Contractors Program Seeks to Fill Market Need

Litigation around the country concerning contractors’ liability for construction defects discovered after operations are completed has made coverage very difficult to come by for specialty trade contractors, but it has created an opportunity for insurers and program administrators.

A new group seeking to meet this need, Construction Insurance Solutions (CIS)—composed of Dayton, Ohio-based Norman-Spencer McKernan Agency Inc. (NSM), Dallas-based RISC Inc. and Arthur J. Gallagher of Louisiana—recently introduced a national program for specialty trade contractors involved in commercial and residential construction.

“An insurance company that all three of us were consultants to or program administrators for came to us with an opportunity to put this together because of their construction defects strategy going forward,” NSM’s Paul Norman said.

Norman and A.J. Gallagher of Louisiana’s Bob Bush have known each other for 20 years and thought that the “A++” XV Best-rated carrier insuring the program was a good fit.

In terms of exclusions the program is “not nearly as broad as what some of the other carriers are doing,” according to Bush. “By far the majority of the accounts we’ve written have not had a residential exclusion to them.”

“We will not have any restrictive endorsement if the contractor is not considered a structural contractor,” Norman said. “That’s the key here. If it’s a structural contractor, then we add 10 percent on what we define as residential, but that’s structural operations specific.”

Features of the program include: a general liability minimum of $2,500 with a property damage deductible; primary limits of $1 million/$2 million for product/completed operations; and annual aggregates with a $5,000 minimum policy premium, as well as commercial umbrella limits up to $25 million.

Norman and Bush agreed that with three different territorial managers selling the same program, their shared expertise in both construction risks and state-specific peculiarities to bear would help meet the existing market demands.

“Because of what standard carriers and E&S carriers are doing with endorsements, we think every state provides us with opportunities,” Norman said. “There are some states that present more difficulties than others because of ongoing construction defects litigation. Our opportunity is because of what the market is doing or has done in limiting coverage for these contractors countrywide.”