Navigating Construction Risks: How to Protect Your Project
Do you worry that your building under construction may catch fire? Or be damaged by a Saskatchewan windstorm? Does the thought of stolen tools or a contractor walking away mid-job keep you up at night? Building takes a lot of moving pieces, and it only takes one missing link to set your project back weeks or months.
Let’s look at the six most common construction risks, what they actually look like in real life, and how you can handle them.
Table of Contents
Common construction risks to protect your project against:
- 🧰
Damage or theft to equipment and tools - 🌪️
Natural weather disasters - 💼
Contractor default - ⚖️
3rd party losses & contract liability - ⚠️
Faulty workmanship - 📋
Professional liability
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HWI
1. Damage or Theft to Equipment and Tools
Unsecured construction sites are prime targets for thieves looking for expensive tools, electronics, and heavy machinery. Valuable gear can also be ruined by site accidents or fires.
Example: Over the weekend, someone cuts through your perimeter fence and steals $15,000 worth of specialty hand tools and copper piping from your locked storage trailer.
The Solution: Secure your site with overnight security cameras and high-visibility lighting. To protect your bottom line, carry tool and equipment insurance so you can replace what was lost without paying entirely out of pocket.
2. Natural Weather Disasters
Saskatchewan weather is famously unpredictable. High winds, heavy plow winds, sudden hailstorms, or localized flooding can quickly pull down framing or ruin materials that aren’t closed in yet.
Example: A severe summer plow wind tears through the region, knocking over the exposed, unbraced wood framing of a new commercial building overnight.
The Solution: Create strict bad-weather prep steps for your crew, such as bracing unfinished walls and tarping raw materials every evening. Back this up with Course of Construction (Builders Risk) insurance, which helps pay to rebuild structures damaged by weather during development.
3. Contractor Default
Sometimes, a subcontractor goes out of business, runs out of money, or simply stops showing up halfway through their contract. This leaves you scrambling to find a replacement, often at a much higher price.
Example: Your electrical subcontractor abruptly declares bankruptcy and leaves the project with only 30% of the wiring finished, delaying every other trade on site.
The Solution: Use performance bonds and labour and material bonds (types of surety bonding). These bonds act as a financial guarantee that the work will get finished even if the original contractor defaults.
4. 3rd Party Losses & Contract Liability
When you run an active building site, you are legally responsible for the safety of people passing by or visiting. If your project causes injury to an outsider or accidentally damages neighbouring properties, you could face massive legal costs.
Example: A delivery driver walks onto your site to drop off paperwork, trips over a stray piece of rebar, breaks their ankle, and sues your company for medical bills and lost wages.
The Solution: Keep a clean, highly organized site with clear signage keeping the public out. Protect yourself financially by holding a solid Commercial General Liability (CGL) or wrap-up liability policy to cover legal defence and settlement costs.
5. Faulty Workmanship
This happens when physical construction work is done incorrectly, failing to follow the building plans or local safety codes. Fixing these mistakes usually requires tearing out completed work and starting over.
Example: A framing crew incorrectly installs the structural load-bearing trusses on a roof, meaning the entire roof assembly has to be safely taken down and rebuilt from scratch.
The Solution: Make sure your contracts explicitly state that sub-trades are responsible for repairing their own physical mistakes, and verify they carry the right coverage before they set foot on site.
6. Professional Liability
Unlike regular physical errors, professional liability stems from mistakes in thinking, advice, or design, such as errors made by engineers, architects, or project managers. This includes bad layouts, incorrect calculations, or poor consulting advice that ends up causing project delays or extra costs.
Example: An engineer makes a math error on the foundation blueprints. The mistake isn’t caught until after the concrete is poured, requiring a complete redesign and an expensive retrofit to make the building safe.
The Solution: Require all design professionals to present proof of Errors & Omissions (E&O) insurance before work begins. If your own team does in-house design or project management, ensure you carry your own Contractor’s Professional Liability coverage.
Pro Tip: Risk management comes down to four choices: avoiding it (walking away if the risk is too high), reducing it (using safety steps), accepting it (taking on minor risks with a backup fund), or transferring it. Insurance is the most reliable way to transfer risk away from your balance sheet.
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Contact our team for a surety bond quote or to discuss your coverage needs.
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Last updated:
Posted in Business on July 21, 2022 by Hope Prost
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