SAFETY CORNER

How Is Construction Like a Ship?

The ins and outs of inland marine insurance

By Sean Dewalt

Most Alaskan contractors are knowledgeable about commercial inland marine insurance, which covers property in transit over land. Whether insuring the contractor’s equipment and tools or providing builder’s risk coverage for a commercial project, this important insurance helps owners sleep better knowing that unexpected losses like theft and property damage will be covered. Inland marine also covers instruments of communication, such as towers, and fixed objects like bridges and solar panels. However, there is a longer and more varied list of other items that inland marine covers, some of which may surprise even the most seasoned professionals, such as firearms, fine art, and valuable papers.

For centuries, ocean marine insurance was widely used to insure a variety of goods being shipped (cargo policies) and the vessels containing them (hull policies). Lloyd’s of London issued the first actual “all risk” ocean marine policies in 1688. The Marine Insurance Act of 1906 codified laws and regulations pertaining to ocean marine insurance, solidifying the coverages and laws that hold strong today. For example, the “general average” principle of loss allocation for stakeholders is the backbone of today’s insurance.

Like other insurance, inland marine insurance was invented out of necessity. In the mid-1800s,

the introduction of factories, electricity, machines, and the combustion engine created new inventions needing specialized insurance coverages. These emerging risks also needed to be studied and understood by the insurers from an exposure and control standpoint. Policies were narrowed to enumerated perils, meaning only the covered items listed on the policy were covered against loss. These new policies were often called “floater policies,” an insurance policy that covers personal property wherever it may be within the policy territory. This gave insurers and policyholders latitude to insure property that was not static. Railroad rolling stock, heavy equipment, and specialized tools used in construction often move, and this dynamic coverage filled in the gap of insurance options during that time. According to market research by Facts & Factors, “The demand of global Marine Insurance Market size and share was valued at approximately $26.5 billion in 2021… and is anticipated to reach over $31.5 billion by 2028.” Clearly, this is a valued risk management product and

Exposures and controls for inland marine property vary greatly by the type of risk. While most covered property is exposed to theft and vandalism, it is important to assess each risk individually and apply controls that are feasible and adequate to protect the assets.

For builder’s risk insurance, the coverage limit is usually the forecasted amount of the completed project. This has become increasingly more difficult to predict with volatile commodity prices and dynamic labor costs. Factoring in the current challenges with supply chain management, costs can increase greatly over the course of construction. Therefore, protecting the build—from groundbreaking to ribbon-cutting—should include a good project management team and qualified contractors. Protections against loss should include secure fencing to enclose the entire project, good lighting, security patrols and signage, locked trailers and job boxes, Lloyd’s of London issued the first actual “all risk” ocean marine policies in 1688. The Marine Insurance Act of 1906 codified laws and regulations pertaining to ocean marine insurance, solidifying the coverages and laws that hold strong today.

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The construction site at Bartlett Regional Hospital in Juneau controls for risk by the use of fencing, lighting, warning signs, and locked equipment.

Carter Damaska | Alaska Business

and a formal process to ensure these protections occur. Video monitoring is a useful tool and can often be helpful for deterring theft, unwanted visitors, and monitoring the build over time.

Mitigating risk related to a build involves a few other considerations: x Unwanted visitors attempting to camp or loiter anywhere near the build site should be addressed immediately. x Natural events like wind, flooding, and earthquakes should be a priority consideration. x Fire is always a big concern, so ensuring proper hot-work programs are in place, utilized, and enforced can help to mitigate associated risk. x As winter arrives, inclement weather poses hazards to buildings that are not buttoned up. These exposures are normally addressed in the planning phase but should always be monitored as the build moves along.

Taking Control

For contractors' tools and equipment, loss prevention techniques include key control, company logos on mobile equipment, and enclosures. It is important to work with all the project’s contractors to have a complete security plan, including limiting the number of personnel with access to the site and equipment. Consider installing GPS systems to track job trailers and heavy equipment, in case of theft, as well as installing secondary hidden electrical and fuel shut-off switches, especially since many pieces of equipment run off the same key. Keeping an inventory list of tools with photographs can be especially helpful should an insurance claim need to be filed.

Often this equipment must be transported to and from job sites. If a third party is hauling the equipment, ask if the carrier has motor truck cargo coverage. This inland marine insurance product can cover equipment being loaded and unloaded, as well as in transit, while under the care, custody, and control of the trucking company. This is a free risk transfer to the equipment owner and ensures that any loss or damage to your equipment will be covered under the carrier’s insurance, not the equipment owners.

Fixed property covered under inland marine insurance, such as solar panels and wind turbines, should be secured against natural events such as wind, snow loads, and fire. Proper installation of the equipment is paramount and should be done by qualified contractors familiar with the product. Ensure the installers are properly insured for product completed operations prior to the start of any work. Snow and ice should be removed as needed, and frequent documented inspections are prudent.

Lastly, take time to look around your company’s assets. What needs to be protected? When considering a risk management program for inland marine insurance, turn to a commercial insurance agent for sage advice. Always select an insurance carrier that has free loss control services to reduce risks and increase your profitability. Step back, look around, and ask, “What could actually happen here?” Often that simple exercise of high-level risk assessment can reveal ground-level exposure. After all, it is a dynamic world out there and one never knows what might happen next. Always be prepared and informed.

It is important to work with all the project’s contractors to have a complete security plan, including limiting the number of personnel with access to the site and equipment.