The construction industry is being reshaped by two major trends — contractors are taking on an expanded role in project design, as well as embracing digital technology for both project modeling and daily operations. Both of these trends significantly increase the liability exposures contractors face.
On the design side, it has become the norm for projects to encompass far more than just building to plan. Many contractors now provide architectural and engineering services; act as consultants in the design phase; manage project construction; and collaborate with designers and owners using nonstandard project delivery methods.
The average cost of a data breach has risen to $3.79 million for companies participating in a widely followed survey, up 23 percent in just two years.
At the same time, contractors are increasingly using sophisticated software tools such as building information modeling systems and laser scanning to expedite project delivery. Technology also plays a greater role in daily operations as contractors handle and store a wide range of confidential and personal information; from valuable building plans to financial and employee data.
New business models, new ways of working and new technology bring a wider range of risks. Previously, general contractors had little to no professional liability exposure. That’s not the case today. Contractors’ exposures have evolved from standard commercial general liability, auto liability and builder’s risk to include exposures linked to design and management of work along with cyber exposures arising from modeling software and the confidential project, customer and employee data they store on their own or remote networks or with a “cloud” provider.
To protect themselves, contractors need to recognize existing, as well as evolving professional liability risks they face and ensure their various coverages address those exposures. By working with a carrier that has a deep understanding of the construction industry, professional liability and cyber risks, contractors can ensure that their risk management strategy keeps pace with the evolving industry.
To develop an effective robust cyber security program, contractors should work with data security professionals as well as risk engineers at their insurance carrier.