This summer, I had the opportunity to attend three very different construction conferences, with some common themes emerging. First, Xpera Group (now part of VERTEX) had a significant role in West Coast Casualty’s Construction Defect Seminar as a sponsor, exhibitor, and most notably, hosting an entire panel discussion. The next stop was Key West, Florida for the ultra-elite VEADR conference hosted by Xpera partner, LiMa Solutions. Finally, Xpera had a booth at the annual Pacific Coast Builder’s Conference (PCBC).
Construction Claims are (still) expensive
In our last issue, we showed the correlation between building permit filings and construction defect claim filings. After spending several years “litigating the boom,” we are now “litigating the bust.” With such a huge decline in new construction, we are now seeing the corresponding drop in construction claims.
While that may be of some relief, one thing that was clear at all three conferences is that those claims are still really expensive. The insurance carriers aren’t the only bearer of those costs either. Due to high deductibles and self-insured retention (SIR) requirements, builders are also becoming increasingly concerned about the total cost of claims. Therefore, increasing pressure is being placed on attorneys and their experts to find more cost-effective and expedient approaches to resolving claims.
Green is here to stay
A second trend is that green building is no longer an option, but is firmly part of mainstream design and construction. Whether you call it “green,” “sustainable,” “high performance,” whether it is meeting minimum code requirements, being evaluated according to a third-party standard, or part of a home-grown initiative, builders and insurers must face new realities to compete in the marketplace.
Ramping up without messing up
The singular question everyone in the industry seems to be asking is, as construction begins ramping up again, how can we learn from the mistakes of the past to properly manage the risk on future projects?
The biggest impact of the recession has been on the laborers that became a surplus as work dried up. Reports indicate that we face a serious crisis due to the lack of skilled labor in the various trades. Complicating this is the fact that in order to meet increased demands for improved building performance, buildings are becoming more complicated, and as a result, riskier.
While the last building boom saw a significant uptick in the use of (and in some situations, requirement for) third-party quality management providers, an unfortunate trend has surfaced in recent years. Specifically, so-called “QA/QC” companies have been engaged in a pricing war that has resulted in a race to the bottom. The net effect, ironically enough, is that the quality of the quality providers is greatly reduced. Recent claims involving some of these “low-price leaders” show that cutting corners on QA/QC services may be very costly in the long run.
Savvy insurance carriers, risk managers, and builders have come to realize that the old adage still rings true: “An ounce of preservation is worth a pound of cure.” Instead of taking time and money to fix mistakes that have already occurred, forward-thinking firms are preventing mistakes in the first place.