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by Rick Stryker, P.E.
The emergency vehicles and personnel are gone,
and you're staring at a smoldering hole
that was your new (fill in the blank here: dining
hall, gym, swimming pool, whatever you're
spending a bucket of money on). A disaster has
consumed it completely. The project was almost
done, and you expected to get the certificate
of occupancy in just a couple of weeks. But now
it's gone, you get to start over, and you'd
better get to it quick because the campers are
coming. So this month, we're going to take
a look at who is at risk and how to manage some
of the risks associated with construction projects
on your property.
Where does the potential chain
of disappointment begin? The biggest is probably
inattention to detail in the preparation of the
construction contract documents. Remember that
any construction agreement for your facility
should be prepared and reviewed by your consultants.
Those include your lawyer, engineer, architect,
and insurance agent. The more that you have to
lose if things go badly, the more thorough and
detailed this document should be. Also, even
when the terms and administrative procedures
are identical from one project to the next, each
construction contract is unique because the final
product is unique. The location, amenities, and
site preparation work all affect the price and
the hazard potential of each. So each project
deserves a fresh look at and refinements to the
terms and conditions that frame the operational
and administrative parameters of the construction
contract.
Managing Risk
What sort of coverage is
available and what can it do for the organization?
If you're going to manage risk, you need
to identify what the risks are as well as what
can be lost as a result of a claim. For the purposes
of this discussion, let's simplify things
to just two categories: People and things. Let's
begin with the human element of the equation,
since those situations can be easiest to imagine,
and grasp the potential risk.
The Human Element
First
on our list are all the people who are not involved
with the project, but who may be attracted to
the work site. Whether their interest is curiosity
(staff, campers, or guests) or walking off with
building materials (trespassers and thieves),
the liability to the organization is much the
same. Since the hazards associated with construction
are as transient as the construction operation
itself, it seems logical and natural for the
contractor to assume the risk. Unless the construction
agreement sets the terms and requirements you
expect, it's unfair and frankly unreasonable
to make the contractor guess what measures will
be "adequate." Solutions could be
as simple as requiring thorough job site clean-up
at the end of each work period. They could also
be as extensive as twenty-four-hour watchmen,
temporary fences, and warning signs. If your
property has issues with keeping unauthorized
people off the property, perhaps the more extreme
measures would be appropriate. Clearly there
is a wide range of options that must be tailored
to meet your specific site requirements and constraints
as well as the job itself. As the property owner,
only you can communicate those nuances to your
consultants so that they can shape the agreement,
shifting the burden of risk.
What about people
who are supposed to be in and around the construction
zone? Those would include the contractor's
direct employees, his subcontractors, and your
authorized representatives. How do we ensure
that the risk is appropriately apportioned? The
contractor's employees should certainly
be under his umbrella. If the subcontractors
aren't also, they should be required to
document their own coverage before they're
allowed on the site. Properly assembled construction
documents will require proof before the first
shovel of dirt is turned, or nail is driven.
If your organization's "authorized
personnel" have been assigned duties in
the construction area and they're qualified
to be conducting that business, your insurance
likely will cover them, but you should absolutely
confirm that in advance and in writing. Unless
that's part of the original agreement,
you'll be hard pressed to get the contractor
to add or shift coverage once the agreement is
in place. Similar to looking for car insurance
for the already-wrecked SUV, after the contract
is inked is the wrong time to ask about insurance
inside the construction area.
There's another
category of "authorized personnel" who
are often involved in projects at camp, and that's
the volunteer group. A mainstay of the nonprofit
world, volunteer work-groups represent an extraordinary
risk to the organization. An insurance sage shared
a story with me once, and I'll try to recount
the situation as best as I recall it being told
to me. A group of volunteers were at camp on
a "work weekend." Camp supplied room
and board in exchange for sweat equity on a fairly
simple construction project. On Saturday, one
volunteer zipped the fingers off another's
hand with a saw of some sort. The victim happened
to be a surgeon who, in the blink of an eye,
lost his livelihood. Though the individual had
long been a supporter of this organization, the
situation ended being heard in court where it
was determined that since the "volunteers" had
been compensated with food and shelter, that
they were in fact, employees of camp. Workers' compensation
only made a small dent in the medical costs. I
don't remember being told the award in
damages, but I seem to recall that it put the
camp out of business completely.
Insuring Against
Material Loss
What about insuring the "things" of
a construction project? Of many, one option that
you can and should require is "Builders
Risk Insurance." Builders risk compensates
for the loss or damage to a project that's
under construction, before it's turned
over to the owner. Because the conditions and
situation differs from project to project, the
coverage is unique to each one. So if a contractor
tells you, "Oh, yeah. I have builders risk," you
need to be immediately suspicious that either
he doesn't know what that is or that it's
in such a small amount as to be just about worthless
should a claim arise.
You also need to know that
builder's risk is only available to the
general contractor; you can't purchase
it on his behalf. That's because the policy
usually has terms and conditions over which only
the general contractor has control. These are
project management issues like site security,
and the timing, delivery, storage, and installation
of equipment and materials to the site.
Of course,
none of this stuff is free. From the consultants
who help you set the terms of the agreement and
shape the administration of the project to the
passed-along costs of the required insurance
coverage, your organization will be paying these
bills. But isn't this what we were talking
about? It's part and parcel of managing
the unique, short-term risks which are part of
every construction project. No amount of insurance
will prevent accidents and unfortunate events.
But by working through the process of identifying
and quantifying the risks, your team of advisors
can help you make informed choices about how
those will be managed and who will shoulder the
burdens. Should disaster strike, you may be able
to breathe a little easier and say with certainty, "That's
what insurance is for, and I know that we're
covered!"
Originally published
in the 2008 November/December issue of Camping
Magazine.
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