Category: Commercial

Is Your Intellectual Property At Risk?

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Intellectual property is the crown jewel of any business, no matter its size. That’s why R&D departments exist and also why companies incur great expense to obtain patents. In fact, the race to innovate has heated up dramatically. But as Tom Aeppel noted in an October 25, 2004 The Wall Street Journal article entitled “Patent Dispute Embroils Industries,” the growing drive to be first has also ushered in another phenomenon:

“The number of U.S. patents issued annually has more than tripled over the last two decades to 187,017 in 2003 as companies try to distinguish themselves among other global competitors with new products or processes.  But patents are also the source of growing litigation. There were 1,553 patent-infringement lawsuits filed in 1993 in U.S. federal court, compared to 2,814 last year.”

In the past, many businesses relied on the coverage provided under the advertising injury portion of their comprehensive general liability insurance to protect them if they were accused of violating intellectual property. The parameters of advertising injury in these polices included coverage for the unintentional acts of misappropriating advertising ideas, or the infringing upon copyright, title or slogan that occurred during the course of advertising goods, products, or services. However, since most companies’ activities go well beyond the scope of what could realistically be defined as advertising, the protection provided by commercial general liability is obviously too limited in this area to be of real value. Under the typical commercial general liability policy, infringement of intellectual property claims that resulted from activities other than advertising would not be covered. By the same token, intentional acts of infringement are also not covered.

The gap between what is and what is not covered in terms of intellectual property infringement under commercial general liability presented a serious problem as competition increased. That’s why insurers developed a specialized type of coverage called Intellectual Property Insurance. This type of coverage has two forms. The most popular form is defense coverage. This is designed to underwrite both the cost of mounting a legal defense against an intellectual property infringement lawsuit and the cost of any settlements or judgments that result from it.

The second type of coverage is called enforcement or pursuit coverage. This policy is for the party that has been wronged so that it can pursue anyone that has infringed upon its intellectual property. This type of coverage is especially appealing to a company that has a valuable patent, but may not be positioned in terms of its capital to exploit that patent’s potential as well as one of its larger competitors. Having this coverage safeguards the company’s intellectual property rights while it acquires the capital it needs and enables it to go after a competitor who violates those rights.

Losing one’s intellectual property can mean the death knell in the current global economy. As companies find themselves having to compete both domestically and in emerging markets abroad, it’s clear that innovation is the only way to stay in front of the herd. If that’s the case, then it stands to reason that Intellectual Property Insurance is one more necessity for doing business in the new economy.

Don’t Wait until a Fire Ignites on Your Construction Site to Start Fighting Fire

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The wildfires experienced by Californians over the recent years are just one of the many examples we see when it comes to just how threatening and damaging fire can be. Since job site fires pose a constant threat to construction projects, contractors should prepare for a potential fire by periodically confirming that their risk management plans adequately address the issue.

Don’t wait until you actually have a fire on-site to start your fight against fire. The following tips have been recommended by the International Marine Underwriters Association to help keep construction sites free from the threat of fire:

1. No smoking – have and enforce a no smoking policy on the construction site.

2. Loss control plan – the written loss control plan should comprehensively address the risks of fire exposure and include specific objectives to be enforced by management on the job site, general safety measures, and a named person to be in charge of on-site safety coordination.

3. Inspections and logs – project managers should do daily on-site inspections of all materials and equipment, the work area, and any other nearby location with potential hazards. A running log should be kept of these daily inspections.

4. Hot works – cutting, brazing, welding, and other hot works operations should have a person designated to observe the working area, as well as areas adjacent to it. The person should maintain a line of sight and watch combustible products, sparks, and slag. The surrounding areas should be inspected for a minimum of 30 minutes after the hot works operation ceases.

5. Portable heating equipment – place all portable heating equipment on non-combustive platforms or flooring. Use recognized standards and/or the manufacturer’s specifications for ensuring the appropriate maintenance, fueling, and clearance.

6. Enclosures – construct temporary enclosures with designated paths for transporting materials. For the best results, only construct the temporary enclosure with non-combustible approved materials and locate it away from overhead exposures.

7. Flammable materials – the labeling and identification requirements of gas and flammable liquid containers should be reviewed carefully before they’re brought on the construction site. Make sure that safe storage areas for flammables have been clearly designated and that the area includes surrounding barriers and signs.

