The partial collapse at a condo construction site last month in Welland, Ontario, is an example of the challenges of insuring large-scale building projects in Canada, an expert has said.
These concerns can be applied to the partial structural damage incidents at Upper Vista Welland — a project of Evertrust Developments — which resulted in a full Ministry of Labour investigation and a successful bid to allow the company’s team to re-enter the site on a partial demolition permit. The project manager deemed this news to be “a huge step forward,” with an engineering letter declaring the space to be safe and stable.
Insurance Business spoke with Hrab to gain insight into the types of claims could come from a situation like this, as well as how insurance coverage has changed for large-scale projects like this over the years.
While not professionally involved with Evertrust, Hrab stressed that an insurer’s first thought when hearing of a collapse is whether there was a threat to the personal safety and livelihoods of the workers or individuals who may have been around the site.
“With this being the second time, I wondered if the potential for physical injury was greatly increased,” he said.
“Especially after the first incident, it was unknown what the cause of the loss was, which could have resulted in some probably pretty catastrophic physical injury.”
No instances of accidental harm were related to this event.
An insurer will also be mindful of the potential destruction of contractor property. A construction project of this magnitude will most likely have professionals from outside of a company’s roster come on board to complete short or long-term work.
“There’s potential damage to tradesperson equipment on-site, which includes vehicles, expensive tools/machinery and building materials,” Hrab said. While not an issue in this case, the collapse could also impact structures that lay adjacent to the building site. “Residential homes and commercial buildings could also have been affected by falling concrete, which would open a whole new set of claims on an insurance front.”
When encountering and recouping the losses of an incident, an insurance company would dispatch claims people, architects and engineers to assess the area, initiate any safety protocols to settle the losses and ensure no further claims are initiated. A broker would be involved throughout the process to ensure that the correct information is being relayed to the policyholder while also providing integral next steps to resume work.
When an incident occurs on a construction site, especially when structural integrity is at stake, a stop order is put in place to halt any work and allow regulators to assess the damages and potential for further accidents.
“Very little work will be able to be done until professionals have come along to assess the situation and been determined to be safe for all workers and contractors to resume their roles,” Hrab said. “This could be anywhere from six to 12 months depending on the severity of the case.”
With the Ministry of Labour granting Evertrust limited access to demolish parts of the building that have caused these partial collapses, the company can now begin the process of rectifying the situation to resume the construction phase once again.
However, since there will be a need for a further safety investigation, and a near halt on progress, this will impact Upper Vista Welland’s opening date, while also effecting the work schedule for those involved with the project. “Stopping production also comes with financial and reputational risks,” Hrab said.
“But what is most important is that the workers will be able to complete their job in a safe environment with optimal regulations put in place.”
The ability to find a single insurer to take on a multimillion-dollar project has become quite a rarity in the Canadian market. “In the construction space, we were relying heavily on Lloyd’s of London and syndicates that would support insurance ventures,” Hrab said.
“However, over the last few years, they have scaled back on their appetite, so only a few companies would solely write insurance for a $50 million build.”
To overcome these limited options, companies would have to shop around between various insurers and MGAs for different policies to secure a thoroughly insured construction site. “Rather than taking on 100% of the risk, insurers may only want to take on 15% to 25% instead,” Hrab said.
“We have to get creative in finding solutions, so is if there is a loss, the spread of risk is better than just one person taking on the totality of the loss.”
For developers, incidents like this can make the path to insuring future projects more costly in lieu of recent events. “If they do find coverage, deductibles will be quite high, while there will most likely be rigid requirements at the binding stage,” Hrab said.
What do you think about the complexities of large-project insurance? Sound off in the comment section below.
