“Insurance reps, contractor risk managers and attorneys highlighted looming new risks at the Insurance Risk Management Institute’s construction conference, held in Orlando, Fla., from Nov. 12 to Nov. 15, that could spell new bottom-line impacts and a need for more vigilance.
Speakers also noted that subcontractor defaults remain a concern, even as markets show some signs of recovery. Luke J. Nolan Jr., a director in the Southwest at insurer Aon, said he was “worried about one-third of subs who are on thin ice.” Attorney Steven Charney said the cost of a default may be underestimated by a factor of three. “You have to factor in the cost applicable to redoing defective work in addition to the work not yet done,” he said. Charney said the average default claim is now one to 1.5 times the amount of the original subcontract. He urged general contractors to ensure they have “black and white” proof of the financial impacts of defaults,but also noted that many “are not capable financially of performing work they sub out.”
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