Excavation contractors face risks daily, from safety and compliance issues to equipment breakdowns. These risks leave contractors exposed to many types of liability, which often result in large settlements that bankrupt companies. Instead of filing claims after it is too late, it’s important to address exposure proactively through risk management.
Excavation Risks
If the construction industry is unique, excavation is even more particular. Some of the biggest safety hazards seen by excavation contractors include slips, trips, and falls.
Excavation sites utilize trenches daily. It comes with a separate set of risks, such as trench collapse and people and vehicles falling into trenches.
Additionally, falling material has the risk of injuring people and property. Due to the nature of excavating, structures on the site within the excavated areas are at risk of collapse as well.
Because excavation uses lots of equipment underground, contractors are more at risk for explosions, leaks, and flooding because of faulty equipment in trenches and underground.
Additionally, project delays, negative environmental impacts, contract legal disputes, and reputational risks are liabilities that all excavation contractors must face.
Fines, Fines, and More Fines
A Massachusetts excavation contractor faced $1.3 million in fines from OSHA. Two workers for Atlantic Coast Utilities were hit by a dump truck and fell into a large trench. This incident ultimately caused both workers to die.
The OSHA investigation uncovered that Atlantic Coast Utilities had failed to address over thirty other safety violations. One major violation was that the two workers who died had not been properly trained on the site’s safety procedures.
Some other unaddressed safety risks were struck-by incidents, improperly equipped trenches at risk of cave-in, and unsafe oxygen levels in the air in the trench.
OSHA greatly increased the fines because of the repeated violations and the company’s willingness to ignore the blatant safety violations.
All it takes is a comprehensive risk assessment and a willingness to address concerns to prevent deaths.
Be Proactive: Adopt a Risk Management Plan
1. Address safety concerns
Accidents caused by a lack of general safety lead to many problems, from death to reputational harm.
Contractors should always follow the OSHA safety standards for their industry and implement detailed safety training to address these hazards. It is extremely beneficial for contractors to invest in telematics and smart technology in their construction fleets to address safety risks before they become a larger problem.
2. Prevent claims from happening
The best way to address a claim is to prevent it from happening in the first place.
In construction, this can mean implementing insurance policies such as general liability insurance, investing in smart technology to reduce risks, and adding Standard Operating Procedures to employee equipment training requirements.
3. Prioritize compliance
Complying with excavation regulations is a serious business. Contractors could face business-altering fines if they fail to address licensing requirements, regulations, and building codes.
To address compliance issues, contractors must know about these codes and regulations; otherwise, they are unaware of what they must address. Once they have proper methods to address regulations, keeping records of their projects and evidence of compliance will ensure they can address any claims of violated regulations.
4. Predict insurance costs
The excavation industry is seasonal, so predicting the costs of a business’s income (and its policy costs) is very difficult.
To address this, contractors can do a few things.
- Purchase their insurance policies from an insurance carrier that has data-driven pricing so that the policy more accurately reflects the potential costs.
- With an insurance expert, forecast costs with an experience modification factor.
- Keep detailed records for accurate information during your workers’ comp audit and avoid being overcharged.
- Invest in a workers’ comp billing plan that is pay-as-you-go, meaning the contractor pays the premium monthly based on the actual payroll for that month.
5. Limit legal exposure
Contractors deal with third parties such as subcontractors and clients regularly. Without proper contracts, the risks of legal disputes arising from third parties suing the contractor increase.
To address this, contractors should invest time in an annual analysis of their exposures to properly address them and avoid legal action. Additionally, having expert advice on contract alignment can be extremely helpful.
What Type of Insurance Do You Need?
There are a few necessary types of insurance for all independent excavation contractors.
- Commercial Auto Insurance: This insurance provides coverage for business vehicles. Additionally, a contractor might consider investing in an HNOA endorsement on their Commercial Auto Policy if they have employees who use their cars for business matters regularly. Heavy and potentially dangerous equipment, theft, personal vehicles used for business, distracted driving, and road hazards are all risks that disproportionately affect contractors in the construction industry.
- Equipment Insurance/Inland Marine Insurance: Contractors constantly transport tools and equipment from place to place. This is why Equipment Insurance is a smart investment; it covers any rented or owned equipment and tools transported on land that may be damaged due to misuse, vandalism, etc.
- Workers’ Comp Insurance: The financial impact of injuries sustained on the job is covered by Workers’ Comp Insurance. The construction industry is more at risk for workers suing for injuries: they have stricter legal requirements, a higher injury rate than other industries, and complicated subcontractor relationships. Workers’ Comp can help here.
- General Liability Insurance: General Liability Insurance is important to invest in because contractors face exacerbated risks to their reputation, especially regarding client requirements and subcontractor liability. Not only is it required, but it also covers many costs related to claims made regarding damages and injuries.
- Builder’s Risk Insurance: This type of insurance is valuable to excavation contractors because it covers the lots and structures on them that they use during their excavation. These areas face risks in rough weather, vandalism, theft, faulty workmanship, and equipment breakdown.
- Umbrella Coverage Insurance: Umbrella Coverage covers many risks beyond the scope of other policies the contractor has purchased. This is a good catch-all for any unforeseen risks that may arise later.
- Errors and Omissions (E&O) Insurance (Professional Liability Insurance): E&O Insurance covers claims of mistakes or negligence. For businesses with professional services, E&O is vital.
- Directors & Officers (D&O) Insurance: D&O covers a business’s board members and executives. Some common offenses covered are lack of corporate governance and breach of fiduciary duty.
- Employment Practices and Liability (EPL) Insurance: EPL Insurance is helpful for claims of harassment and discrimination, which are wrongful employment practices.
- Product Liability Insurance: Product Liability Insurance covers claims about injuries caused by a company’s product.
- Pollution Liability Insurance: Pollution Liability Insurance is helpful for excavation contractors, as they work with devices and materials that may harm the environment. This type of insurance covers financial loss from polluting the environment, from cleanup to third-party damage.
- Cyber Liability Insurance: Cyber Liability Insurance helps cover risks associated with cyber mistakes, such as data leaks, privacy issues, fraud, and credit monitoring.
- Crime Liability Insurance: Crimes, such as fraud and embezzlement, are covered by Crime Liability Insurance. This type of insurance covers company employees and third parties as well.
- Excess Liability Insurance: Excess Liability Insurance covers costs beyond the cost limits of other insurance policies. It is essential to handle unpredictable large risks and limit financial losses with them.
Partner with POWERS® Insurance
Insurance alone is not enough to fully protect your business. Managing risk involves various strategies, with a key focus on addressing your financial risks. The first step is to implement a strategic risk management plan.
We can help with that! We will conduct a comprehensive assessment of your risk profile to identify the necessary policies for addressing uncontrollable risks.
At POWERS Insurance & Risk Management and Leif Assurance, we stand by your side. We understand the unique risks that excavation contractors face. We want to help you understand those risks and prepare accordingly.
Our role is to help you select the insurance product that best suits your needs, ensuring you maximize the benefits of your policy. Following this, we will collaborate with you to develop an integrated risk management plan, empowering you to make informed business decisions.
Schedule a free consultation today.