8. Firefighting equipment – keep firefighting equipment on-site and easily available at all times. The project manager should ensure that there is always a reliable water supply available for the equipment to connect to and that the equipment will adapt to local fire department equipment if necessary.

9. Rooftops – roof vents should be adequately cleaned to decrease sources of ignition like lint. Additionally, a minimum of one portable fire extinguisher should be located at-level during rooftop operations. Make sure the extinguisher has sufficient capacity for the fire risk.

Employee Crime Poses a Significant Threat to Small Companies

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Research conducted by the Chubb Group of Insurance Companies revealed that over 36 percent of private companies have been victims of an employee theft within the past five years.  The dollar value of these thefts has averaged nearly $350,000. The researchers also pointed out that more companies are facing similar situations as they reduce staff and make budget cuts. Both actions motivate employees to steal funds, equipment and inventory. 

The insurer reported in its 2005 Chubb Private Company Risk Survey, that 31 percent of companies polled plan to outsource some aspect of their operations, 21 percent plan to eliminate employees, and 20 percent plan to reduce or completely eliminate some employee benefits this year. These actions will be the catalyst for an increase in employee theft.

Larger companies are better equipped to absorb the financial impact of employee crime, but theft of this magnitude could spell financial disaster for a smaller company. Interestingly, the insurer’s research shows that in spite of the possibility of losing everything due to employee theft, more than two-thirds of private companies don’t have crime insurance.

To help small businesses identify and eliminate the potential for employee theft, Chubb is offering a booklet titled “A Guide to Workplace Fraud Prevention” on its website (www.chubb.com/businesses/chubb3331.html). KPMG Forensic developed the booklet. This unit of KPMG International is made up of employees with expertise in a variety of disciplines connected with fraud detection and investigation.

One of the recommendations the authors make is to start by developing an ethical corporate culture. Have a written code of ethics that incorporate the firm’s key ethical values and be sure it is communicated to employees. Many companies also require an annual written statement from every employee that they understand the code and are in complete compliance with it.

Along with the development of an ethics code, KPMG recommends that companies develop an effective fraud response plan that includes:

·   Limiting fraud opportunities by establishing strong internal controls and limiting overrides of those controls.

·   Managing pressures and incentives to steal that are inherent in the business process to the extent possible.

·   Focusing fraud detection and prevention efforts on risks where potential financial loss is the greatest or where cumulative losses from smaller frauds may be significant.

·   Fostering a strong “perception of detection” through proactive fraud identification, detection and investigation efforts.

·   Responding to identified fraud by consistently applying a “zero tolerance” policy.

CERCLA Rights to Sue for Clean Up Costs Reinstated

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In the case of United States v. Atlantic Research Corporation, the Supreme Court ruled that potentially responsible parties (PRPs) that voluntarily clean up contaminated sites may sue other PRPs to recover their cleanup costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The reinstatement of this right comes after many years of federal court battles over the issues of authority and methodology for recovering cleanup costs from other PRPs.
When CERCLA was originally enacted, the courts interpreted section 107(a) as providing a method for PRPs to recover their costs from other PRPs. However, in 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA). Section 113(f) of this law outlined explicit means for PRPs to pursue contribution from other PRPs. After the enactment of SARA, some federal courts held that section 113 was the only remedy for cleanup cost recovery. Other courts prevented PRPs from suing under section 107 of CERCLA and expanded section 113 to allow PRPs’ contributions without the need for a suit.
Section 107 makes PRPs liable for “all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe” and “any other necessary costs of response incurred by any other person.” In Atlantic Research, the United States argued that the section 107 use of “any other person” was limited to suits brought by “non-PRPs.”  That meant that Atlantic Research, a PRP, was barred from filing suit. The Supreme Court held that all the words of the statute must be “read as a whole.” They added that using the United States’ reading of the language would decrease the number of plaintiffs permitted to sue to almost zero, which would make Section 107 worthless.
Section 113 prohibits claims against PRPs who have satisfied their liability to the United States or a state in an administrative or court approved settlement. In Atlantic Research, the United States argued that permitting PRPs to seek recovery under section 107 negates the protection offered to PRPs who have settled under section 113. The Supreme Court conceded this. However, the Court stated that this “supposed loophole” would not discourage settlements because district courts would take into account any earlier settlements when assigning the level of liability to the various PRPs involved.
The Supreme Court also ruled that section 107 and 113 provide two “clearly distinct” remedies. Section 107 permits PRPs to recover cleanup costs they have incurred from other PRPs. A PRP that has satisfied a settlement agreement or court judgment under CERCLA may pursue contribution from other PRPs through section 113. The Court made clear that simultaneous recovery under section 107 and section 113 is not allowed. PRPs can’t choose their method of recovery. The appropriate remedy will depend on the circumstances in each case.

