Construction is a complex business. Equipment can break down; employees can be injured; a project can go awry in unexpected ways. Add a marine element to the work underway, and the pitfalls that a contractor must navigate to manage risk become even more challenging.
Marine contractors have long understood that they need specialized coverage and have sought out ocean marine insurance carriers with the expertise to help them. Each project they bid on, however, can come with a variety of special requirements. As a result, marine builders seek an even higher level of insurance customization than is often required for the rest of the construction industry.
What marine contractors need is an insurance product that draws from both the ocean marine and construction disciplines. By drawing from and blending the expertise and common practices of both ocean marine and construction underwriting, Travelers has produced a Marine Construction product that provides contractors with the coverage they need for many of their specialized exposures, as well as the flexibility they require to meet bid specifications that change from project to project.
Travelers’ new Marine Construction Program for Contractors comes with a commitment to serve an industry that needs regular interaction and consultation with agents and underwriters because of its very nature of doing business one contract at a time. By making sure every field underwriter has a common knowledge base, expanded general forms that address ocean marine exposures, and well-developed special coverages ready to go, Travelers has streamlined the process for marine contractors.
Getting the Right Coverage
From an insurance perspective, marine construction often presents more challenges than land-based business. Standard commercial policies often exclude coverage for certain liabilities that pose significant risk to marine contractors. Looking at just a few examples can make it clear why finding the right coverage is a business imperative for any marine contractor, whether they are a well-versed veteran of maritime projects or a neophyte company just breaking into the field to broaden their target market and win new business.
For example, take the marine construction business that wins a contract to widen the pedestrian walkway on a drawbridge. If the project requires the removal of a mechanical part that is taken offsite for repairs, an ocean marine policy would normally provide coverage while the mechanism was in the care, custody and control (CC&C) of the contractor. A typical standard commercial policy, however, specifically excludes CC&C, leaving the contractor on the hook if something happens to the part while it is offsite.
Now move beyond this small example and imagine that a marine construction company has won the bid to build the marina for a new hotel development, with a dock that can accommodate 200 or 300 boats. The following kinds of exposures may come into play:
- With employees working on different aspects of the project, the contractor may be subject to different types of workers compensation laws: state Workers Compensation laws for land workers, the federal Longshore & Harbor Workers’ Compensation Act for dock workers and those who assist on barges, in addition to the Jones Act for full-time vessel crew. It is critical that the contractor have coverage for all types of worker injuries, not just the ones covered by state laws.
- During construction activities that take place from tug boats, crane barges or other craft, someone else’s property may be damaged; for example, a construction vessel may inadvertently scrape the hull of someone’s private boat while it is maneuvering near the dock construction area. If the contractor does not have watercraft liability coverage, he/she most likely will have to pay to cover the damage out of pocket.
- In the construction context, standard protection and indemnity (P&I) insurance may only cover liability arising out of a contractor’s vessels until the project is completed. But damage can become evident after the job has been completed and the contractor is no longer working on the project. Marine construction general liability insurance may be written to cover completed operations, so the contractor has some protection even after the job is over.
- With environmental regulations tightening, especially around bodies of water, and lawsuit damages rising, marine contractors may also want special protection for sudden, accidental pollution incidents.
- Standard excess liability umbrella coverage is not designed for marine exposures. By buying a bumbershoot policy, the contractor has excess liability protection over both marine and non-marine coverages, including auto, general and employer’s liability.
Meeting Bid Requirements
In addition to facing the types of exposures described above, a marine construction company also shares with other contractors a business model that requires it to be responsive to bid specifications. This makes a marine contractor’s needs different from most ocean marine businesses, which may work closely with an agent for a short time and then have a policy set in place that is good until renewal time a year later. Instead, marine contractors may need to interact with their agent frequently, establishing coverage on a bid-by-bid basis to meet the requirements of a project. As a result, marine contractors not only want to look for the right coverage but also find a carrier that can provide responsive contract-by-contract customization service.
For example, a contract may specify that the contractor needs to provide a specific per-project aggregate limit, or provide indemnity for a municipality that is seeking the bids, or carry special coverage because the project is within 50 feet of a railroad. A request for bids may specify that the project owner has arranged for a wrap-up policy, covering all contractors who work on the project. In this case, the contractor may want the project excluded from his normal insurance coverage as a way of lowering his premium. A contractor also may form a joint venture with another company for the duration of the project and need coverage for that entity as a named insured to address potential joint liability for errors and negligence. The same contractor may set up a limited liability company for a single project, then shut down that company when he moves on to the next job. In turn, the contractor may still need coverage for that entity as a named insured in connection with the discontinued operation to deal with any claims that arise after the project is completed.
In the highly competitive construction world, whether land-based or marine, the success of a contracting business lies in the ability to timely meet the specifications spelled out in the bid request document. When it comes to the insurance requirements, the marine contractor has to work with his or her agent and insurance carrier to provide the right coverage.
Finding the Best Fit
Marine contractors need fast and accurate service to submit their bids in a timely manner. That means they need to work with their agent to find a carrier that is familiar with the typical requirements of marine construction and has dedicated underwriters that specialize in this field, with strong experience in both construction and ocean marine. In addition, contractors can benefit from working with a carrier that has skilled underwriters with the authority to make decisions on the many different aspects of coverage that may be required by different project owners. While many coverages may be available on standard forms that have been modified for ocean marine, others may require the underwriter to custom build a package that fits the specific project requirements. With the bid deadline hanging overhead, marine contractors will want a carrier that has streamlined processes so underwriters can operate quickly to arrange the right coverage.
Other aspects that marine contractors will want to put on their wish list include field offices spread across the United States to provide access to local underwriting and claim expertise, and a long track record in the marine construction and land-based construction industries that promises the type of commitment the contractor can rely on. All of these factors – the specialized coverage for marine construction, the flexibility required to meet bid specifications, and the ability to get fast answers from well-versed underwriters – were the key elements that marine contractors told Travelers they were looking for in insurance coverage. The result is Travelers Marine Construction Program for Contractors, a program that has been designed to give marine contractors the products they need, when they need it.
(*) Taken from our November 2012 edition of MarineNews Magazine.