The national general liability marketplace for contractors, builders, and developers continues to evolve at a rapid rate. When the economic rebound for many parts of the country began in 2011, the construction industry also started to rebound. Today, we’re seeing the aftermath of construction defect and other construction-related claims stemming from those early projects. The results are not pretty, and insurance companies continue to pay out landmark settlements causing them to re-think their approach to insuring construction, or to stop writing coverage altogether. Global pandemics, natural disasters—including wildfires, hurricanes, and tornados—also put pressure on these compiles (and reinsurance) to re-think their insurance portfolio strategies (yes, even wildfires have an effect on general liability for contractors).
Utah remains very favorable for contractors and is generally builder-friendly for a variety of reasons. We’ve seen this first hand with many carriers maintaining consistent appetites, minimal rate increases, and a commitment to delivering superior policies and positive claims experiences. However, Western litigation in neighboring states is putting pressures on these markets to make changes, and Utah bears the burden in many cases. As such, it’s important that contractors and builders understand how the national/global marketplace affects what’s available to them and consider a variety of insurance placement strategies vs simply “buying an annual policy.”
Annual General Liability Policies
As stated, we’ve seen consistent approaches from various carriers for a number of years, and we’re happy these markets exist. However, we’re starting to see signs of policy form verbiage changes that could be concerning to many, including Sub-Contractor Work Exclusions, Earth Movement/Subsidence Exclusions, and Continuous/Progressive Loss Exclusions. We’re also seeing carriers start to limit a builder or trade’s ability to have coverage for single family homes above a certain unit count and/or outright exclude multifamily units (townhomes, condos, and even for-rent apartments in some cases). As such, it’s important to consider a carrier that is broad in nature with their coverages, but it’s also important to consider alternatives options as well.
Project Specific Policies and/or WRAPS
I’ve talked before about the benefits of these in prior posts (The Need for WRAP Coverage and Risk Management for Contractors), but in essence, a project specific policy covers a developer/builder for a specific project and carries coverage under that policy through the statute of repose. A WRAP does the same but extends the coverage to all subcontractors (among other benefits). We’re seeing commercial and single family/multifamily developers alike increasingly consider project specific or wrap policies as the traditional general liability programs continue to put restrictions on projects. Considering these options is also a good thing because:
- Your liability is carved out on a separate policy, and claims arising from the project are less likely to affect your general liability insurance program (insure your insurability!).
- You maintain quality coverage for yourself but also likely everyone on the project if you purchase a wrap.
- Many of these programs integrate risk management consultative services that ultimately help build a better project overall.
Yes, many projects specific and wrap programs are also getting hit hard with claims across the country, causing them to shut down or drastically increase their rates. However, many lessons have been learned along the way, and we’re starting to see a rise in new carrier programs, each with a new-look approach to insuring projects. The results are more options for Utah builders/developers, and as such, better coverages often excluded on the general liability policy for them and their subs alike. It will be interesting to see how these new carriers evolve from here in their offerings, but now is the time to introduce yourselves to these markets and understand what these options look like for your operation moving forward. I’m not saying you must abandon an annual general liability program as your only insurance strategy, but you should at least understand what these alternatives look like so you can be prepared for other changes that may come in the market. If you don’t, you may simply be caught blindsided when your carrier changes its position on Utah as a result of adverse activity elsewhere.
