5 Most Common Claims Against Contractors and How to Avoid Them

Accidents are expensive and construction contracting has the second-highest bankruptcy rate of any private business — which makes sense considering all that can go wrong in a general contractor’s day-to-day business operations. As the one responsible for the company, and what employees and subcontractors do, you run the risk of catastrophic financial loss. Read on to learn how to identify and prepare for some of the most common claims against general contractors.

1. Damage to Third-Party Property: A dropped hammer cracks the tile in the bathroom, your ladder hits a subcontractor's truck and dents it, paint gets on a couch, an oily rag is left in a garage and catches fire. Working out of other people’s homes and buildings means that you are liable for whatever accidents may occur. Before work starts, identify potential hazards and manage them — cover surfaces to avoid paint and debris accumulating and move fragile items out of the area in which you are working. Further, implement protocols that encourage safety among your employees.
2. Workplace Injury: Whether using a ladder or power tools, it is not uncommon for an employee to get hurt on the job. To help avoid employee injury, make sure your supplies are in good working conditions and employees know how to use tools appropriately. Give your people regular breaks so that they are able to be alert and focused on the job. And finally, wear the proper protective gear and follow set safety protocol.
3. Construction Delays: In the age of the coronavirus, delays are practically commonplace. Whether because of severe weather, defective plans, or tool theft, disgruntled clients may opt to sue if you are unable to complete a project on time. Prevent delays by being realistic about timelines, choosing subcontractors carefully, and creating a carefully planned contract that may include delay clauses.
4. Stolen Equipment: A 2016 report from the National Equipment Register (NER) and the National Insurance Crime Bureau (NICB), estimates that the annual cost of stolen equipment is somewhere between $300 million and $1 billion. Theft not only forces you to replace tools but also halts projects until you can secure the replacement. Try not to leave equipment on job sites overnight, and secure them anytime they are left unattended, including on your lunch break. On large equipment, consider purchasing a tracker so that it can be more easily found if stolen. Make sure too to keep a regular inventory of equipment so that you know what is missing and for how long.
5. Water Damage: Whether resulting from a roof repair or replacement or accidentally drilling into a pipe, water damage claims are widespread and expensive. To reduce the risk of this kind of claim, train employees on likely causes of water damage. Inspect your equipment to ensure it is in good working order, and know where pipes are before drilling or cutting anything. Additionally, be weary of exposed pipes and the risk of frozen and/or burst pipes in the colder months. In the event that water damage occurs, respond swiftly by cleaning up the damage and turning off the water.

Even with insurance, construction claims take time and money to negotiate and can derail a business. While the best claim is ultimately one that is avoided, nothing is foolproof. Behind your risk mitigation efforts should be strong insurance coverage — including general liability, commercial auto, and worker’s compensation at a minimum — which we can help tailor-make for you.