Construction accidents happen all the time. Accidents involving worker injuries or damage to property can shut down a job site and cause significant losses. Contractors should be diligent and aggressive in examining all of the available options for recovery under their different insurance policies and bonds. This article will provide a refresher on some basic tips to help policyholders improve claims practices with respect to construction accidents.
1. Identify relevant insurance policies:
Identifying what policies exist that might cover the loss can sometimes be easier said than done. Construction accidents come in many different forms and can involve many different parties who suffer various types of losses. The general contractor, owner, subcontractors, and vendors could all be involved or affected in some way. Each of these parties has its own insurance coverage and will have promised each other various forms of risk transfer through those policies and through their contracts.
Depending upon the facts surrounding the accident, there may be other parties who the general contractor assumed the responsibility of securing additional insured coverage for. At the outset of a claim, the general contractor should be evaluating its own policies for coverage, but it should also be reviewing the additional insured coverage available from its subcontractors for itself and other interested parties.
While general liability policies will likely be the main target, the general contractor needs to investigate every insurance policy that could potentially be involved and make sure the proper claims are made. This may include professional coverages, auto coverages, and even first-party coverages in certain instances.
2. Give notice early and often:
Each claim under each policy will likely be subject to different notice and reporting requirements, which should be examined and followed as soon as possible. At this point, a contractor should not spend time trying to determine whether each claim is going to ultimately be successful. Because there could be a timing issue with the notice requirements, notice should be quickly provided to all policies identified as potentially implicated. The timing of the claim submission can be crucial, especially in certain jurisdictions, and it can be highly detrimental to wait to give notice because the contractor is still investigating or evaluating the potential claim.
3. Have the right team in place:
Depending upon the type of accident and the extent of the damages, doing everything correctly may require more than just an in-house risk manager. These matters can become extensive and complex. Contractors should consider involving additional people in their claim response team, including brokers, adjusters, coverage lawyers, and industry experts.
Having the right insurance recovery team in place will ensure that every opportunity for recovery is pursued correctly and fully. The extra expense in utilizing a comprehensive team will ensure that the insurers get a carefully orchestrated presentation of the claim and a consistent message across all points of contact. It will also help to ensure that the contractor’s position is consistent from the outset of the claim, in case the claim ultimately becomes disputed and/or litigated in the future.
4. Evaluate available coverage:
Once the insurer has been notified, you can expect that it will start evaluating the available facts and putting together a coverage position. You should do the same. A common mistake we see contractors make is to submit the claim and then sit and wait until the insurer sends a coverage position. This is wasted time.
Where notice was given promptly, the contractor is likely still going to be learning about the claim at this stage. It should also be evaluating the available policies to start identifying possible coverage issues where the insurers may contest coverage. These early stages of the claim are the perfect opportunity to issue spot the available coverages and get prepared in case the insurer’s response is not as favorable as it should be.
Coverage counsel can begin putting together a strategic plan that synthesizes all of the dynamic aspects of the situation. This might include considerations such as (1) whether there are any issues in a policy’s triggering language, (2) what is the priority of coverage among the different potentially applicable policies, (3) whether contracts exist to sufficiently trigger blanket additional insured forms, or (4) whether there are going to be losses beyond basic bodily injury or property damage and how those might be covered. Answering questions like these can help the contractor identify which policies are the best ones to target and in what order of priority.
5. Be aggressive on setting a drop dead date for resolution of all claims:
If left to their own devices, these types of claims can take on a life of their own and consume an inordinate amount of time, energy, and expense. Setting an aggressive time table to have the various claims resolved can be productive.
Explaining to assigned adjusters why a specific resolution date is necessary will help your cause. Make sure they understand that it’s not just an arbitrary date, but there are valid reasons to have the claims resolved by a drop dead date. It is ok to be assertive as long as everyone is polite and professional.
