The Risk of Innovation: How New Construction Methods Can Spark Insurance Claims
New Innovations, New Risks
In the fast-evolving world of construction, new methods and materials promise to revolutionize building processes by cutting time and costs. However, these innovations come with their own set of risks, making it crucial for brokers to conduct in-depth research when dealing with prototype buildings and materials.
When we refer to "prototypes" in the context of construction, it doesn’t necessarily mean that something is entirely untested. Instead, it signifies that these designs, methodologies, or materials are not yet widely adopted in Canada. This term can apply to everything from cutting-edge building designs and construction methods to innovative materials and products.
The Rise of Modular Construction
One of the most significant innovations in the construction industry today is large-scale prefabricated modular construction. This method involves creating complex building modules in a controlled factory environment before transporting them to the construction site for final assembly.
Bernard McNulty, chief agent of Allianz Commercial in Canada, explains how this process allows entire rooms, complete with plumbing, electrical, and finishes, to be constructed and protected from environmental factors such as moisture. Even roofing can be applied in the factory setting, reducing the time and exposure risks associated with traditional on-site construction.
However, McNulty notes that while modular construction offers numerous advantages, it also presents unique challenges. Losses related to transportation, storage, and site assembly of these modules can occur, particularly when moving components by truck, rail, or ship. For example, in northern Alberta, McNulty’s team is working on a 700-room modular lodge for oil and gas workers, showcasing how speed and efficiency are dramatically improved through modular construction.
Eco-Friendly and Sustainable Building Materials
The push towards eco-friendly and sustainable building solutions is another growing trend in construction. Innovative designs and systems in heating, ventilation, air conditioning, and other critical building components are becoming increasingly common. For instance, new designs in escalators and elevators can cut power usage by up to 40%, offering significant benefits over conventional systems.
Yet, the novelty of these innovations can also bring unforeseen challenges. McNulty shares an example of an eco-friendly flooring system made from recycled materials that experienced significant issues with adhesion. As this product was new to the Canadian market, identifying the root cause of the problem involved multiple investigations, including assessing the product, the surface preparation, and the adhesive used.
Managing Claims and Liability
The challenges associated with prototype construction methods often lead to complex claims and liability issues. Losses stemming from new materials or designs can trigger multiple policies, including construction and liability coverage for all involved parties. Sorting out responsibility for these losses can be a painstaking process, often involving on-site assessments and consultations with manufacturers and work crews to ensure proper installation.
Additionally, beyond the direct costs associated with replacing faulty components, construction delays can add significant expenses, which are frequently covered under specialized insurance policies.
Navigating the New Construction Landscape
As the construction industry continues to evolve with new methods and materials, brokers play a vital role in ensuring that these innovations are properly insured against potential risks. By understanding the complexities of prototype buildings and construction materials, brokers can better protect their clients and help navigate the intricate landscape of liability and claims management.
At Why Worry Risk Management, we specialize in assessing and mitigating risks associated with emerging construction trends. Whether it's modular construction, eco-friendly innovations, or other cutting-edge building practices, our team is here to ensure you have the right coverage for every stage of your project. For more information on managing risks in modern construction, reach out to us today.