Construction Industry Tips

Cincinnati Insurance offers tips to help our construction industry policyholders mitigate various types of risk associated with the COVID-19 outbreak, including construction site shutdown, contract language considerations and navigating expected labor and material shortages. Most of the recommendations are appropriate for any construction business site, regardless of the type or location.

The best way to deal with this pandemic is to plan, prepare and to stay informed. Due to the fluidity of this situation, it’s important to monitor the alerts pertaining to this virus to keep workers and their families safe and to minimize long project delays due to labor shortages by following federal, state and city agency pandemic guidelines, including:

  • Cleaning and disinfecting
  • Monitoring illness
  • Social distancing
  • Quarantining due to long incubation period from 1-14 days
  • Caring for children due to school and daycare closings

For specific steps contractors can take, please review CPWR COVID-19 Resources, which includes aggregated resources and information.

Remain vigilant in monitoring the construction sites closed for a prolonged time, which can themselves pose a hazard to the public. If a site is going to be closed for cleaning or simply to prevent the chance of spreading illness, then consider these tips:

  • Secure the site to prevent access from any unauthorized personnel, including construction fencing and posting of permits
  • Work with local police and fire authorities: discuss steps taken and provide them your site shutdown plan and contact information
  • Maintain and secure all scaffolding, debris netting, sidewalk sheds and temporary walkways
  • Maintain all adjoining property protection
  • Maintain all guardrails and edge protection systems, such as netting and cocoon systems, and floor and shaft opening protection
  • Store and maintain cranes in accordance with manufacturer recommendations and approved onsite certificate drawings
  • Ensure the proper shoring and protection of open excavated sites, trenches or backfill
  • Confirm construction equipment is safely stored and maintained in accordance with manufacturer recommendations. Enable all hidden kill switches and record serial numbers of equipment left onsite
  • Safely store and secure all construction materials and remove, tie down or ballast any lightweight materials susceptible to becoming wind borne. Lock up all valuable materials and equipment in safe areas to deter theft
  • Remove all fuel-powered equipment and fuel containers (gasoline, diesel or propane) from the building and properly secure in a flammable storage cabinet or remove from the site
  • Maintain any fire supply, suppression and detection systems
  • Maintain all essential utilities and ensure the building, perimeter and trailer/yard are well illuminated
  • Remove any standing water and ensure project has adequate grading, which allows proper removal of stormwater
  • After rain events, physically inspect all perimeter silt fencing, catch basins and repair potential breaches
  • Haul away construction debris and empty or remove recycling containers and dumpsters from the site once it’s secured
  • Clear and clean public sidewalks and roadways

Current events make this a time for everyone in the construction industry to assess their risks of supply chain disruptions, labor shortages and governmental restrictions on their projects. Consider how the often-overlooked force majeure contract clause may impact project delays or increased costs caused by COVID-19.

Black’s Law Dictionary defines force majeure as when business is disrupted due to a factor beyond its control. Most construction contracts contain a force majeure provision that:

  • Allows a contractor to delay or stop performance under the contract due to certain, unforeseen circumstances that are not the fault of either party to a contract
  • Specifies the party who bears the cost or risk of loss for any resulting construction delays as dictated by the language of the controlling written agreement
  • May release deadline requirements when a contractor is unable to meet deadlines

Force majeure provisions can be a valuable tool in preventing contract liability that could arise because of COVID-19-induced construction delays. There are a significant number of articles circulating on the internet about how force majeure clauses may come to the forefront of disputes in the construction field. Below are just a few examples:

While force majeure provisions vary greatly in scope and allocation of risk, we strongly recommend that contractors review their current construction contracts with competent legal counsel to better understand any force majeure provisions and to plan for potential construction delays resulting from the spread of COVID-19.

Construction project participants need to assess and evaluate their respective risks on an ongoing basis. Carefully review future contracts with your legal and insurance team to include provisions for disruptions and delays caused by COVID-19. Pay close attention to clauses relating to force majeure, termination, suspension, owner funding, pay when paid, pay if paid, and/or change orders in the contracts.

As a Cincinnati Insurance policyholder, you have full access to use ConsensusDocs, at no additional charge, for one year after signing up. The standard contract agreements already address many of the concerns noted above. Ask your agent for details.

The Facts

Direct and indirect supply chain disruptions are expected to lead to material delay and shortages as manufacturing facilities and suppliers worldwide decrease production or stop work all together. According to accounting services firm Marcum LLP, U.S. contractors rely on China for approximately 30% of materials and equipment, which may impact your project as they manage the pandemic.

In a recent AGC survey, 16% of contractors are already experiencing a shortage of materials, equipment or parts on their projects, as states look to contain the spread by ordering the temporary closures of nonessential businesses.

Assess and Evaluate

Be proactive; discuss and develop contingency plans and protocols with subcontractors and vendors. Know your avenues for avoidance and mitigation of losses for existing contracts as well as options for recovery. Work with your legal counsel to provide any written notices required under your contract in order to preserve your rights, remedies and potential claims. Get answers to the following questions:

  • For key milestones of your project, identify where the supplies, materials and equipment are manufactured, in the U.S. or abroad
  • Establish the current timeline for product manufacturing and delivery, where your project falls in the schedule and length of transit time
  • Analyze the financial and schedule challenges if you can no longer obtain the materials and equipment
  • Consider the impacts of potential material and equipment substitutions caused by lack of inventory, including:
    • - design changes
    • - compatibility of substituted systems with construction already in place
    • - other building systems
  • Identify the most vulnerable materials and equipment that may cause a delay, the impact and status of materials in transit

Here are some additional resources to better understand your supply chain disruption:

Construction project participants need to continually assess and evaluate the risks, so please contact your agent with questions for your Cincinnati Insurance loss control consultant.

Our loss control service is advisory only. We assume no responsibility for management or control of customer loss control activities or for implementation of recommended corrective measures. These materials were gathered from trade services and public information. We have not tried to identify all exposures. We do not warrant that this information is consistent with Cincinnati underwriting guidelines or with any federal, state or local law, regulation or ordinance.

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