In the case of United States v. Atlantic Research Corporation, the Supreme Court ruled that potentially responsible parties (PRPs) that voluntarily clean up contaminated sites may sue other PRPs to recover their cleanup costs under section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The reinstatement of this right comes after many years of federal court battles over the issues of authority and methodology for recovering cleanup costs from other PRPs.When CERCLA was originally enacted, the courts interpreted section 107(a) as providing a method for PRPs to recover their costs from other PRPs. However, in 1986, Congress enacted the Superfund Amendments and Reauthorization Act (SARA). Section 113(f) of this law outlined explicit means for PRPs to pursue contribution from other PRPs. After the enactment of SARA, some federal courts held that section 113 was the only remedy for cleanup cost recovery. Other courts prevented PRPs from suing under section 107 of CERCLA and expanded section 113 to allow PRPs’ contributions without the need for a suit.Section 107 makes PRPs liable for “all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe” and “any other necessary costs of response incurred by any other person.” In Atlantic Research, the United States argued that the section 107 use of “any other person” was limited to suits brought by “non-PRPs.”  That meant that Atlantic Research, a PRP, was barred from filing suit. The Supreme Court held that all the words of the statute must be “read as a whole.” They added that using the United States’ reading of the language would decrease the number of plaintiffs permitted to sue to almost zero, which would make Section 107 worthless.Section 113 prohibits claims against PRPs who have satisfied their liability to the United States or a state in an administrative or court approved settlement. In Atlantic Research, the United States argued that permitting PRPs to seek recovery under section 107 negates the protection offered to PRPs who have settled under section 113. The Supreme Court conceded this. However, the Court stated that this “supposed loophole” would not discourage settlements because district courts would take into account any earlier settlements when assigning the level of liability to the various PRPs involved.The Supreme Court also ruled that section 107 and 113 provide two “clearly distinct” remedies. Section 107 permits PRPs to recover cleanup costs they have incurred from other PRPs. A PRP that has satisfied a settlement agreement or court judgment under CERCLA may pursue contribution from other PRPs through section 113. The Court made clear that simultaneous recovery under section 107 and section 113 is not allowed. PRPs can’t choose their method of recovery. The appropriate remedy will depend on the circumstances in each case.

Follow Safety Standards, And Common Sense, To Ensure Safe Scaffold Use

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A scaffold is an elevated, temporary work platform that is engineered in a specific manner to support a defined weight load. Ensuring the safety of workers who utilize scaffolds, and avoiding injury to nearby people or property, requires choosing equipment that meets current safety standards, installing it as directed by the manufacturer, and using it for its intended purpose. Any tampering with the construction or weight load can result in injury or death.

The first consideration when practicing scaffolding safety is proper selection. Only use scaffolds that have been tested to the ANSI/SSFI SC 100 standard. When choosing a suspended scaffold, be sure that the hoist complies with ANSI/UL 1323 and that it has been tested and approved by Underwriters Laboratories (UL) or ETL Testing Laboratories. Parapet clamps, cornice hooks and outrigger beams should be tested to the ANSI/SSFI SPS 1.1 standard.

One of the problems associated with scaffold use is collapsing, which can result when the scaffold is overloaded or improperly assembled. Follow the manufacturer’s instructions concerning loading. Evaluate the weight of the workers and materials that the scaffold will support, and determine if the buildings or structures that may be used to support the scaffold are adequate for that weight load.

Another common accident involving scaffolds is overturning or tipping, which can occur if a scaffold is not properly tied. The general rule is that ties must be installed if the scaffold height, as measured to the uppermost platform, is greater than four times the smallest base dimension. Cantilevered platforms, such as side brackets and hoist arms, can exacerbate the problem of overturning and may require that the scaffold be tied at lower points. Additional ties may be necessary if an enclosure is put on the scaffold, because any enclosure, even an open mesh one, increases wind loading, which can cause overturning.

Scaffolds should be equipped with toeboards to avoid injuries to the people and property below from falling tools, materials or debris. The ANSI/ASSE A10.8 standard says that toeboards are required with guardrail systems on all open sides and ends of a scaffold if the structure is in a location where individuals are required to work or pass under it.

