2014 November

Construction worker shortage increasing liability risks of contractors and owners

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by Bill Kenealy (reprinted from Business & Insurance – see link following for more info)

NASHVILLE, Tennessee — As a global trend toward urbanization and large infrastructure projects looks to spike demand for services in the coming decades, the construction industry is at a crossroads.

While the industry has benefitted from a raft of advances in building design and technology, it still needs to address lingering concerns about labor shortages and construction defects. The recession decimated the construction industry and thinned the ranks of skilled workers, and worries persist about whether there are enough workers to go around as the industry’s workload scales up, experts say.

“You need the right people for the right job,” said Timothy R. Kania, New York-based senior vice president for energy and construction with Liberty International Underwriters. “So you have to be concerned about the qualifications of the people executing the job.”

Many in the industry express concern about the implications of the labor shortage for worker safety.

David B. Walls, Dallas-based president and CEO of Austin Industries, said the issue of worker safety became an overriding passion for him early in his career after the father of an inexperienced worker who was killed on a jobsite Mr. Walls was overseeing confronted him with the words, “ “Why did you kill my son?’ “

“The good news is that the construction industry has continued to improve its safety record over the last few years,” Mr. Walls said earlier this month at the International Risk Management Institute Inc.’s 34th Construction Risk Conference in Nashville, Tennessee. “The bad news is that it is, according to the Bureau of Labor Statistics, still the worst of any industry.”

In addition to implementing best practices to avoid common jobsite accidents such as falls and electrocution, a world-class safety regimen must value people and be effectively communicated at all levels of an enterprise, Mr. Walls said.

“Leadership is the weakness when it comes to safety at constructions firms,” Mr. Walls said. “Most companies nail the structural processes for safety, but forget about the leadership.”

Bill Noonan, New York-based vice president of risk management at construction services provider Structure Tone, agreed that effective communication is vital to worker safety.

“The only thing worse than not having a safety program is having one that nobody pays attention to,” Mr. Noonan said. “You get the behavior you tolerate, so you have to have employee buy-in from the start.”

Effective communication is critical when dealing with subcontractors, Mr. Noonan said, adding that to be truly effective, risk managers need to move beyond email exchanges and insist on face-to-face meetings with the people on their jobsites.

“I think town hall meetings are extremely important,” Mr. Noonan said. “It’s important that we invite subcontractors in to talk to us instead of just firing off a letter.”

Likewise, Frank Keres, Chicago-based risk manager with Clune Construction Co., said safety and risk management are inherently linked.

“I can’t be a risk manager unless I’m the safety guy,” he said. “So, if you are a risk manager, you have to be out in the field.”

Moreover, risk managers need to leverage the expertise of their insurers to ensure they get the proper coverage.

“When it comes to worker safety, the broker/agent might be the most important person we have,” Mr. Keres said. “They can be a true intermediary and smooth communication between a contractor and underwriter.”

Nonetheless, he said risk managers looking to create a better safety culture need to be receptive to input from all quarters.

“Safety should flow from the bottom up because workers are the ones getting hurt,” Mr. Keres said. “You should be listening to your employees, not just your owner and insurance people.”

Sonja Guenther, Denver-based vice president and workers compensation specialist at IMA Financial Group Inc., said no suggestion to improve workplace safety should go unexamined.

For example, when data revealed a propensity for soft-tissue injuries and muscle strains in certain trades, such as masons, on jobsites, a relatively straightforward, low-cost resolution presented itself, Ms. Guenther said.

“We used to laugh at the idea of workers stretching before work,” Ms. Guenther said. “You wouldn’t think about playing golf without stretching, so why would you allow a mason to lay brick in cold weather at 7 a.m. without stretching?”


Avoiding Sham Risk Pools and Protect Pool Collateral From Misuse

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Captive Experts LLC manages a risk pooling arrangement for members of the Harbor Risk Pool Association (www.HarborRiskPoolAssocation.com). This is the most cost effective risk pooling arrangement we are aware of in the closely held family business enterprise risk micro-captive industry.

It also addresses the shortcomings of many risk pools including but are not limited to weak underwriting, inflexible pool reinsurance formulas not properly priced for different policy terms and limits, a lack of actuarial support for reinsurance pooling formulas, lack of regular reporting (no transparency), inadequate or excess collateral requirements, no claims investigation, and no capacity for participants to protect misuse of collateral.

The contractual pool arrangement of participant captives who are members of the Harbor Risk Pool Association addresses these concerns. This pooling arrangement also provides periodic financial, claims and pooled risk exposure reporting.






Good example of self insured risks all companies face perfect for enterprise risk captive coverage

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Read this excerpt by a Los Angeles class action lawyer explaining the complexity of self insured risks most companies are not aware of. Properly formed and managed captives can provide a source of recovery for companies to defend these actions and pay associated losses. Without a captive serious business liquidity issues could arise.  http://marcprimo.blogspot.com/2014/02/portland-firm-settles-two-lawsuits-with.html

Another Captive Withstands IRS Challenge on Risk Distribution – Tax Court Securitas TC Memo 2014-225

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The IRS lost another challenge to captives in the recent Securitas tax court case. Captives help businesses improve risk management and build liquid loss reserve investment portfolios to protect the enterprise from an ever increasing risk environment which is especially true for US businesses today. Over 90% of the world’s litigation and regulatory actions are in the US. It is unfortunate the IRS continues challenging captives rather than publishing more definitive guidance to prevent practices it feels are abuses. Click here to read an excellent summary by a tax CPA of the recent Tax Court victory for captives that further amplifies the findings of the Rent-A-Center case that risk distribution is not merely measured by number of insured companies.