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Contractors cautioned on environmental, defect risks


Construction contractors and subcontractors must be aware of increasing environmental risks, particularly related to asbestos claims, and costly construction defect claims. 

William Noonan, Atlanta-based head of construction, large and complex accounts, and executive vice president of North America Construction for Willis Towers Watson P.L.C. in Atlanta, warned about environmental risks such as asbestos, mold, soil, groundwater and lead during a webinar hosted by the National Institute for Occupational Safety and Health’s Office of Construction Safety and Health on Thursday. 

“There’s obviously insurance in the marketplace to deal with all of these, but I want to focus on making sure insurance isn’t your only avenue of protecting yourself,” he said. “These are issues that need to be looked at early on.”

Asbestos claims are on the rise in recent years, which may surprise people considering the use of asbestos has stopped or diminished in building construction, Mr. Noonan said. 

“They’re on the rise because of all the interior fit out and renovation projects going on across the country,” he said. “Every time you cut into a wall or cut into the exterior of a building or pull up floor tile … there’s a chance you’re going to run into asbestos.” 

Construction defect litigation are the highest exposure claims for construction companies, Mr. Noonan said. 

“I have the greatest respect for the underwriters and claims people, but through their attorneys, I find, that every day (insurers) are looking for more ways to deny coverage or greatly limit coverage available to contractors,” he said. “My statement is not anti-insurance company. It’s just a factual read of what’s going on in litigation across the 50 states.”

“We have to build better and we have to build smarter — there’s no doubt about that,” Mr. Noonan continued. “When you look at the costs of construction defect claims, not only in the payments going out, but in renewals for construction companies and subcontractors and their insurance premiums, better and smarter is the way to go.” 

Residential buildings such as high-rise condos “seem to be causing the most pain in the insurance industry right now regarding construction defect claims,” he said. 

“Quality assurance and quality control have to be a part of the project culture,” Mr. Noonan said. “I see mock-up simulations are becoming standard on many projects.”

Workers comp implications

On the workers comp side, there are several key issues that contractors and subcontractors need to be aware of, he said. For example, most states put the onus on general contractors to provide workers comp benefits to the injured employees of uninsured subcontractors. In addition, injured workers employed by subcontractors generally cannot sue their employers under exclusive remedy provisions, but may be able to sue third parties such as general contractors, construction managers or project owners whose negligence contributed to their injuries. 

Many general contractors and owners have policies that they will not do business with subcontractors that have experience modification ratings greater than 1.00, which indicates loss experience that is worse than expected, or they require these subcontractors to have mitigation or safety plans, Mr. Noonan said. 

“In the world of subcontractor pre-qualification, this is becoming an issue more and more,” he said.

“Risk management 101” for contractors and subcontractors means including safety requirements such as fall protection for employees working six feet and higher in the business contract “so that everyone knows that’s what’s expected,” Mr. Noonan said.