Coverage counsel and your brokers are great resources at this stage. If the insurer is represented but the claim has not progressed to litigation, counsel to counsel calls can be effective to push the claim along. If unrepresented, counsel can press the assigned adjuster to move the claim along. At the same time, the contractor’s broker can leverage its underwriting contacts and use its book of business with the insurer as a tool to leverage movement on the claim.
6. Document everything:
One of the greatest fears of an adjuster is to be at the center of a well-documented bad faith claim. Everything that happens and everything that is said and promised during the life of the claim should be documented. Keeping an exhaustive, detailed record of what is going on (or not going on) can motivate an adjuster to move faster, especially if they know a record is being created for use in a potential bad faith claim. If the claim ultimately leads to litigation, being able to sync the contractor’s records of how the claim was handled with the claims handler’s own notes in the claims file can be a very compelling way to create leverage in the case. Where conversations happen over the phone, take notes of the call and, ideally, send follow up confirmation emails of what transpired on the call.
Insurers move at their own pace, so it is the contractor’s job to provide them with the incentive to treat the claim as a priority. You should strive to make it as easy as possible for them, all the while making sure they know that you are creating a comprehensive record of what occurs. If a bad faith claim is necessary, they know that you will be bringing a clear record with you.
7. Don’t forget to ask for partial payments:
If there is a situation where all parties agree there is coverage for at least a part of the claim value, many insurance companies will attempt to hold onto that amount until the entire claim is resolved. This allows the carrier to hold onto their money and earn from it as long as possible.
If everyone agrees the contractor is entitled to coverage for a certain portion of a claim, it should demand a partial payment at that point. This can put much needed liquidity into accounts and help the project to move forward.
There can also be a strategic element to utilizing partial payment demands. At a time when other aspects of the claim are being disputed, an unpaid partial payment of an undisputed amount of the claim can be a strong leverage point to help coax movement on the disputed component. Depending on the jurisdiction, insurers can be subject to strict payment timelines where amounts are undisputed. If the insurer is pushing those timelines, you may be able to utilize that as leverage.
8. Don’t forget about statutes of limitations and contractual limitations periods:
Sometimes contractors get so far into the weeds arguing their various claims that they lose sight of the time limitations set forth in the insurance policies as to when lawsuits have to be filed. Contractual time limits for filing suit can be different from your state’s statute of limitations for a particular type of claim.
Never rely on the fact that you are currently negotiating your claim seemingly in good faith with the insurance company. Time and again insureds have lost out on coverage they were entitled to because they were negotiating their claims with their insurers when the contractual limitations period passed. Judges have generally not been receptive to the “but we were negotiating in good faith” defense and will likely not accept that as an excuse for missing the applicable limitations deadline. At the outset, have your claims coverage counsel review all of the various contractual time frames and statutes of limitations and determine how they work together, in light of applicable jurisdictional case law. Make sure to input them into a calendaring system so they will not be missed. If the insurer is really negotiating in good faith, it should be open to a tolling agreement to postpone the limitations period while negotiations continue.
When all else fails, sometimes claims just have to be put into litigation to get the result you want. However, not all litigation is created equal. Sometimes, the nature of the parties’ positions will force the claim down a long and heavily contested road before any progress is made. Other times, a little bit of discovery can help to clarify the situation for the parties and feed a productive early mediation that resolves the dispute entirely. In some instances, we have even seen the filing of the complaint cause the claim to be elevated to the right person’s attention such that the claim was just paid outright, after that person reviewed the issues holding up payment and realized the adjuster had taken an incorrect position. Counsel should be advising on realistic odds of success for the issues involved, which will allow you to make an informed and cost-conscious decision about whether litigation makes sense.
Claims are an inevitability in the construction industry. Contractors should not allow themselves to be surprised by them. The right team should already be in place when the claim comes in and there should be a plan of attack already established to make sure that all of the steps above are done in a timely, efficient, and effective manner.
For more information, contact William S. Bennett at WBennett@sdvlaw.com.