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| Liability Insurance Crisis |
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| Liability Insurance Becomes CCB Top Priority |
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The Oregon Construction Contractors Board (CCB) has received hundreds of letters, faxes and e-mail messages from construction contractors who are experiencing significant price increases in their liability insurance premiums or who are finding it very difficult to find a carrier who will insure them.
Contractors are reporting that they have been forced to consider one or more of the following actions:
- Paying insurance premiums that have increased an average of 160 percent in the last year (in some cases 1,000 percent).
- Raising their prices and passing the increased costs on to the client.
- Paying lower wages to their employees.
- Working illegally without liability insurance.
- Leaving the state because they cannot afford insurance.
- Changing the scope of their business to non-construction activities or going out of business altogether.
The board declared the liability insurance issue to be its top priority at a recent board meeting, issuing a resolution directing CCB staff to “…prioritize their efforts and dedicate all available resources to finding solutions to this problem.”
Oregon law requires construction contractors to carry liability insurance. The insurance must be in place before construction contractors can become licensed by the CCB. Contractors must keep their coverage current to maintain their licenses.
Contractor’s liability insurance is a contractual relationship between a construction contractor and an insurance carrier to reimburse a third party (customer) for property damage or personal injury loss caused by the contractor.
The CCB is working with a variety of partners to seek solutions to the liability insurance problem.
Board members and staff participated in a fact-finding hearing hosted by the Oregon Department of Consumer and Business Services (DCBS) on April 13. The purpose of the hearing was to gather information on whether to create a market assistance plan (MAP) for construction contractors who are having trouble getting liability insurance.
Representatives from the insurance industry, government agencies, consumer groups and construction industry participated in the hearing. (See Market Assistance Program (MAP) below)
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| Finding liability insurance - Market Assistance Plan (MAP) |
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The Oregon Market Assistance Plan (MAP), under the auspices of the Oregon Department of Consumer and Business Services (DCBS), is provided to help construction contractors who are having trouble getting liability insurance. Click here for more information.
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| What is an additional insured? |
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Many construction agreements call for one company to name another company as an “additional insured”. Before this occurs, each party should have a general idea of what this means.
In most situations, the insurance at issue is the Commercial General Liability (CGL) policy of the lower tier party. A common scenario is a prime contractor asking a subcontractor to name the prime contractor (and perhaps the owner or others) as an additional names insured on the subcontractor's CGL policy. This request is sometimes found within the terms and conditions of a proposed subcontract.
Before agreeing to this, both parties should have a basic understanding of what it means. In general, naming a company as an additional insured on your CGL policy enables that company to make a claim directly against your policy.
In today’s world of defective construction claims, prime contractors (and their insurance carriers) are becoming more insistent on obtaining a certificate of insurance where the prime contractor is a named additional insured. Then, if there is an allegation of defective construction by a subcontractor, the prime contractor can make a claim directly against that subcontractor’s CGL insurance. This can be particularly important if the subcontractor is no longer in business.
(From the Scott Hookland LLP newsletter. Scott Hookland LLP is a law firm located in Tigard. You can reach them at 503-620-4540.)
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| Common questions about liability insurance |
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For answers to commonly asked questions about liability insurance carried by
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| Statesmans Journal: Insurance at a premium for contractors |
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“Oregon builders have to add to home prices to cover liability costs”. Click here to read the article ‘Insurance at a premium for contractors’ in the May 17, 2004 Statesman Journal.
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| City of Portland SPARTA Program (public works) |
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Service Providers & Artisan Tradesman Activities (SPARTA) Liability Program was designed to provide Commercial General Liability, Excess General Liability, Professional Liability and Non-owned Automobile Liability coverage to tradesman, artisans, contractors and tenants who would not otherwise be able to provide the insurance limits needed to successfully bid and compete for Public Entity business opportunities. For more information, click here.
Accessing the SPARTA PROGRAM is as simple as a toll free telephone call. The toll free number is 800-420-0555. The fax number is 714-687-1106.
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| CCB Resolution on Liability Insurance Crisis |
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On May 5, 2004, Construction Contractors Board (CCB) passed a resolution determining that the cost and availability of liability insurance for construction contractors constituted an emergency.
Whereas, the construction industry has been a bright spot in Oregon’s troubled economy by providing jobs for hundreds of thousands of Oregonians.
Whereas, insurance premiums have increased an average of 165 percent over the last 12 months for residential contractors.
Whereas, an increasing number of insurance policy exclusions have compromised the real protections afforded Oregon consumers.
Whereas, construction contractors have reported they are going out of business or considering leaving Oregon because they cannot purchase affordable insurance.
Whereas, increased insurance costs are being passed onto Oregon consumers.
Whereas, some construction contractors have informed the Construction Contractors Board (CCB) they are forced to work illegally without a proper CCB license because they are unable to purchase statutorily mandated liability insurance and,
Whereas, these contractors are working without liability insurance, putting their customers, their businesses, and Oregon’s vitality at risk.
Therefore, this insurance crisis is a significant and real threat to the state’s efforts to grow Oregon’s economy.
Be it resolved:
The Construction Contractors Board finds that the cost and availability of statutorily mandated liability insurance for CCB licensees constitutes an emergency and has directed staff to prioritize their efforts and dedicate all available resources to finding solutions to this problem.
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| Letter to Governor Kulongowski |
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On June 3, 2004, the CCB policy board wote to Governor Kulongoski asking for support in developing solutions to the insurance liabilitiy crisis facing construction contractors. Click here to read the letter in full.
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| CCB Insurance Survey Results |
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Over the last two years contractors have reported that their insurance premiums have drastically increased—in some cases established businesses have found it nearly impossible to find an insurance provider at any cost. Click here for the most recent survey results.
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| Agents can submit insurance info online (help for insurance agent |
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The CCB recently introduced a program that will save insurance agents, contractors and the CCB time and hassle.
In order to be licensed by the CCB, contractors must have general liability insurance. A certificate of insurance must be submitted by the contractor’s insurance agent to the CCB.
It can take 5-10 working days to process the certificate.
The new web-based program is much faster, usually processing the information the same day it is submitted.
Using web-based technology, CCB staff worked with the insurance industry to develop an online form that insurance agents can fill out and instantly transmit insurance information necessary for contractors to maintain their license with the CCB.
The CCB rolled out the project in July of 2003. Starting with a list of just a few insurance agents, the program expanded rapidly. Today, 400 agents are registered to submit insurance information online.
“The new system has proven a real benefit for all of us,” reports CCB Licensing Manager Kristie Patton. “Insurance agents really like it. They say it is a very efficient and user-friendly system.”
While it still remains the responsibility of the contractor to provide evidence of his/her insurance, the contractor benefits because this is a faster, more convenient and more economical method for insurance agents to send information directly to the CCB.
Insurance agents must fill out the Application for Online Insurance Entry Access and mail to the CCB. Click here to download the form for printing. For questions about the online insurance certificate submittal program, call the Customer Service Unit at 503-378-4621.
“I hope contractors will ask their insurance agents if they participate in the program, and if they’re not, encourage them to sign up,” says Patton.
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