Consumers are projected to spend approximately $317 billion on home improvements this year.1 In addition, an increase of approximately 6.5% has been predicted for commercial construction in 2017.2 An increase in improvements, means a greater need for artisan contractors. An Artisan Contractor is one that is specific to a trade, for example a plumber, carpenter, painter, roofer, tree trimmer, water or fire restoration expert, or other contractor who provides a specialized service.
Insurance Market Source tapped into its network of experts for insight into key trends across the insurance landscape. After speaking with Jessalynn Suda, Corporate Associate Vice President, Burns & Wilcox, and Tyson Peel, National Property & Casualty Manager, Burns & Wilcox Canada, it is evident that while many brokers and agents find writing these policies straightforward, there are three key concepts that may assist in better preparing for the process of placing an Artisan Contractors policy.
The nature of work of an Artisan Contractor can vary from one specialty to another and based on contractual agreements. Due to this, insurance carriers require a supplemental application.
“The supplemental application aides brokers in distinguishing what kind of business the carrier is insuring and understanding the nature of the exposures faced,” said Suda.
A painter, for example, can have different class codes for different types of painting, including residential homes, automotive painting, or bridge and high rise painting. High-rise structure painting jobs such as large commercial buildings or structures like bridges could be subject to a maximum height to which an Artisan is allowed to ascend in order to complete the job and may require different types of harnessing to reach those heights. Moreover, a job that requires a painter to use a scaffold poses a different type of risk and resulting exposure than those that do not. While the bodily injury of an employee resulting from a fall from a scaffold is not covered under this form of a policy, resulting property damage might be covered.
“Although the specialty is the same, the contractor’s responsibility and nature of the work could vary greatly,” said Peel.
Suda suggests that aiding a client in understanding the significance of Artisan Contractor class variation is key to properly insuring them—all of which is achieved by completing the supplemental application. To be prepared to fill this out, brokers and agents should know a client’s work history, including insurance history, loss history and experience.
“One of the most frequent questions received from brokers is on the coverage form,” said Suda. “General Liability coverage does not cover faulty work, and there is a fine line between what would fall under a faulty work exclusion and what is actually covered.”
Suda offered a common example of this with plumbers. If a plumber installs a part incorrectly and it causes problems in a plumbing system, the policy would not cover the replacement of the system or its parts. However, the policy would respond to the resulting water damage that occurred due to the faulty work.
It is helpful to aid clients in understanding those differences upfront as it lays the groundwork for smoother claims handling if the issue of faulty work should arise. While faulty work is not generally covered, Suda says that “brokers can instruct clients to purchase Voluntary Property Damage Extensions – or Care, Custody, and Control extensions – which is a sublimit offered to cover damage to items in a contractor’s care, custody, and control. However, this is not offered through many carriers and may not be available to all contractors.”
Changes in Business
“I would advise brokers and agents to keep in constant contact with their clients on a regular basis in an effort to stay abreast of potential changes in their clients’ business,” said Peel. “There are quite a few circumstances that could change the status of a client’s coverage.”
Scaling or expanding services can almost completely change coverage needed for a client.
“As an example, if a roofing client has historically provided shingle roofing services and later decides to expand their services to include hot-tar roofing without notifying their broker, they may face non-renewal or termination of the policy,” said Peel.
Services like hot-tar roofing are often listed under an Artisan Contractor policy’s exclusions due to the increased risk exposure. Artisan Contractors who take on more difficult or specialized projects like this infrequently, will often overlook minor steps that prevent major damage.
“For the roofer accepting a hot-tar project, a frequent oversight is the need for personnel to stay onsite for a certain amount of time after the job is complete,” said Peel. “That particular roofing class needs to be monitored for hot spots that could eventually result in a fire.”
Brokers should ask about the possibility of changes in business up front and check in with clients throughout the duration of the coverage to ensure they are properly covered.
“Clients have also been known to change the name of their business in an attempt to hide past claims or lawsuits to gain a more favorable premium,” said Peel. “It is important for brokers and agents to gather the proper details from clients when writing new policies.”