The standard goes on to say that when materials are piled higher than the toeboard, the scaffold must be equipped with a safety screen that is strong enough to prevent objects from falling. The screen must be positioned between the toeboard and the toprail and extend along the entire opening.

When a scaffold is in use, don’t allow workers to remove a scaffold component without authorization, because it may cause the structure to become unstable or render safety equipment dysfunctional. You should also never permit workers to alter scaffold components or use them for purposes for which they were not designed.

If a rolling scaffold is being used, wheels or casters must be locked to prevent scaffold movement. In addition, the top platform height, as measured from the rolling surface, must not exceed four times the smallest base dimension. Secure or remove all materials from rolling scaffolds before moving them. Never permit workers to ride a rolling scaffold.

By following established safety standards, and using a common-sense approach, you’ll be able to avoid some of the most common accidents and injuries that can result from scaffold use.

Consider Business Income from Dependent Properties to Insure Against Supplier Shut Down

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A business that suffers a major accident such as a fire or hurricane may have to shut down for days, weeks or longer for repairs. Often, the income lost during the shut down will exceed the cost of repairing or replacing the damaged property. Businesses can protect themselves against this severe financial loss by purchasing business income insurance. However, sometimes a business can suffer a significant income loss, not because of damage to its own property, but because of damage to someone else’s.

Consider the following business situations:

  • A metal parts manufacturer derives 80 percent of its income from sales to four customers.
  • A restaurant located within a five-minute drive from a factory that employs 1,200 people.
  • An electronic components distributor that buys its products from three manufacturers.
  • A supermarket chain that sells milk under its own brand name but that outsources production of the milk to a dairy products supplier.

In all of these examples, the businesses depend on third parties for supplies, purchases, or attraction of customers. If any of these third parties were to shut down, the resulting loss of income would devastate the business.

A business that depends on a few third parties for a large share of its income may want to consider buying Business Income From Dependent Properties insurance. This coverage pays for income lost as a result of damage to the property of another business on which the policyholder depends financially. The form classifies these properties, called “dependent properties,” into four groups:

  • Contributing locations, which deliver materials or services to the business or to other businesses on the policyholder’s account. The three manufacturers that provide product to the electronic components manufacturer are examples of contributing locations. The form does not consider a supplier of utilities (water, power or communications) to be a contributing location. A separate coverage form exists to insurer these types of suppliers.
  • Recipient locations, which accept the business’s products or services. The four customers who provide 80 percent of the metal parts manufacturer’s income are recipient locations.
  • Manufacturing locations, which manufacture products for delivery to the business’s customers under a contract of sale. The dairy products supplier producing the milk for sale under the supermarket’s label is a manufacturing location.
  • Leader locations, which attract customers to the policyholder’s business. The factory near the restaurant is a leader location.

Coverage applies if the dependent property suffers damage from a cause of loss that the policy would cover if it damaged the business’s own property. For example, a typical property insurance policy covers damage caused by fire or explosion, so this insurance will pay if the dependent property burns or explodes. However, since most policies do not cover flood damage, the insurance will not pay if a dependent property floods.

The insured business has a choice of how to arrange the insurance. One option is to make the amount of insurance covering the business’s own property also apply to the dependent properties. The other option is to buy separate amounts of insurance that apply to each dependent property. Under either option, coverage begins 72 hours after the time the damage occurs.

Virtually every business depends to some degree on other firms for parts of its operation. Dependent property income losses do happen; many businesses in lower Manhattan suffered these losses in the months following September 11. Discussion of the exposure to loss from dependent locations should be a regular part of a business’s review with its insurance agent. Standard coverage protects against loss to a business’s property, but the worst loss may come from damage to someone else’s.

Are Your Employees Vulnerable to Automation-Related Injuries?

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As office technology grows, it is developing its own special brand of injuries. Many of your office workers perform work that can lead to automation-related illnesses. To protect your workers and decrease your liability, you need to identify such health hazards and take measures to prevent their occurrence in your workplace.

The most common automation-related injuries are repetitive motion injuries, also known as cumulative trauma disorders (CTDs). The name stems from the fact that the injury develops over time because an employee performs the same task in the same range of motion.

Carpal tunnel syndrome is the most common CTD. This disorder typically develops from the repetitive motions of typing and computer work. The continuous bending of the wrist causes the tendons to swell in the tunnel formed by the carpal bones and ligaments. The swelling pinches the median nerve that gives feeling to the hand. Common symptoms of carpal tunnel syndrome are burning or painful tingling in a hand or shooting pains throughout the entire arm.

