Accounting Practices | p. 13 |
2.3 Identifying Construction Risk Areas | p. 13 |
2.4 Minimizing Risks to Avoid Disputes | p. 16 |
2.4.1 Selection and Installation of Management Systems | p. 16 |
2.4.2 Review of the Contract and Subcontracts | p. 19 |
2.4.3 Records and Filing Systems | p. 20 |
2.5 Conclusion | p. 21 |
Chapter 3. Surety Bonds for Construction Costs | p. 23 |
3.1 Introduction | p. 23 |
3.2 Why Are Bonds Needed? | p. 24 |
3.3 Types of Surely Bonds | p. 24 |
3.3.1 Bid Bonds | p. 24 |
3.3.2 Performance Bonds | p. 25 |
3.3.3 Labor and Materials Payment Bonds | p. 25 |
3.3.4 Combination Performance and Payment Bonds | p. 26 |
3.3.5 Supply Bonds | p. 26 |
3.4 Underwriting Requirements for a Contract Surety Bond | p. 26 |
3.5 The Underwriting Process | p. 26 |
3.6 Underwriting the Contractor | p. 28 |
3.6.1 Ownership | p. 28 |
3.6.2 Organization | p. 29 |
3.6.3 Background and Construction History | p. 30 |
3.6.4 Continuity | p. 31 |
3.6.5 Current Operations | p. 31 |
3.6.6 Financial Condition | p. 33 |
3.6.7 References | p. 37 |
3.7 Specific Job Underwriting | p. 37 |
3.7.1 Job Description | p. 38 |
3.7.2 Job Size | p. 38 |
3.7.3 Work Program | p. 39 |
3.7.4 Contract Terms | p. 39 |
3.7.5 Bond Forms | p. 39 |
3.7.6 Miscellaneous Job Provisions | p. 40 |
3.7.7 Underwriting Conditions | p. 40 |
3.8 Reinsurance | p. 41 |
3.9 Summary | p. 42 |
Chapter 4. Preparing to Be Bonded--Contractors and Subs | p. 43 |
4.1 Reputation/Experience | p. 44 |
4.2 Finances | p. 44 |
4.3 Game Plan/Vision | p. 46 |
4.4 Subcontractors and the Bonding Process | p. 47 |
4.5 Elements of a Contract Surety Bond Submission | p. 49 |
Chapter 5. Insurance Coverages Checklists for the Construction Industry | p. 67 |
Chapter 6. General Liability Insurance | p. 95 |
6.1 Introduction | p. 95 |
6.2 Commercial General Liability | p. 95 |
6.3 Coverages | p. 96 |
6.3.1 Coverage A: Bodily Injury and Properly Damage Liability | p. 97 |
6.3.2 Coverage B: Personal and Advertising Injury Liability | p. 102 |
6.3.3 Coverage C: Medical Payments | p. 103 |
6.4 Additional Contract Provisions | p. 103 |
6.4.1 Section II: Who Is an Insured? | p. 104 |
6.4.2 Section III: Limits of Insurance | p. 105 |
6.4.3 Section IV: Commercial General Liability Conditions | p. 106 |
6.4.4 Section V: Definitions | p. 107 |
6.5 Key Coverage Amendments | p. 109 |
6.6 Limits of Insurance and How They Apply | p. 110 |
6.6.1 Partnership and Joint Ventures | p. 110 |
6.6.2 Personal Injury | p. 110 |
6.6.3 Other Endorsements | p. 110 |
6.6.4 Excess Umbrella Liability | p. 111 |
6.7 Summary | p. 111 |
Chapter 7. Builder's Risk Insurance | p. 113 |
7.1 Introduction | p. 113 |
7.2 Document Specifications Requiring Special Negotiations | p. 117 |
7.2.1 All-Risk Coverage | p. 118 |
7.2.2 Peril Exclusions | p. 121 |
7.3 Conclusion | p. 123 |
Chapter 8. Workers' Compensation | p. 125 |
8.1 History | p. 125 |
8.2 The Workers' Compensation Policy | p. 128 |
8.2.1 Coverage | p. 128 |
8.2.2 Exclusions | p. 129 |
8.2.3 Definitions | p. 130 |
8.2.4 Conditions | p. 130 |
8.2.5 Endorsements | p. 131 |
8.2.6 U.S. Longshore and Harbor Worker's Endorsement (USLandH) | p. 131 |
8.2.7 Jones Act | p. 131 |
8.2.8 Costs | p. 132 |
8.3 Risk Financing Plans | p. 134 |
8.3.1 Guaranteed Cost Plan | p. 134 |
8.3.2 Incurred Loss Retrospectively Rated Plan | p. 136 |
8.3.3 Paid Loss Retrospectively Rated Plan | p. 137 |
8.3.4 Large Deductible Plan | p. 138 |
8.3.5 Captive Insurance Company | p. 139 |
8.3.6 Qualified Self-Insurance Program | p. 141 |
Chapter 9. Workers' Compensation Insurance Cost Control | p. 145 |
