Experts offer cover guidance for contractors

By Lori Helms

Walk with me now, won’t you, and suspend reality for just a moment as we enter the (hopefully) pretend world of “Asphalt and Pavement Contractor Insurance Nightmares.” Odds are, if you’ve been in business for even a brief period of time, you’ve had a brush with a potential nightmare scenario of a perfectly planned job gone wrong … kind of like one of these:

Let’s say it’s Monday (because as a contractor, let’s be honest, doesn’t it always feel that way?), and a paving project was well underway, it’s suddenly discovered that one of your trucks has leaked hydraulic fluid all over the place because someone didn’t tend to the winter maintenance schedule on the fleet during your slow times. That leak subsequently entered the water system and now you’ve got a pollution event on your hands (and in your wallet), for which you likely aren’t covered if you’ve purchased only the standard required insurance policies.

Or here’s a good one – across town on that same Monday but on another project, one of your workers has accidentally oversprayed certain pavement maintenance materials onto your customer’s $200,000 sports car parked nearby. You thought you’d keep your insurance costs down by just paying a high deductible, but all you’ve managed to do is sabotage yourself because instead of choosing the right coverage to begin with, you’re going to be shelling out a good deal of dough, making quite the dent in that project’s profitability.

Insurance experts Scott Cerosky, Principal of World Insurance Associates in Brewster, New York, and Gary Goldman of Gary S. Goldman & Associates shared examples like these with me recently as we were discussing a contractor’s best practices when it comes to finding the right insurance coverage for your contracting business. As people with decades of experience in the contracting world themselves before entering the realms of insurance and consulting, they’ve likely heard and seen it all as far as what can truly go sideways when proper coverages are not in place and the worst scenario possible suddenly comes to life.

We also contacted Justin Failoni, Partner and Senior Vice President at Acrisure’s South Division in Miami Lakes, Florida. He shared a similar instance in which a contractor’s equipment struck a sewer main, resulting in a pollution event.

“While the repair to the sewer main itself was covered under the General Liability (GL) policy, the resulting damage caused by the released sewage was not – since pollution events are typically excluded from standard GL forms,” he says. “This left the insured facing significant out-of-pocket costs.”

Even the best laid plans for a pavement or asphalt project can go awry, and all the experts I contacted agreed that it’s possible to not be caught flat-footed – or under-insured – when one of those nightmare scenarios suddenly enters the world of the living. In addition to the standard coverages of general liability, workers’ compensation and automobile insurance, Failoni says for niche industries such as asphalt and paving, some tailored options should be considered. Those include:
• Contractor’s equipment coverage: protects costly machinery such as pavers and rollers from theft or damage.
• Inland marine insurance: covers equipment and materials during transit, which he says is critical for asphalt deliveries.
• Pollution liability: addresses environmental risks from asphalt spills or emissions.
• Builders risk insurance: covers materials and work in progress for new paving projects.

In turn, Cerosky tells me that there’s been a trend in the industry toward greater demands from customers and myriad regulatory bodies that affect the types of coverages a contractor should hold. In addition to the tailored coverage mentioned above, he says the typical triumvirate of general liability, workers comp and auto insurance coverage limits can be increased by purchasing an umbrella policy (purchased in $1 million increments) that essentially increases the coverages of all those underlying policies (basically, enjoying the “umbrella” of higher amounts hovering over them). He also emphasizes the need for each project to have a detailed scope of work.

“It’s the best thing to defend you in the event of claim,” says Cerosky. He says it’s critical to make sure that the scope of work is clearly defined – leaning heavily into the “what, where and when” of each project. That way there is absolutely no misunderstanding as to what your project will include, exactly which areas will be worked on and the timeframe in which you agreed to perform the work (with obvious exceptions for weather-related delays).

Also, Cerosky says contractors should not be surprised if a customer requests a performance and payment bond. He describes it as a financial guarantee instrument that protects the customer and guarantees that the work will be performed to the specifications outlined in the project’s contract. The payment portion of the bond guarantees that any subcontractor you may hire will also be paid for work performed. Cerosky says those bonds are issued at amounts that vary from one percent to three percent of the contract.

By nature, insurance coverages for asphalt and paving contractors will look significantly different than the coverages that might be recommended to your local retailer or restaurant. For that reason, all our experts agreed that the first step is to consult with someone with specific industry expertise.

“With experience serving major contractors and developers, there’s no one-size-fits-all solution,” Failoni says. “Coverages must be customized to each client’s needs. This is why partnering with a broker specializing in the industry is crucial – it helps avoid wasteful spending and maximizes protection.”

“Asphalt paving contractors should adopt a comprehensive approach to insurance that addresses their unique risks, complies with legal requirements and meets client expectations,” says Goldman. “Partnering with an insurance professional can help tailor a policy package to fit specific needs.”