Ways to Obtain Insurance for EIFS
My Web site gets numerous inquiries each day about EIFS insurance issues. Over the last year or so I’ve dutifully answered so many help requests that I’ve compiled a standard list of suggestions that I send back to people. I’ve also received a lot of interesting feedback from contractors and insurance agents. This month’s column is a summary of those suggestions that hopefully will help you get insurance and stay insured.
First, insurance agents are often just that: agents. They usually represent one or several carriers and often have little control over their carrier’s policies. Agents say that contractors should carefully review their records and determine how many claims, if any, have been made against their policy. It’s possible that having no claims will help renew an old policy or obtain new insurance. Unfortunately, in some cases, the track record is not a factor, and the premiums are simply raised through the roof. Or worse, sometimes coverage for EIFS work is cancelled.
Contact your lawyer, accountant and business advisor, and explain about this insurance situation. They may not be aware of this growing tide of insurance problems in the construction industry. There may be ways to establish effective defenses against claims via good business planning but such things need to be done before the claim takes place. For instance, try dividing your company into separate business entities, so insurance problems in one area of business do not have so much of an effect on your other businesses.
Prove your workmanshipMake a list of things you do at the job site to make sure that claims do not occur. In a sense, this means developing your own in-house quality control program. This not only helps reassure the insurance people that you’re no so much of a risk but also can help you get new work by showing general contractors that you offer better quality than your competitors. Such a package of information need not be a complicated, formal document, but the exercise alone of piecing together the information is good for your business acumen, and will probably give you some ideas about simple, inexpensive things that can help avoid field problems. Here is a partial list of the kinds things that should be included in a QC program.
The lack of inspection of work as it occurs is often cited as a reason why problems occur. With EIFS, it’s especially germane, as there’s not much that can be determined about the state of the wall once it’s completed without tearing into it. For example, what things are to be inspected, and when (how often)? What are the pass/fail criteria for successfully completing a given task? If something has not installed correctly, how is it remedied?
Develop a list of the types of products that are covered by the QC program. For example, which types of EIFS (barrier vs. drainage) are covered? What brands or products are the contractor “approved” to install? Also, are foam shapes that are not part of the EIFS product covered? Is caulking covered? What about windows and building paper and other wall components that the EIFS contractor sometimes does not install?
List the qualifications (training certifications, years of experience, etc.) of various people in the office and at the site. This includes the chain-of-comments for dealing with managerial issues.
For more detail about the types of information that goes into a proper QC program, take a look at a document titled “Acceptance Criteria 10,” available for free from the ICBO code group’s Web site www.icbo.org. This document describes the content of quality control manuals. Although it is intended for manufacturing processes, it can easily be applied to the construction process.
Have external approvalsThe concept of “self inspection,” by EIFS installers of their own work, does not impress insurance companies. Inspections need to be done by someone who has no interest in the EIFS installer’s business or getting paid by him. It’s thus helpful to know who the qualified and reasonable local inspectors are, so you can have the inspection done by someone you can live with.
Insurance agents and building owners have griped to me about EIFS inspection reports not being detailed enough. To be frank, there are not enough experienced EIFS inspectors around to fill the demand; many also inspect all sorts of other materials. Some insurance agents say reports all too often simply say “tear it all off,” rather than offering less expensive solutions. The “tear-it-all-off” approach costs the insurance company a fortune, and it’s often unnecessary. If you become the victim of a poorly executed inspection report, challenge whatever you feel is deficient in the report, and offer alternatives to unnecessarily expensive repairs.
A lawyer suggested the following idea. In some areas, drainage-type EIFS are required by code on wood-frame buildings. Even if it’s not required, you can still propose using it. Then let the owner or architect turn you down. This tactic can help, especially if it’s in writing. For example, when a lawyer gets you on the stand and asks what you did to try to make sure the alleged problems did not occur, you’ll have a plausible answer. The same theory applies to proposing the use of decent windows, good sealants and even requesting details drawings.
Check with your EIFS suppliers and see what sort of quality control systems they use in making their products. Although many EIFS producers have elaborate production QC programs, which are monitored by outside agencies, some do not. Thus, the specific product you use may affect your ability to get insurance. Keep in mind that it’s rare for the EIFS product itself to be the source of the problems, so the emphasis in a QC program should be on construction procedures and construction details.
As for construction details, it’s a good idea to make sure the building you’re working on has all the details (drawings) available to the EIFS installer, showing how the EIFS is to be installed.
Get involved with the national and regional trade associations that are dealing with insurance matters. One contractor who is searching for insurance does not nearly spark the interest of a big insurance company to the same extent as a large group of potential policy holders offering millions of dollars in premiums.
Make sure that you have the latest training on the specific EIFS products that you are installing. This means going to classes regularly and getting documentation that backs up the claim that the training is current.
Make sure building owners understand that EIFS, or any construction product for that matter, is not totally maintenance free, and that they have a responsibility to maintain their building. Many EIFS producers offer “user manuals” that outline appropriate periodic inspection and maintenance procedures.
Keep in close touch with your insurance agent. He may have little to do with his carrier’s internal policies regarding EIFS, but it’s sure better to know as soon as possible if you’ll need to find another carrier, rather than scramble around when the renewal paperwork arrives.
Consider using look-alike products, such as stucco with a textured finish as the topcoat, in lieu of a full EIFS. Clearly, there are numerous projects where either product will look OK and stucco is often not perceived as the same thing as EIFS. However, sometimes it is, simply because it has EIFS finish on it.
Think about how you might get a job based on not doing the entire job in EIFS but only part of the building with EIFS. For instance, how about doing the lower floors, near grade, with stucco, and the upper floors with EIFS. The lower floors need higher impact resistance anyway, which points toward a harder material, like stucco. Keep in mind that some insurers are placing limits on how high a percentage of a contractor’s work can be EIFS, as opposed to other claddings.
Encourage the EIFS industry to continue to develop and implement full and complete EIFS training and QC programs.
Finally, put all the above information into a binder, with tabs and an index. Make up a bunch of these binders, and keep them with you. Supply them liberally to potential clients, but have your lawyer review them first. Think of this information as business and market development, where you can not only provide soothing technical reassurances to insurance agents, but can also tout your experience with photos and testimonials. This makes a good impression of paperwork-oriented people like insurance agents.