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R&R Insurance Blog

Dan Scheider

Recent Posts

A Contractor’s Newest Threat or Opportunity – Cyber Insurance

Posted by Dan Scheider

Cyber Insurance for ContractorsCaution is often the reaction I get when discussing Cyber Insurance to construction executives in Wisconsin. From their perspective it would be a nice policy to have should the North Koreans focus their slave hacking force on a plumber in Sheboygan. The resulting ransom of 200 bitcoin for their $200 laptop seems a laughable prospect to a field that generally isn’t tech reliant. The truth, however, is that contractors are a growing target for hackers, but fear isn’t the only reason for a contractor to have Cyber Insurance.

So is greed.

Newly mandated contracts are forcing the conversation of Cyber Insurance between owners and contractors. On October 31, 2018 the American Institute of Architects (AIA) requires the use of their new 2017-revised agreement documents and to toss the old 2007 versions. Among the most standard forms are basic contract agreement between owners and contractors: A101, A102, and A103. All three of those forms have a new section dedicated to Cyber Insurance.

The relevant language begins in the from at section A.2.5.1. This segment encourages the owner to purchase Cyber Security Insurance for any loss or data breach should such an event happen on the job. This represents an opportunity for a contractor to sell the fact that they have 3rd party Cyber Insurance and can cover such a breach. Alternatively this could be a threat should the contractor have no Cyber Insurance and potentially lose out on a bid to a competitor who has said coverage.

Why was Cyber Insurance language inserted in this part of the contract? The AIA believes there is a growing threat of electronic data loss to owners after several real world examples surfaced where negligent contractors were at fault.

In 2013 an HVAC contractor in Pennsylvania was working at a Target retail store. An employee of the HVAC contractor opened a virus laced email. This email stole the identification and password of the contractor and was able to infiltrate Target’s vendor portal. From there the criminals were able to gain access to Target’s internal network. The result was the 5th largest cyber-attack in history and 70 million compromised credit cards.

Beyond encouraging owners to attain Cyber Insurance, Forms A101-3 present easy opportunities for owners to require Cyber Insurance from contractors. Further along in the contracts (section A.3.3.2.6) the owner is given a segment to fill in additional coverages a contractors is required to possess on the job. In the real world we are starting to see contracts requiring a Cyber policy– often with high limits too.

More than just a threat, Cyber Insurance represents an opportunity for contractors. Having a policy ahead of a big job not only protects your company in case of a breach, but also gives the sales or marketing department extra ammunition to make the winning offer. 

Not all Cyber policies are the same. There is a major difference between a first and third party coverage. Contact an agent to work out the best Cyber policy for your business.

Topics: Construction, Cyber

Why Trade Contractors Need Pollution Liability

Posted by Dan Scheider

iStock-642235496Pollution liability policies are only for contractors involved in environmental or pollution cleanup … or so goes the common perception in the construction industry.

The truth is a trade contractor without a pollution policy actually has a serious coverage gap when it comes to mold, bacteria, asbestos, silica, and lead.

Insurance carriers, always adverse to risk, write General liability policies with exclusions specifically for the aforementioned substances. It would instead be the Contractor’s Pollution Liability policy picking up the tab for bodily injury and property damage claims involving these often overlooked pollution conditions. 

Just about every contractor has some exposure to these elements:

  • Plumbers have exposures to category 3 water (the water in drain pipes), mold, and bacteria. When the plumber’s work goes wrong, water damage caused by leaking pipes can lead to mold growth. A claim from a bystander alleging his quality of life was impaired due to the bacteria-abundant “category 3 water” would be excluded from a general liability policy.
  • HVAC Contractors need worry about mold, bacteria, and legionella. Condensation in HVAC systems generally is the culprit in mold/legionella issues. Should your company have installed an HVAC system with too much humidity resulting in mold, claims arising out of the bodily injury (or even claims from the mere worry of bodily injury) would be excluded from a general liability policy.
  • Roofing Contractors have exposure to mold, lead, and asbestos. Working on older buildings increases the chance of lead and asbestos exposure. Even a simple defect in the installation or repair of a roof could cause a large pollution related loss – i.e. a leaky roof resulting in mold growth. Costs associated with locating and removing mold can be extensive as the structure needs to be thoroughly inspected.
  • Electricians are not exempt either from pollution liability and have similar exposure to mold, lead, and asbestos. Imagine a contractor running wire above a ceiling and stepping on a sprinkler pipe hidden by insulation. Should water damage result in mold growth, a general liability policy would not be your go-to. Like a roofer, work on older buildings increases the chances of lead and asbestos exposure.

Some Insurance carriers offer limited scope pollution endorsements. These endorsements do not compare in scope of coverage to a properly designed contractors pollution liability policy. After a loss, it’s too late to find out if a limited scope pollution endorsement provides enough coverage.

Should you have any further questions on potential coverage gaps in your current policy, talk to your Commercial Insurance Agent or shoot me an email.