Contracting and the Importance of Hazard Identification
By Daniel P. Costello
The construction industry is one of the most challenging in the United States economic landscape. Successful developers, general contractors, artisans, and trades have to balance the scheduling of projects, safety, costs, labor demands, and potential lawsuits. In today’s world of litigation and eye popping jury verdicts managers, superintendents, and owners need to be cognizant of the importance of legal contracts, the risk transfer clauses contained with in the contracts, and their remedies for non-performance. In this article we will discuss the challenges facing the industry by examining the top hazards including the often overlooked hazard of the legal contract process.
Safety in the industry has moved to the front of industry for all contractors. Most risk managers and safety experts agree on the top ten “10 hazard’s” of the industry. We believe that if property identified and controlled, the elimination of these hazards will reduce the company’s exposure, lead to better performance on the job, and will reduce operational costs, including your growing insurance premium.
THE TOP TEN
1. Safety and Work at Heights: The lack of proper scaffolding and fall protection are OSHA’s top two leading causes of citations in 2006. As a general rule, the higher the contractor works, the higher the chance to experience large losses to accidents related to scaffolding and falls. However, the best way to eliminate contracting risks is to work on a level surface, have proper controls regarding scaffolding and fall protection, and conduct regular training. Its always in your best interests to have someone with a 10 hour OSHA certificate on the site or to provide training to your company. Many insurance companies will provide this training for your company, for a nominal fee, if you simply ask.
2. Trench Safety: Excavation, grading, water, sewer main construction and other risks that dig trenches, work in confined spaces, work in and around heavy digging equipment that have deadly potential. The safest contractors use trench boxes on any project where they are below 2 feet to prevent serious injuries. Significant injuries can occur to workers working below 2 feet do to the pressure and weight of over 2 feet of dirt. Although plumbers encounter these hazards on the most frequent basis, sprinkler installation, and those working below ground also face these hazards.
3. Proper Supervision with Designated Competent Person at Each Work Site: This is an important hazard that should not be overlooked. Most large construction related accidents occur where there is not a designated competent person supervising the work. It is important to note that although you may have the proper person in place who is OSHA competent to prevent injuries, it is important to insist that your subcontractors have the same persons in place. Paper Contractors who hire all subcontractors to do the work can put your company at risk. We strongly feel that paper contractors like this cannot provide adequate on job supervision to control work quality and/or job site safety.
4. Adequate Risk Transfer Controls for Subcontractors: General Contractors and any other trade contractors that hire subcontractors much have proper subcontracting controls such as:
- Construction Contract with a fair and reasonable indemnification agreement
- Proper Insurance Requirements that includes Additional Insured status
- Adequate Limits of Insurance
Third Party Over losses are one of the critical causes of severe losses where an injured employee collects workers compensation and then directs litigation to the Owner, General Contractor or Trade Contractor who hired the subcontractor of the injured employee usually on the basis of failure to provide a safe work site. The proper implementation of subcontracting controls can protect the Owner, General Contractor or Trade Contractor who hired the subcontractor of the injured employee from this type of Third Party Over litigation. At Daniel P. Costello & Associates, we have worked with clients across the country to address these issues.
5. Unskilled Labor, Inadequate Training, Improper Communication of Hazards and Lack of Bi-Lingual Skills: The overwhelming demand for new housing combined with an increase in demand for commercial related construction has caused a shortage of skilled and unskilled labor in the market place. In view of this, there has been an increase in loss severity relating to inexperienced and untrained workers such as falls from heights, trench collapses and injuries while operating heavy equipment.
Companies that stress the importance of proper training and communication at the work site, are the companies that will prosper in this industry. The best method to avoid these potential hazards is to insist on supervisors with at least the minimum requirements mandated by OSHA regarding proper supervision. Additionally, companies need to communicate job site safety with signage in Spanish and English, and the need for effective bi-lingual skills with those on the jobsite.
6. Employer/Employee Relationship: An emerging issue of concern is the common attempt of some employers to hire independent contractors to do the work and pay these workers on a 10 99 basis. This is becoming very prevalent as employers attempt to avoid the increasing expense of taxes and benefits associated in hiring true employees.
However, most independent contractors are often uninsured or carry just General Liability coverage but rarely Workers Compensation. This is an issue because many courts deem these 1099 independent contractors to be employees. If the court determines that legally these are your employees who are working at the direction of the employer, you are subject to liability.
These so called independent contractors who become severely injured can pick and choose how to direct litigation to their employer and our ability to exclude coverage via the Commercial General Liability’s Employee Exclusion is imperiled. The employers General Liability coverage can become an unintended sole remedy for independent contractors who are severely injured.
This is a very complex issue and an issue that does not have an easy solution especially in view that most contracting risks will at least occasionally hire casual labor and pay them on a 10 99 basis as independent contractors. Contractors should mandate that all independent contractors carry General Liability including Additional Insured status for the contractors they are performing work upon behalf of, and Workers Compensation coverage or a signed opt of worker’s Compensation if applicable. All coverage should be verified via Certificate of Insurance with either updates on a yearly basis, or coverage for a specific project without a limitation in the dates of coverage.
7. Business Automobile Accidents: The largest most significant accidents for most Companies is related to Business autos for the company. Common sense and repetition to stress the importance of proper driver selection standards regarding acceptable MVR’s, training, experience and meeting any required DOT standards. In addition, fleets should be well maintained and contracting risks should implement personal use limitations. Again most insurance carriers will work with your company to help reduce these risks. An effective program is also the “How’s My Driving”, can cut poor driving significantly.
8. Contractor’s Equipment Lack of Security: Theft of expensive contractors equipment due to lack of implementing proper security to protect equipment is a major concern for contractors. Clearly theft is an enticement for equipment of this nature because of the potential significant value and disposable. This is particularly true in certain areas of the country such as Texas, Arizona, and Florida where equipment may be disposed across the border and is more difficult to trace.
Losses of this nature are controlled by properly securing the job site. This is accomplished via lighted and fenced job sites, watchmen, immobilizing the equipment when not in use (remove battery, distributor, etc.), identification of serial numbers on all equipment, installation of anti-theft device, and proper inventory control.
9. Proper Storage and disposal of Flammable Liquids and Soiled Rags: Those with any chemistry training recognize that fire losses can be caused by improper storage and disposal of flammable liquids and soiled rags that spontaneously catch fire. Painting and floor staining operations using oil based paints, stains, finishes, and solvents should use proper Loss Control methods to properly dispose and store these products. These products should be stored in metal cans with water for both the unused and left over flammable liquids and also soiled rags.
10. Proper Legal Advice: Contractors who do not have a plan to deal with the above losses or to at least take the time to seek advice put themselves in an extreme disadvantage in the marketplace. No longer is it enough to be a great tradesmen in your industry. Business planning and legal safeguards are essential to making your company successful.
Contact our office to speak to us about eliminating your potential hazards, and safeguarding your company.