There are several steps you can undertake to combat the problem of carpal tunnel syndrome and other repetitive motion injuries:

·   Be sure workstations are ergonomically correct. The computer components need to be adjustable and every workstation should have a footrest, wrist rest, and document holder.

·   Train employees how to work in an ergonomically correct manner. Their keyboard should be positioned at elbow height so that their wrists remain straight and elbows remain at a 90-degree angle while they work. The top of the monitor screen should be at, or slightly below eye level. They should sit with their backs against the chair.

·   Provide adequate break times so that employees can leave their workstation for at least 15 minutes. There should be both a morning and afternoon break.

·   Keep productivity requirements reasonable. Employees shouldn’t feel continually pressured to skip breaks to complete assignments.

·   Rotate employees so they don’t have to perform the same motions all day.

The second most common automation-related injury is eyestrain. This results when employees stare at computer monitors all day. Some ways you can minimize the risk of vision problems include:

·   Reduce florescent lighting in the work area and provide desk lamps instead.

·   Use window shades to reduce glare on computer monitors.

·   Provide equipment that will allow employees to place reference materials close to the computer monitor and at the same distance from their eyes.

·   Train employees on the hazards of staring at computer monitors for long periods of time.

·   Ask computer operators to have a yearly eye examination.

Excessive noise can also result in automation-related injuries, such as headaches and migraines. In addition, noise compromises efficiency and decreases productivity. You can reduce the effects of noisy equipment by installing heavy drapes and thick carpeting. Placing a rubber mat beneath a machine helps reduce vibrations.

Duke Study Says Obese Workers File More Worker Compensation Claims

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A Duke University Medical Center study revealed that obese workers filed twice the number of workers’ compensation claims as non-obese workers. In addition the over-weight workers had 7 times higher medical costs from those claims and lost 13 times more days of work from work injury or work illness than did non-obese workers.

The results of the study were published April 23, 2007, in the Archives of Internal Medicine.

The researchers looked at the records of 11,728 employees of Duke University who received health risk appraisals between 1997 and 2004. Duke ordinarily gathers this information anonymously as a way of identifying potential areas of occupational risk in order to develop plans to reduce that risk. The analysis covered a variety of occupational titles, such as administrative assistants, groundskeepers, nurses and professors.

The study compared the relationship between body mass index (BMI) and the rate of workers’ compensation claims. BMI assesses a person’s weight in relationship to their height, which is why it is considered the most accurate measure of obesity. For Americans, a BMI of 18.5 to 24.9 is considered normal; 25 to 29.9 is considered overweight, and 30 and above is considered obese.

The researchers discovered that workers with a BMI greater than 40 had 11.65 claims per 100 workers, compared with 5.8 claims per 100 workers for employees with a normal weight. They also found that obese workers averaged 183.63 lost days of work per 100 workers, compared with 14.19 per 100 workers for employees of normal weight. The average medical claims costs per 100 workers was $51,019 for the obese and $7,503 for the non-obese.

The study showed that the body parts most susceptible to injury among obese workers were the lower extremities, wrist or hand, and back. The most common causes of these injuries were falls or slips, and lifting.

The researchers concluded that their findings were applicable to the community as a whole, since the demographics of Duke closely reflect the local area. They plan to use the Duke population to help the community, so the solutions they devise can benefit the community as a whole.

However, the primary message they hoped to deliver is that the solution to reducing the burden on workers’ compensation involves eliminating both individual risk factors such as obesity and the risk factors within the workplace that cause injury. By targeting obesity and workplace risks simultaneously, businesses can reduce absenteeism, increase the overall health of workers, and decrease the cost of health care.

Compressed Air: The Least Recognized Hazardous Material

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Workers in many industries use compressed air as a power source for their tools and equipment. Unfortunately, workers sometimes don’t realize the potential dangers inherent in compressed air use, so they fail to take necessary safety precautions. Improper compressed air usage can result in disabling injuries and possible death.

In training employees about compressed air use, first discuss the three major hazards:

·   Skin penetration that causes hemorrhaging and pain-Compressed air can enter the body through cuts in the skin. If this happens, an embolism (air bubble) may form in the bloodstream. If the embolism migrates through the circulatory system to the heart or lungs, it can cause a blockage in a blood vessel in the organ, which could result in death. If compressed air enters the body through the mouth or nose, it can injure internal tissues and organs. If an employee is hit in the eye with compressed air, it can push the eyeball out of the socket. Blowing compressed air into an ear can rupture the eardrum.

