November 26, 2014 in Uncategorized
It is amazing how the government will say that the cost of living has not increased substantially. This is because they do not take into account three of the most expensive consumer products when calculating the rates: food, gas and non-core CPI measures. Instead of calculating the CPI by including home prices, housing costs are calculated by rental rates. For sure, it is complicated. But complicated or not, all contractors know that bids must be low in order to secure contracts and prices for goods and services are increasing. This is quite evident in the cost of fuel which can fluctuate from one week to the next depending on turmoil overseas and natural disasters here at home. A contractor can make an educated bid today but costs may increase next week and the whole project can be in the red.
Pennsylvania has chosen to give back to contractors by allowing insurance dividends to be paid on contractors’ policies. Some states have already had this program in place. It is not unusual to see a dividend of 16% and this is real money that the contractor can add back to the bottom line.
What this also means is that an excavating contractor can actually get the insurance he needs rather than what he can afford at one given time. We all know that general liability insurance is mandatory across the board. Some GC’s and property owners require a minimum amount of liability and the excavating contractor who has won the bid has just so much time to provide proof of insurance. If there is an excavating contractor who has jobs going simultaneously, it is advantageous to have a policy that covers all new work as it comes in – rather than having to write one policy for each job.
There are coverages that an excavating contractor may not know is available or that his insurance agent has not been proactive in describing. PALICA has a link on their website http://www.pennsylvanialica.com/which shows the benefits of becoming a member in addition to the dividend program and lower costs on insurance. It also give you a link to an agent with United Fire Group which underwrites every type of insurance for the excavating contractor.
Samples of the additional coverages that are available include:
Business Owner’s Insurance: For the excavating contractor this combines property, liability and crime protection. It includes a variety of enhancements that offer protection for many aspects of your business such as data processing, security breach and identity theft services, employee dishonesty, money and securities. Equipment breakdown covers the cost to repair or replace mechanical, electrical or pressure systems that suffer a breakdown.
Contractor’s Errors and Omissions: Customers depend on their jobs being completed on time and on budget. But, no matter how careful you are, mistakes can happen. You need the coverage to protect your business from losses caused by defective materials or faulty workmanship. These types of losses can have a devastating impact on your production, profitability and reputation.
The (E&O) offers unique coverage to protect you against four important coverage exclusions in a standard general liability policy: Product Exclusion, Work Exclusion, Professional Liability and Product Recall Exclusion.
The term Excavating Contractor is a big, important term. The company deals with big jobs, big equipment, and the potential for just as big a mistake or accident as the giant companies. However, many excavating contractors are what you might consider a ‘one man band.’ This does not mean that one man does all the work – far from it! The small business owner will find a temporary staff of talented workers, probably leases all the equipment needed for a specific job and maybe even outsources all human resource functions. He may be a sole proprietor or LLC.
Just because you run a small business does not mean you do not need the same types and limits of insurance as the giants. This new program has a specialized plan just for this personal called the Small Contractor Program. If you are a member of PALICA, you will see a link to the program on their website.
Our new small contractor program is specifically designed for contractors who want broad liability coverage at a competitive price. It also offers important optional coverages to meet the unique needs of the excavating contractor.
Every business owner knows he needs general liability insurance. All contractors and property owners will want proof of insurance prior to the beginning of any excavating. In addition to general liability the contractor can have a Care Custody and Control Property Damage addition written into the policy. This added protection protects against damage to property in your possession for which you are legally liable. Claims are covered and are paid under this clause.
A Contractor’s Property Plus addition is something to really consider. It provides increased coverage for fire department service charge, pollution cleanup, newly acquired property, valuable papers, signs, outdoor property, accounts receivable, fire extinguisher recharge, data processing, and lock replacement.
One of the most valuable customized coverages for the small contractor is Equipment Breakdown coverage. This is not an insurance policy like auto insurance that covers accidents. You can enhance your policy to cover the cost to repair or replace mechanical, electrical or pressure systems that suffer a breakdown. Some costs your business may accrue due to a piece of equipment breaking down are also covered. These costs include coverage for business income, data restoration, service interruption, demolition and increased costs of construction, refrigerant contamination and perishable goods.
If the small contractor does not use his own vehicle in the day-to-day operation of the company, he can get coverage for Hired and Non-Owned Vehicles. This will cover any borrowed vehicles and even those that have been hired.
PALICA assists members with important information so that the small business owner can make an educated decision. Membership is not exclusive to the large companies only. Excavating contractors have three levels of membership in Pennsylvania and each has its own yearly dues. There is an Active Contractor Member with membership dates of November 1 through October 31 of each year. There is a less costly membership for a Company Associate Member. This is reserved for those who sell materials, services and equipment to contract members. And there is also a Supporting Member for those who are interested in the field. This membership has no voting privileges.
