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Insurance issues following the global health crisis

On Behalf of | Jun 6, 2023 | Construction Law |

The global health crisis caused adverse economic consequences nationwide, and the construction industry was no exception to its ill effects. Some 70% of construction companies took losses during the crisis, and though the return to an economy with pent-up demand presents great opportunity, there are challenges to confront.

Insurance implications

There’s been an overweening need to re-align insurance coverage with the much altered, post-crisis environment.

Basically, the cost of doing business has skyrocketed. Labor shortages have driven up wages for workers. This, in turn, drives up the cost of workers’ compensation insurance, which all construction businesses with employees must carry.

Supply chain issues have driven up the costs of materials across the board. Unfortunately, prior to the global health crisis, it was not standard practice for contractors to include an escalation clause in their contracts to cover cost increases, so contractors are left holding the bag. They can either absorb the climbing costs, or they must renegotiate their contracts.

Then there’s the shift in technology usage. Since 2020 there’s been an accelerated move to video conferencing, online messaging, online project management tools and digital payment processing.

With this shift, construction companies have increased exposure to cyber crime which can include phishing scams, data breaches and ransomware raids. These are among the new industry risks to mitigate. Cyber liability insurance is a must to carry.

Rewriting insurance policies to adjust for delays in project completion is another development. Hurricanes and tornadoes Florida knew how to deal with, but government shutdowns? Since much of the coverage contractors carry is time bound, allowances are needed to manage the disruptions a global health crisis can cause.

It’s a much-changed landscape for the construction industry post-crisis. Industry-wide initiatives will be needed to confront the challenges posed by these spiraling insurance costs.

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