Protecting your client's idle construction sites

An empty construction site

RSA Insurance is offering advice to help brokers advise their clients who’ve had to shut down construction sites as part of the effort to contain COVID-19. Nearly 80% of construction projects across Canada have been shut down as of this week.

“The question becomes, how do you keep your insurance coverage going through this vacancy period,” Steve Schmelzle, national practice leader at RSA, told Thompson’s. It’s important for sites to take mitigation efforts that will both keep the public safe and provide the due diligence for the insurer, he said.

Brokers should speak with their clients and ask questions specific to the kind of construction project, to ensure that their coverage is tailored to their needs. “At RSA we want to ensure that the capital that is being deployed on these risks is being safely adhered to,” Mr. Schmelzle said.

In usual circumstances, if a project is shut down for a specific period of time — often 30 days — the insurance coverage becomes void due to a material change of risk. With so many projects currently shut down, RSA is trying to ensure that closed sites will continue to have coverage, he said.

Along with ensuring claims are covered, many large projects have contracts that require insurance coverage, so if the coverage lapses, the client would be in contravention of the contract. RSA wants brokers to know that they’ll work with clients, but that the clients need to keep the insurer informed about the status of the project and let them know what risk mitigation measures are in place, said Mr. Schmelzle.

“The key message is advising your insurance company of what steps or measures the insured has done to protect the project,” he said. Public safety is also a major concern with empty construction sites, he added, and these steps will keep people safe as well as keep the insurance coverage valid. “What we expect from a $100m bridge project is going to be different than from a $3m commercial fit-up,” he said.

RSA isn’t giving a blanket extension on how long sites can remain vacant and retain their coverage because it wants brokers to stay in regular communication with each client, he said. “We’re keeping a period in there that forces the broker to contact the client to say, your periods coming up, what’s the status of your project, are you still keeping the risk mitigation measures in place, has anything changed?”

You can take the first steps in ensuring your client is protected by sharing our tip sheet for protecting idle construction sites or by reaching out to our Construction Centre of Excellence for more information.

Steve Schmelzle, Construction & Contracting COE Leader

This article originally appeared in Thompson's Daily Insurance News Service, April 9, 2020.

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