Recent trends in workers’ compensation coverage suggest that the number of claims are likely to continue to increase, specifically for high-risk industries, like the construction industry. This article explores multiple trends and issues which are likely to impact workers’ compensation insurance for construction companies. Several of these trends and issues reflect demographic, labor, and technological shifts, which have important implications for contractors and construction companies.
1. Technological Innovation and Worker Safety
New wearable technologies and other data-collecting products such as helmets which warn of employee fatigue and sensors which help with ergonomic corrections have emerged in the markets to support safety measures in the construction industry. Although devices such as these tools can help business owners to demonstrate the implementation of safety programs to their insurance carriers, they can also distract the workers who are wearing them or go through a product malfunction, which could lead to injuries in the workplace and could also result in higher workers’ compensation premiums. While these new technological devices are intended to support worker safety on construction sites, it is also important for business owners to evaluate the potential risks of new technologies on a project site.
2. Certificate of Insurance Issues
Pitfalls of Lax Coverage Review
Construction projects require a lot of coordination between contractors and subcontractors on a project site. Based on their construction contracts, project owners and contractors need to verify whether other contractors and subcontractors have the appropriate insurance coverage in place, with regard to policy limits, additional insured endorsements, and any other coverages which may be required. Frequently, these insurance coverage verifications are made through certificates of insurance. A certificate of insurance can serve as evidence of coverage and it should include the specific types of coverage, limits, and sublimits provided for in a subcontractor’s insurance policy. A general contractor or a construction company who does not verify that their subcontractors have the appropriate insurance coverage by reviewing a certificate of insurance could be liable for a claim from an employee who would otherwise not be covered under their policy. Conditions found in a construction company’s workers’ compensation policy could also include the requirements that a project owner or a contractor periodically check their subcontractors’ policies and certificates of insurance to verify that the appropriate coverage is in place.
Poor Record-Keeping Can Increase Liability
It is important to have an attorney review a business owner or a contractor’s workers’ compensation insurance policy, as well as any certificates of insurance from subcontractors who are working on a construction project. This can help a business owner or contractor determine if the subcontractors working on their project are appropriately covered and contractually compliant with the necessary coverage requirements. Given the increased changes in the insurance market and the new exclusions which are continually introduced on different policies, it could be expensive for contractors and construction companies to track certificates of insurance and verify that each subcontractor has the contractually required coverage they need. Further, if a contractor or construction company does not track and analyze the subcontractors’ certificates of insurance on an annual basis, they could be subject to a premium audit from their workers’ compensation insurance carrier at the end of the policy term, which could include any work which a subcontractor has done throughout that time period. This premium audit could result in an additional charge from the workers’ compensation insurance company if the carrier determines that there were increased exposures based on subcontractor labor on the project.
Periodic Policy Reviews are Warranted
It is also possible that the insurance carriers for the subcontractors could have added additional exclusions or limitations to their renewal policies. Accordingly, it’s significant for project owners and contractors to request their subcontractors’ renewal insurance policies and endorsements on an annual basis to verify that the subcontractors’ coverage still meets the project’s insurance requirements. Project owners should anticipate that there could be changes to the subcontractors’ insurance policies, and should have an attorney review any subcontractor policies and endorsements on a regular basis.
3. Labor Capacity Issues
If a construction company lacks the workers it needs for its projects, it could be challenging to ensure safety measures on a job site. This is especially important if there is more work than available workers for a particular construction project. If a construction company does not have the capacity or expertise in its labor force to handle complex or especially risky construction projects, this could result in an increased level of accidents on a project site. This could lead to increased workers’ compensation insurance premiums for companies, due to the possibility of significant disabling injuries and frequent claims under a construction company’s insurance policy. If a construction company is trying to reduce costs and hire fewer workers, this could also result in a growing number of accidents if a company’s workforce lacks the experience to handle these projects.
4. Labor Shortages on Construction Sites
Contractors and construction companies are experiencing labor shortages in part because there are numerous challenges finding and retaining qualified workers. Finding and training competent employees takes time. A study done by the Construction Industry Research and Policy Center found that 44.5 % of 9,000 claims which were analyzed were filed by workers with less than a year’s experience in the industry. It is important for a construction company to train its new employees to identify hazards at work and to be aware of their safety in order to reduce the likelihood of injuries. Each company should aspire to the implementation of a comprehensive safety program on project sites in order to reduce accidents.
5. The Growth of the Female Workforce in the Industry
The percentage of female workers in the construction industry is rapidly increasing. However, a lot of the safety equipment in the industry is not always available in sizes which fit female employees on construction job sites. This means that female workers are more exposed to risks on a job site than male workers, especially if they are not likely to have the proper safety equipment in their sizes. Due to the lack of availability of safety products in women’s sizes, it is possible that incidents on a project site could increase over time. Additionally, contractors and construction companies should consider implementing a robust safety program on their job sites which considers the unique needs of female employees and promotes their safety. The increased risk of accidents could lead to rising workers’ compensation insurance rates, and it is important for a construction company or a contractor to consider the safety of all of its employees.
6. The Aging of the Construction Workforce
According to the National Association of Home Builders, the construction industry has continued to age due to a higher median age for its employees. Although aging workers tend to be more experienced and skilled than younger workers, it is also possible that this trend could result in increased injuries on construction project sites. Since more experienced workers on construction sites are more likely to follow safety procedures and precautions, the primary challenge related to their injuries is not frequency, but severity. Therefore, it is important for employers to consider this factor and develop the appropriate safety programs to accommodate the needs of aging workers. Moreover, employers should consider implementing different safety measures and obtaining safety equipment which can help to support older workers on construction project sites. Since older workers are also more likely to be involved in fatal accidents, construction companies should evaluate their safety programs and modify them as needed to promote workplace safety.
7. Regulatory Changes
The construction industry has experienced increased reporting requirements, which can also impact workers’ compensation insurance considerations. In 2016, OSHA implemented the Improve Tracking of Workplace Injuries and Illnesses Rule, which required construction companies with at least 250 employees to submit Form 300, a log of work-related injuries and illnesses, and Form 301, an injury and illness incident report, to OSHA. In 2018, the rule was modified in the context of industry concerns that OSHA could use the electronic reports to publish this information about employers on its website. The rule was limited to require companies to submit only summary data on OSHA Form 300A, a summary of work-related injuries and illnesses.
Recently, OSHA proposed a return to the 2016 version of the rule, which would require detailed injury and illness reports even when companies have complied with OSHA standards. In addition, the new rule would also expand the number of companies that would need to comply with the reporting requirements, because it would require companies with at least 100 employees to submit the reports. OSHA has stated that it plans to make some injury reporting information publicly available. The proposed rule can lead to additional concerns for employers, who may need to implement stricter data collection procedures and safety measures. OSHA’s plans to publicly publish employer-related worker injury information can lead to increased workers’ compensation premiums as well. If insurance carriers have access to publicly available data from OSHA’s reports, it is possible that they could also introduce new exclusions and rate increases on workers’ compensation policies for construction companies.
For more information about workers’ compensation coverage trends, or to request a review of your workers’ compensation policy, contact Saxe Doernberger & Vita, P.C. at firstname.lastname@example.org or call 203.287.2100 and we will connect you with a seasoned attorney who can answer all of your questions.