Safety – The Hidden Return on

Investment

Presented by:Ron Adams

Director of Risk Management

Builders Mutual Insurance Company

Headquartered in Raleigh, NC Grew from North Carolina Home Builders Association In business since 1984—understands the unique coverage needs of the

building market Devoted exclusively to the construction industry For general contractors and trade contractors—both residential and

commercial Solid financial position consistently recognized by A. M. Best with ‘A’

(Excellent) rating Distributed a dividend to eligible WorkSafe policyholders 21 out of 25

years, totaling $45.9 million

Complete Lines of Coverage

Workers’ Compensation Commercial Package Policy Commercial General Liability Commercial Property Commercial Inland Marine Commercial Crime Commercial Auto Builders Risk Umbrella Liability

Costs - The Data

Unintentional injures were estimated at $701.9 billion for 2008

Wage & productivity losses were estimated at $145.1 billion

Administrative cost estimated at $22.3 billionEmployers’ uninsured costs estimated at $22.3 billion146 million workers were injured at a cost of $183 billion

Is Safety a Cost or Investment?

Investment in a well designed and implemented safety program can be recovered by the prevention of ONE accident

Conservative estimates indicate the indirect cost of an accident are 3 to 5 times the direct cost

Example:– $10,000 direct cost equals $30,000 to $50,000 in

indirect cost– If your profit margin averages 3%, it would take $1.6

million in completed business to cover the loss

Direct Costs

Increased cost of insurance / poor loss ratioDeductiblesIncrease in Experience Modification FactorDamage to property / equipment

Indirect Costs

InvestigationsLoss of productivity / moraleWorker replacement – cost of hiringDamage to work / equipment / other employeesDelays in scheduled workOSHA inspections / finesPR - Image

Causes of Loss

FallsStruck By / Caught BetweenMotor VehicleUnprotected OpeningsEquipment OperationsConstruction Defects

Construction Defects

The trial courts have recognized that construction defects are tangible and can typically be grouped into the following four major categories:– Design Deficiencies – Material Deficiencies – Construction Deficiencies– Subsurface / Geotechnical Problems

Construction Defects - continued

The courts have typically used these categories and associated standards to determine culpability for construction defect problems. The metric used to measure is whether the specific condition under review has violated any applicable building codes, is the direct result of construction means, methods, or practices that are below the standard of care in the building industry, resulted from a deviation from the Permitted/approved plans and specifications, or the specific condition is below the reasonable expectation of the home buyer/owner.

What To Do First

Contracts / Change Orders “Continuous” Inspection during construction processDocument inspection process – photos are betterDo not make structural changes to design/blueprints w/o

PE stamp Use only subs you know and trust – subcontractor

agreements / contracts Inspect, inspect, inspect!Don’t be the first to try a new material or method Look for manufacturer’s warranty

How to Address the Issue

Statue of reposeGive your homeowner a clear way to contact you in the

case of a problem Don’t provide your homeowner with a list of your subs to

contact in case of a problem – be the first point of contact

Respond promptly to a homeowner’s notification of a potential problem

View the problem as an opportunity

How to Address - continued

Good PR can come from a prompt response with appropriate corrective actions being taken

Utilize remediation specialists to inspect and report the cause

Speak with your attorney regarding placing a “right to cure” and arbitration clause in sales contract

If you do use arbitration language, be sure to speak with your attorney regarding having connecting language in your subcontractor contracts.

Safety Programs & Culture

Setting the right safety culture for your business– Defining & communicating the importance and

economic value of safety – more than a written safety policy

– Employee involvement / management commitment

– Shared responsibility for results– Defining & measuring results – “What Get’s

Measured, Get’s Done”

Safety Programs & Culture - continued

Develop & implement a written safety policy that best fits your organization – hold everyone accountable

Define those areas that are measurable and monitor on a regular basis

Communicate the results and develop corrective actions – praise positive improvements

Use the resources provided by your agent/broker, insurance carrier, industry experts

Involve all departments in the process

Conclusions

Develop the right safety culture for your business

Defining, measuring and communicating expectations and results

Use your insurance & safety professionalsRemember – “What Get’s Measured, Get’s Done”