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    7 of the Most Common Construction Insurance Claims

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    most common insurance claims in construction canada

    The warmer weather of spring means construction season is ramping up. In this article, we’re examining popular claims for commercial construction insurance.

    Construction is a risky business, and accidents or unexpected events can happen at any time. That’s why having proper insurance coverage is essential for any construction project. Construction insurance provides protection against a wide range of risks, from property damage to worker injury or environmental damage. In this article, we’re taking a look at some of the most common insurance claims in construction. By understanding these claims, you’ll be better equipped to protect your business and avoid costly lawsuits down the road.

    Related Read: How to Start a Construction Business in Canada

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    1. Property Damage Claims

    One of the most common construction insurance claims is property damage. This refers to damage or loss to the physical structure of a building, machinery or equipment on a construction site. Property damage claims can be caused by a variety of incidents, such as natural disasters, theft, vandalism or accidents involving machinery. For instance, a crane could malfunction and fall, damaging the building below. Or, a severe storm could knock down a wall or damage the property. In either case, property damage claims can create significant financial and liability risks for the contractor responsible for the site.

    How to avoid property damage claims

    Here are some common ways to avoid property damage claims:

    • Conduct a thorough site inspection before construction begins to identify potential hazards

    • Secure the construction site to prevent unauthorized access

    • Develop and enforce safety protocols for workers and visitors

    • Maintain insurance coverage that includes property damage claims

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    2. Workers’ Compensation Claims

    Workers’ compensation is another common construction insurance claim. This provides coverage for medical expenses and lost wages for employees who are injured or become ill on the job. Construction workers are exposed to numerous hazards, such as falls, accidents with heavy machinery, or exposure to toxic materials. These can result in serious injuries or illnesses. Getting workers’ compensation claims can be costly and time-consuming for contractors. It often involves medical bills, rehabilitation costs, and legal fees.

    How to avoid workers’ compensation claims

    There are some common ways to avoid these claims, such as:

    • Conduct regular safety training for workers

    • Encourage workers to report unsafe conditions

    • Provide workers with appropriate safety gear and equipment

    • Regularly inspect the job site for potential hazards

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    3. Equipment Breakdown Claims

    Another common issue in construction projects can be equipment breakdown claims, which can lead to costly interruptions and delays. Equipment breakdown insurance covers damage to machinery and equipment due to a sudden and accidental mechanical or electrical failure. In construction, a breakdown of machinery or equipment may cause delays, downtime and even safety concerns. For instance, some scaffolding could fall or a crane could malfunction, causing a costly repair or replacement.

    How to avoid equipment breakdown claims

    Contractors should regularly maintain and check their machinery and equipment to prevent equipment breakdown claims. This will ensure the machinery and equipment works at its best capacity.

    4. Builder’s Risk Claims

    Builder’s risk is another common construction insurance claim. This covers loss or damage to a construction project during its construction or renovation. Builder’s risk typically covers the physical structure, materials, and equipment during construction. An example of this type of claim is when a severe weather event causes damage to a construction site or theft of material from the site.

    Related Read: When Should Builder’s Risk Insurance Start?

    How to prevent builder’s risk claims

    To prevent builder’s risk claims, contractors should:

    • ensure that their construction sites are protected against weather events

    • properly monitor and supervise the construction site

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    5. Professional Liability Claims

    Professional liability covers damages and legal fees caused by any professional negligence or errors of construction professionals. Construction professionals can face liability claims for mistakes in design or inaccurate plans, as well as project delays. These claims can have serious consequences for property developers, contractors, and individuals alike.

    Related Read: Does Professional Liability Insurance Cover Negligence?

    How to avoid professional liability claims

    Construction professionals can take a number of steps to avoid being held liable. For instance, they can:

    • ensure that they follow safety and quality standards

    • review plans and specifications frequently

    • keep detailed records of all project-related transactions and communications.

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    6. Delay and Disruption Claims

    Delay and disruption claims are another common construction insurance claim, which provides cover for financial losses resulting from delays or disruptions to a construction project. In construction, delays can be caused by various factors such as weather conditions, labor strikes, supply chain disruptions, or changes in project design, among others. Disruption claims, on the other hand, occur when work on the site is interrupted or disrupted due to external factors outside of the contractor’s control, such as government actions.

    How to prevent delay and disruption claims

    To prevent delay and disruption claims, contractors should:

    • plan ahead

    • conduct regular progress reviews

    • maintain open and transparent communication with project sponsors and stakeholders to ensure that all parties are aware of any changes to project timelines or scopes

    By doing so, contractors can minimize the risk of significant delays or disruptions in construction projects and reduce the likelihood of costly legal disputes.

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    7. Environmental Claims

    Lastly, environmental claims are becoming increasingly common in the construction industry. Environmental claims can arise when construction projects cause pollution, contamination, or other types of environmental damage. Contractors involved in construction activities should be aware of regulations governing environmental protection and take appropriate measures to avoid causing damage to the surrounding environment.

    How to avoid environmental claims

    To minimize the risk of environmental claims, contractors should:

    • adopt best environmental practices

    • have proper waste disposal procedures in place

    • use environmentally friendly construction materials

    Contractors should also be aware of the environmental risks associated with construction activities and take corrective action if any adverse impact is identified. By taking proactive steps to minimize environmental risk and damage, contractors can avoid costly environmental claims and protect the environment.

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    Originally published April 12, 2023, updated August 25, 2023

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