·   Flying debris-Air pressure of 40 pounds can cause particles to hit the eyes and face with the same intensity as shrapnel. Flying particles can also cause cuts to other parts of the body.

·   High noise level-Noise levels caused by compressed air usage can reach or exceed 120 decibels, a level at which hearing damage can occur.

Any training about the correct use of compressed air should include instruction on the need to wear personal protective equipment (PPE). Wearing PPE is essential if an employee is to be protected from the dangers outlined above. You should require all employees working with compressed air to wear safety glasses with side shields or goggles, a face shield, hearing protection, and a dust mask or respirator.

Compressed air safety training also should cover the following rules:

·   Check to see that the line being worked with is an air hose, and not a gas or water line.

·   Inspect the hose to see that it is free of holes, and properly connected.

·   Keep air hoses off the floor so they won’t be damaged by foot traffic. Hoses laying on the floor also pose a tripping hazard.

·   Don’t allow sharp objects to rub against an air hose while it is in use.

·   Coil the hose when it’s not in use and hang over a wide support. Never hang it on a hook or nail. Check the coiled hose and smooth out any kinks, which can cause cracking in the hose.

·   Use the lowest air pressure possible to complete the job.

·   Never point an air hose at anyone.

·   Never use an air hose to clean dust from clothes. Use a brush or vacuum instead.

Incorporating correct compressed air usage guidelines into your company’s safety protocols helps your employees to avoid unnecessary and dangerous working conditions, and can reduce the number of accidents that occur.

Protect Your Work in Progress with an Installation Floater

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The materials that a contractor brings to a job site are subject to numerous perils in a variety of locations. The contractor might take delivery of them at his main location and store them for a period of time. At some point, he will transport them to a job site where they may again sit in storage. Finally, he will cut, drill, weld, or otherwise process the materials until they become a finished part of the building. During all of these stages, the materials may suffer damage by fire, theft, flooding, or even damage in a traffic accident during transport to the job site.

Commercial property insurance policies do not cover materials once they have been moved off of the business’s premises, and they provide little coverage for materials while in transit. To insure property that moves around, the contractor needs an inland marine policy, which is a policy that covers property that can easily move from one location to another. The inland marine policy that covers materials a contractor will install in a building is called an installation floater.

Contractors may be familiar with a similar policy known as a builders’ risk policy. A builders’ risk policy insures an entire structure during the process of its construction. The structure’s owner or the general contractor in charge of the job might purchase this policy. An installation floater, while similar in coverage, insures only a specific type of property during the construction, such as the plumbing or electrical systems. Subcontractors, who ordinarily have a limited scope of work on the job, purchase installation floaters.

An installation floater policy insures property used in a construction project. While the actual policy form will vary from one insurance company to another, it will typically cover materials, equipment, machinery and supplies owned by the contractor or for which he has responsibility. The property must be used in or incidental to the fabrication, erection or construction project described in the policy. One single amount of insurance applies to the property; the limit should be the highest value for that type of property during the job. When insurance companies establish the premium for these policies, they take into account that the value of the property will start out small and increase as the job progresses. For example, if a boiler installation contractor buys an installation floater with a $500,000 insurance limit, the company will adjust the premium to recognize that, for most of the project, $500,000 worth of boilers and related equipment and supplies will not be there.

Installation floaters cover all causes of loss other than those specifically listed in the policy. They cover losses caused by fire, lightning, theft, explosion, and several other perils. Typical policies do not cover losses caused by extreme events like earthquakes and floods, but some companies will consider adding these coverages for an additional premium. Most policies will also exclude damage that occurs during testing of a building component or system (for example, testing of compressors). Some companies may consider adding this coverage as well, depending on the type of property and the nature of the testing.

Beside the policy’s expiration, several other events may cause coverage to cease. Coverage ceases when the purchaser accepts the work, when the contractor’s ownership interest in the property ends, if he abandons the project, or within a stated number of days after he finishes work.

Because every installation floater policy is different, contractors should carefully review their policies. They should discuss any deficiencies or confusing provisions with their insurance agents. Construction contracts often require this coverage, so it is vital for a contractor to make sure he has the proper coverage.