Construction insurance coverage can get hung up on environmental concerns – and although it can be difficult to underwrite, it can prove very lucrative for brokers.
Contractors and subcontractors are susceptible to having their coverage denied, especially in property policies, which can be a thorn in the side for those in the construction industry.
“In my experience, claims for indemnity under property and pollution policies can be more problematic than defense coverage under liability and professional liability policies,” David Miachika, a partner with Borden Ladner Gervais LLP, said at a recent BUILDEX Vancouver conference. “That is because the threshold to establish defense coverage is lower than for indemnity coverage.”
But environmental concerns shouldn’t be viewed as an obstacle, says Anthony Saunders, a broker and risk transfer and environmental insurance specialist with EnviroSure.
“I find that as soon environmental insurance is raised in most discussions, and without even costing the insurance, the common response is, ‘Oh no, that’s just too expensive,’” said Saunders. “The cost of environmental insurance is not the stumbling block. It’s the cost of environmental security – the risk management procedures that need to be deployed to meet the ‘material’ compliance requirements of the insurer.”
The diversification within the construction industry itself can pose a problem too, said Ron Dekanich, president of Network Bonding and Insurance Services in Vancouver, B.C.
“It’s a little more difficult in the construction market because you get such diversification in the types of construction, depending on whether it’s heavy construction, commercial instruction, residential construction, infrastructure work, and so on,” said Dekanich. “As brokers, it’s up to us to really try and find a suitable market that has the capacity and limits to handle small, medium and large contracts for that contractor.”
And environmental risk is a hard sell for insurers, Dekanich points out.
“I think sometimes on the environmental side, certainly for bridge construction, it’s tougher,” said Dekanich. “I think you have to do a lot more homework in order to talk an insurer into taking (on an environmental risk of) that size.” (continued.)
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Although tough, it shouldn’t be seen as a deterrent – but an opportunity to provide the expertise that brokers bring to insurance, said Saunders.
“Through correct insurance, we can educate our community and environmental advisers of the importance to respect the laws governing the protection and sustainability of our environment, simply by issuing policies that will respond to those laws,” said Saunders. “Insurance advisers at all levels have a very important role to play. It is essential for the profession to become educated about environmental risks associated with the many and varied professions that insurance brokers come across.
“The intrinsic values of insurance can be championed effectively by insurance brokers who have arguably the greatest significance in the chain of true corporate social responsibility. The ability to address environmental risk, no matter how insignificant it may appear to be, is the intrinsic role that insurance brokers must learn to play if we are to take up the ranks as contributors to enhancing environmental security.”