9.1 Introduction to Workers' Compensation Insurance | p. 146 |
9.1.1 Safety Is the Key to Cost Control | p. 148 |
9.2 Tips to Reduce Workers' Compensation Costs | p. 148 |
9.2.1 Review Experience Modification Factor (Mod) for Accuracy | p. 149 |
9.2.2 Review Rating Classifications | p. 149 |
9.2.3 Have One Workers' Compensation Policy | p. 150 |
9.2.4 Check Payroll Limitations and Other Mathematical Calculations | p. 151 |
9.2.5 Simulate Calculation of the Experience Mod | p. 151 |
9.2.6 Consider Retrospective-Rated Insurance | p. 151 |
9.2.7 Evaluate State Funds | p. 152 |
9.2.8 Undertake Proper Preemployment Screening, Subject to ADA Rules | p. 153 |
9.2.9 Undertake a Competitive Bid and Compare "Premiums" and Coverage | p. 153 |
9.2.10 As Allowed by Law--Pay Small Medical Bills | p. 154 |
9.2.11 Review Loss-Sensitive Programs | p. 154 |
9.2.12 Confirm That the Insurer Is Assessing Second Injury Funds | p. 154 |
9.2.13 Buy Insurance from an Insurer with a Successful Managed Care Program | p. 155 |
9.2.14 Request Surveillance Checks If Fraud Is Suspected | p. 156 |
9.2.15 Develop Incentive Programs | p. 157 |
9.2.16 Be Active in Claims Management--Keep Track of the Claims | p. 157 |
9.2.17 Get Certificates of Insurance for Subcontractors | p. 158 |
9.2.18 Consider Participation in Wrap-up Insurance Programs | p. 158 |
9.2.19 Large Contractors Need to Evaluate Self-Insurance | p. 159 |
9.3 Reevaluate Safety Programs | p. 159 |
Acknowledgment | p. 159 |
Chapter 10. Environmental Impairment Liability Insurance for the General Contractor | p. 161 |
10.1 Introduction | p. 161 |
10.2 The Risk Management Process | p. 161 |
10.3 Past Environmental Liability | p. 162 |
10.4 Present and Future Environmental Liability | p. 163 |
10.5 Risk Financing | p. 163 |
10.6 Contractor Pollution Liability Insurance Considerations | p. 164 |
10.6.1 Commercial General Liability Insurance | p. 165 |
10.6.2 Pollution Legal Liability Insurance | p. 167 |
10.6.3 Contractor's Pollution Liability Insurance | p. 167 |
10.6.4 Architect's and Engineer's Errors and Omissions Insurance | p. 168 |
10.6.5 Environmental Consultant's EandO Insurance | p. 168 |
10.6.6 Asbestos Abatement Liability | p. 168 |
10.6.7 Asbestos Consultant's EandO Insurance | p. 169 |
10.6.8 Combined Policy Forms | p. 169 |
10.6.9 Commercial Automobile Liability | p. 170 |
10.7 Structuring the Program | p. 170 |
10.7.1 Subsidiary Versus Master Plan Approach | p. 170 |
10.7.2 Blanket Versus Specific Coverage | p. 171 |
10.7.3 Wrap-up Plans | p. 171 |
10.7.4 Determining Coverage Requirements | p. 172 |
10.8 Adverse Legal Climate for Contractors | p. 172 |
10.8.1 Scope of Work | p. 173 |
10.8.2 Standard of Care | p. 174 |
10.8.3 Warranties, Guarantees, and Representations | p. 174 |
10.8.4 Site Information Provided by Client | p. 175 |
10.8.5 Disposal of Contaminated Material | p. 175 |
10.8.6 Indemnification | p. 176 |
10.9 Conclusion | p. 177 |
Chapter 11. Professional Liability Insurance | p. 179 |
11.1 What Is Professional Liability? | p. 179 |
11.2 Design-Build Insurance, Surety, and Risk Management Challenges | p. 179 |
11.2.1 Liabilities and Damages | p. 180 |
11.2.2 Operational Exposures | p. 180 |
11.2.3 Traditional Insurance and Surety Applications | p. 181 |
11.3 Design-Build Insurance Challenges | p. 181 |
11.3.1 Dedicated Project Insurance | p. 183 |
11.3.2 Emerging Insurance Products | p. 184 |
11.3.3 Performance Guarantees and Bonds | p. 184 |
11.4 Design-Build Surety Challenges | p. 184 |
11.4.1 Environmental Surety | p. 185 |
