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Protecting Your Construction Business from Common Claims

Reasons Insurance

Protecting Your Construction Business from Common Claims

The construction industry is a dynamic and rewarding field, but it also comes with its own set of risks. Construction defects, project delays, and stolen equipment are just a few of the common claims that can arise, leading to costly legal battles and financial setbacks for contractors. Fortunately, construction insurance can provide much-needed protection against these risks.

1. Construction Defects

Construction defects can range from minor cosmetic issues to major structural problems that compromise the integrity of a building. These defects can lead to lawsuits from homeowners, property managers, or other stakeholders who have suffered financial losses or personal injuries due to the defects.

Example: A condominium association sues a construction company for several alleged defects in their units, including water leaking through doors, windows, and roofs. The construction company agrees to a $22.5 million settlement to avoid paying the full amount if found guilty.

Insurance Coverage: General liability insurance can help cover legal expenses and damages arising from construction defect lawsuits.

Preventive Measures:

  • Implement rigorous quality control procedures to ensure work is completed correctly.
  • Promptly address any issues or concerns raised by clients during the construction process.

2. Delays in Construction

Project delays can have significant financial implications for contractors, not only due to extended project timelines but also potential penalties for not meeting contractual deadlines. Delays can be caused by various factors, including defective plans, supply chain disruptions, labor shortages, and unforeseen weather events.

Example: A county threatens to sue a construction company for delays in a $300 million hospital project. The parties eventually reach an agreement, and the construction company resumes work on the project.

Insurance Coverage: Builder’s risk insurance can help cover the costs associated with project delays, such as repairing damage to structures in progress and replacing stolen building materials.

Preventive Measures:

  • Carefully review design plans and identify potential issues before starting construction.
  • Create realistic project timelines that consider potential hurdles and delays.
  • Work with reliable contractors who have a proven track record of meeting deadlines.

3. Equipment Theft

Theft of construction equipment is a prevalent issue, costing contractors millions of dollars annually. Stolen equipment can disrupt project timelines, increase expenses, and pose safety hazards for workers.

Example: A construction company loses valuable equipment to theft, leading to delays in completing a project and incurring replacement costs.

Insurance Coverage: Inland marine insurance can help cover the replacement costs of stolen tools, equipment, and mobile machinery.

Preventive Measures:

  • Secure equipment and tools at job sites using fences, locks, and security cameras.
  • Implement tracking systems on large equipment to aid in recovery if stolen.
  • Maintain accurate records of all equipment and materials to facilitate insurance claims.


Construction insurance is an essential investment for contractors, providing protection against a variety of risks that can jeopardize their business operations and financial stability. By understanding the common claims that arise in the construction industry and implementing preventive measures, contractors can minimize their risk exposure and ensure the continued success of their businesses. Have more questions about how to get the most from your insurance? At Reasons Insurance our team is always ready to help. Reach out today!

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