Nation's Building News Online

The General Liability Insurance Crisis: Seven Strategies for Builders

Buying affordable general liability insurance coverage is getting harder all the time, but you can do plenty to manage risk in your business. That will make you a more attractive customer to insurance companies. According to Bruce Harrell, CEO of HBW Insurance Services, which provides warranty insurance to the home building industry, effective risk management comes down to these critical steps:

• Keep good records. Document all aspects of the building and selling process — those records will be crucial if you ever get sued. Retain all plans, materials lists, schedules, change orders, trade contractor agreements, certificates of insurance and sales contracts.
  
  
• Pay attention to site conditions. Most GL policies don’t cover defects related to soil movement, so it’s up to you to ensure that your lot doesn’t have expansive or collapsible soils. Retain all soil testing records.
  
  
• Transfer risks to trade contractors. Your trade contractor agreements should include “hold harmless” indemnity agreements, specify the required insurance coverage ($500,000 minimum for each home on which trades work) and require all disputes to be resolved through binding arbitration. Include a waiver of subrogation, which protects you if trades get sued for work performed on your homes.

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• Manage supervisors with care. Site supervisors are the frontline of defense in your risk management program, as they oversee construction quality and enforce job-site safety procedures. Make sure you thoroughly train and manage them.
  
  
• Make safety a priority. Follow all standard job-site safety procedures to prevent falls and keep workers safe from other hazards. Document your safety and safety training programs. Post “Private Property — Unauthorized Entry Prohibited” signs at all points where someone might access the site, and notify home owners and vendors in writing that they cannot visit the site without an escort. These steps will demonstrate in court that you warned people to stay away.
  
  
• Use a comprehensive sales contract. Have an attorney review all your contracts. Make sure they contain strong arbitration provisions. Document all changes and have home owners sign the change orders.
  
  
• Implement a solid warranty program. Proactively handle all requests for warranty service after the sale. Make sure your employees and trades understand the importance of customer service and warranty calls. Document all requests for warranty service and keep copies of work orders showing you handled the requests.

All of these steps help demonstrate your commitment to running your business safely, responsibly and professionally. That makes you a better risk and can make it easier to buy affordable general liability insurance.

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Home Builders Institute Offers Training Courses for Site/Field Superintendents

Home Builders Institute (HBI), the workforce development arm of NAHB, offers an eight-course curriculum geared toward budding and current site/field superintendents. For more information on the Field Superintendent Designation, click here.

Want more information about effectively managing your business?

NAHB’s Business Management Department offers a variety of online resources to help you run your business better and more profitably. Click Business Management Tools for articles about human resources, financial management, sales, production, technology, customer service and other business-related topics. In addition, visit the NAHB Software Users Network Discussion Forum (SUN) to ask technology consultants and other builders what they think of various software packages and applications.

BuilderBooks.com Has Books About Business Management and Customer Service

BuilderBooks.com offers a variety of publications about business management. To view or purchase these publications online, click here.

Subscribe to NAHB’s Business of Building e/Source

NAHB’s Business of Building e/Source is your monthly electronic guide to the hot issues and emerging trends in home building business management. You’ll find practical advice, tricks of the trade and sound business guidance — all delivered monthly, straight to your desktop, in a quick and easy-to-read format. Business of Building e/Source is available free to NAHB members and their employees. To subscribe, click here on the members only side of www.nahb.org.

University of Housing Offers Courses on Customer Service and Business Management

The NAHB University of Housing offers a course on business management designed to help builders improve their business and profitability. For a list of current offerings, click here.

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