11.4.2 Approach to Surety Underwriters | p. 185 |
11.5 Design-Build Risk Management Issues | p. 186 |
11.6 Conclusion | p. 186 |
Chapter 12. Contractor-Controlled Insurance Programs (CCIPs) | p. 187 |
12.1 What Is a Contractor-Controlled Insurance Program? | p. 187 |
12.2 How a CCIP Works | p. 189 |
Chapter 13. Insurance Administration and Accounting | p. 193 |
13.1 Insurance Administration | p. 193 |
13.1.1 Claims | p. 195 |
13.2 Subcontractors' Insurance Certificates | p. 201 |
13.3 Accounting for Construction Insurance Costs | p. 202 |
13.3.1 Direct Costs | p. 203 |
13.3.2 Indirect Costs | p. 204 |
13.3.3 Overhead Costs | p. 205 |
Chapter 14. Property Casualty Insurance and Risk Management | p. 213 |
14.1 Introduction | p. 213 |
14.2 Importance of Insurance Agents/Brokers and Insurance Companies | p. 217 |
14.3 How to Conduct a Competitive Insurance Placement (Broker Bid) | p. 220 |
14.4 Property/Casualty Outlook for Builders and Contractors | p. 222 |
Chapter 15. Claims Management | p. 225 |
15.1 Purpose | p. 225 |
15.2 Procedures | p. 225 |
15.3 Workers' Compensation | p. 227 |
15.4 Casualty | p. 228 |
15.5 Certificate of Insurance | p. 229 |
15.6 Control Programs | p. 230 |
15.7 Builder's Risk | p. 230 |
15.8 Litigation Management | p. 230 |
15.9 General Claims Procedures | p. 231 |
Chapter 16. Managing Safety for Profit | p. 245 |
16.1 Program Administration | p. 245 |
16.1.1 Corporate Safety and Health Policy/Mission Statement | p. 245 |
16.1.2 Yearly Goals and Objectives | p. 245 |
16.1.3 Commitment by Top Management | p. 245 |
16.1.4 Supervisory Responsibility and Accountability | p. 246 |
16.1.5 The Safety Professional | p. 247 |
16.2 Program Content | p. 247 |
16.2.1 Developing a Safety Action Plan | p. 247 |
16.2.2 Accident Investigation Policy | p. 248 |
16.2.3 Employee Selection and Orientation | p. 249 |
16.2.4 Ongoing Safety Training Program | p. 250 |
16.2.5 Modified Return-to-Work Program | p. 250 |
16.3 Program Assessment | p. 251 |
16.3.1 Detailed Record Keeping and Performance Measurement | p. 251 |
16.3.2 Subcontractor Management | p. 252 |
16.3.3 Work Area Safety Evaluation | p. 257 |
16.3.4 Annual Report to Management | p. 258 |
16.4 Program Support | p. 258 |
16.4.1 MVR Screening | p. 258 |
16.4.2 Substance Abuse Program | p. 258 |
16.4.3 Preemployment Workers' Compensation Screening | p. 258 |
16.5 Employee Commitment or Buy-in | p. 259 |
Chapter 17. Life Insurance and Succession Planning for Contractors | p. 261 |
17.1 The Two Succession Plan Components | p. 261 |
17.2 Integrating Life Insurance into the Succession Plan | p. 264 |
17.3 Business Insurance Planning Techniques | p. 265 |
17.3.1 Keyman Insurance | p. 265 |
17.3.2 Salary Continuation Plan | p. 266 |
17.3.3 Section 162 Bonus Plan | p. 267 |
17.3.4 Deferred Compensation Plan | p. 267 |
17.3.5 Stock Redemption | p. 267 |
17.3.6 Cross-Purchase | p. 268 |
17.3.7 Partial Redemption--Section 303 | p. 268 |
17.3.8 Split-Dollar Plan | p. 269 |
17.3.9 Reverse Split-Dollar | p. 269 |
17.4 The Life Insurance Selection Process | p. 271 |
17.4.1 Considerations in the Selection of Insurance Companies and Products | p. 273 |
17.5 The Acquisition Process | p. 276 |
17.6 Solving the Contractor's Estate Tax Problem with Survivor Life Insurance | p. 276 |
17.7 Summary | p. 278 |
Appendix A. Insurance and Bonding Terminology | p. 279 |
Appendix B. Examples of Insurance Policies | p. 289 |
Appendix C. Examples of Bond Forms | p. 353 |
Appendix D. Financial Statements for Contractors | p. 361 |
Appendix E. Personal Financial Statements | p. 391 |
Index | p. 403 |