Most of the Excavating Contractors you know probably work well away from the shore or ocean. Why would they need something called Inland Marine insurance? The name of the policy may be a little strange but the coverage is really necessary. Now that Pennsylvania has agreed to allow insurance companies to pay dividends on premiums on coverage through LICA, this much needed insurance can become a reality.
The basic inland marine policy covers property and equipment that isn’t covered by another source of insurance. For instance, a contractor may have a construction trailer on site. A storm may come through and damage the structure but it may be covered under a different policy. If it is not, the inland marine clause would cover it.
Inland marine will also cover any computer equipment, software and data that may have been damaged in the construction trailer. This insurance also covers materials, supplies, equipment, machinery and fixtures that are owned by the contractor, or for which he is legally liable, that are to be installed while the property is at a construction site, in transit, or at a temporary storage site. This can be a tremendous relief for owners who must transport heavy machinery from one location to another, or who need to leave the machinery on-site for a lengthy period of time while the project is underway.
There is also the option of adding personalized coverage. This policy is called a “Contractor’s Equipment Program”. This coverage is for the contractor’s equipment, as well as equipment in his care, custody and control. It applies to all equipment, whether owned, rented or borrowed, rather than only equipment listed in the policy. Contractors Equipment Program even includes rental reimbursement coverage, which pays part of the cost of renting substitute equipment when covered property has been put out of service by a covered loss, subject to policy conditions. In addition, it includes coverage extensions for debris removal; equipment leased, rented or loaned to others; and construction trailers
Members of PALICA can have this insurance written this brand new program. If a contractor is not a member, a look at the website is a good idea. You will be able to see all the features and benefits at http://www.pennsylvanialica.com/.
LICA members have access to the LICA Contractor Safety Management Plan. The purpose of this comprehensive safety manual is to provide LICA members with recommended safe operating procedures and to outline techniques that are essential for the protection of the industry’s greatest asset “its people and equipment.” It is designed to be your individual company safety program or supplement to your existing program. It contains toolbox talks, equipment and jobsite inspection forms and much more. For your convenience a complete CD of the manual is included. This manual is worth thousands of dollars and is free to every contractor member.
For members who have college age children, LICA also has a scholarship program for active LICA Contractor members. The National LICA Education Committee awards several annual scholarships that are available to LICA members, spouses, children and grandchildren.
With the state of Pennsylvania now allowing excavating contractors to earn dividends on insurance premiums, some of the more expensive insurance options are more attainable. Business owners with large equipment can experience large headaches when machinery breaks down or some other disaster happens that has a negative effect on completing a contract on time. Standard general liability insurance does not cover the extenuating circumstances; however, this new program can have Contractor Error s and Omissions included in your policy.
Shortened to “E&O,” this specific coverage will protect the business owner against claims of faulty workmanship and materials, and against any resulting loss that can occur. These events would take place after the job was completed. Standard general liability excludes damage to your final product after the customer has signed off on the work.
Another area that is very important is that an excavating contractor can dig a ditch, grade a road or level a site for construction. The job is completed perfectly and without error. The next contractor in line may damage the original work through an error on his part. E&O will protect the excavator against damage to him after his portion of the job or project has been completed.
Then there is the issue of Professional Liability. Yes, your general liability will cover you when you are legally liable for injury or property damage to a third party. However, E&O will protect an excavating contractor when he is legally responsible to pay compensatory damages as the result of error, omission or negligent act while acting in the capacity of a contractor.
Members of the Pennsylvania Chapter of the Land Improvement Contractors of America (PALICA) can have E&O insurance written through this brand new program. This protection does qualify for the new insurance dividends incentive. Some states that have had this incentive in place for some time are seeing payments as high as 16% of the original insurance premium.
There are many other advantages of being a member of PALICA. One benefit is that LICA/PA LICA has a comprehensive safety program and works to provide members with updated information on complying with OSHA regulations. In addition, the organization works to keep members abreast of the latest laws and regulations affecting their businesses, and works to influence legislation for the benefit of business. LICA/PA LICA members gain useful advice from fellow contractors, establish new business relationships, and meet industry experts, equipment and material suppliers, as well as make new friendships.
While the insurance dividends help save members money, LICA also has a national “Petrocon” Program. The Petrocon program is designed to reduce operating costs and expenses for LICA members by reducing prices from 10-40% for commodities such as: lubricants and greases, antifreeze, tires, electric expense (in deregulated states only), and even wireless cellular expense. The program is designed for all sized companies; from the one-man operation to the very large company. This program is available to both the contractor and associate member providing they are a member in good