Market update – Construction Liability
Mid-market contractors have generally had premium adjustments over the course of 2019 and 2020, and we expect renewal outcomes to be more stable in 2021, though insurers are likely to continue to seek moderate increases.
Smaller contractors are likely to see more significant increases in premiums and larger deductibles applied. The insurance market has reviewed its portfolio and has found that smaller contractors can be more exposed to large claims- particularly where they don’t have access to OH&S resources that may exist in larger firms.
Insurers now tend to request, and comprehensively review policyholders’ contract documents. In doing so, they are scrutinising detrimental contracting provisions, both up and down stream. Policyholders with poor contract administration processes and those who provide ‘no-fault’ indemnities or otherwise prejudice defence/recovery of claims, are being penalised. It appears that insurers are moving away from offering blanket contractual liability cover.
Trades, such as plumbers, remain hard to place in the current market. There has been increased frequency in water damage claims, particularly in high rise residential developments. Many of these claims are from failed crimping or product defects.
Policyholders who have experienced losses will be “claims rated” and should expect premium / excess uplifts. There are less ‘alternative’ insurers who will quote on risks that they do not hold and who have experienced previous claims. It will be up to policyholders in this category to negotiate increased excess structures to mitigate against significant premium uplifts.
Clients in this sector should ensure they are reviewing the contracts they intend to execute and seeking their brokers input to ensure they are compliant. Particular attention should be paid to the inclusion of principals as “joint named insureds” and exclusion of proportionate liability or blanket indemnities which could see a claim rejected by an insurer. Contracts with principals are generally becoming more onerous and need to be more heavily negotiated prior to acceptance.