Construction managers (CMs) are at the forefront of an industry under pressure — and understaffed. With the demand for construction projects increasing, many firms are stretched thin, relying on inexperienced workers and subcontractors. It’s a perfect storm that heightens risks across the board — from safety concerns to project delays. At the same time, project backlogs continue to grow, leaving construction managers juggling multiple high-stakes projects. The potential for accidents, cost overruns, and contractual disputes is at an all-time high, making it imperative for agents to recommend comprehensive insurance solutions to their clients.
The CM’s role has evolved significantly over the past 50 years. Once seen as an extension of general contracting, construction management is now a professional discipline distinct from design professionals and general contractors. As an insurance agent working with CMs, it’s essential to understand the differences in construction management services, as these distinctions directly impact risk exposure and insurance needs.
Agency construction managers are hired by project owners, developers, or large general contractors to consult on the management of a construction project. Unlike general contractors, agency CMs do not perform any actual construction or hire subcontractors. Instead, they provide oversight and consulting services, including:
Although agency CMs do not carry the financial risks associated with construction, their role exposes them to a variety of professional liabilities. For instance, providing flawed scheduling or budgeting advice could result in significant delays or cost overruns, leading to professional negligence claims. Additionally, agency CMs are often named in lawsuits involving property damage or bodily injury on the projects they consult for, regardless of their limited hands-on role.
In contrast, at-risk construction managers assume a much more involved role in project execution. Under an at-risk delivery method, the CM guarantees that the project will be completed within a specified budget or timeline. If they fail to meet these commitments, they might face financial penalties or losses, making them financially liable for any cost overruns or delays.
At-risk CMs are often rewarded with bonuses for meeting or exceeding expectations but operate under intense pressure. The drive for the dollar can sometimes lead to cutting corners, such as using subpar materials or rushing through the construction process at the expense of safety or long-term quality. Because of this heightened risk, insurance carriers closely scrutinize at-risk CMs, particularly for any signs that they may compromise construction integrity to meet deadlines.
Additionally, at-risk CMs might present themselves as “paper general contractors” who oversee subcontractors and collect fees without directly handling the project funds. However, if they retain full control over the project schedule and subcontractors, they are essentially acting as general contractors. In such cases, insurance carriers are likely to classify them as high-risk and require more extensive coverage, including general liability, professional liability, and pollution liability insurance.
In construction management, an “at-risk” construction manager is generally defined by their contractual delivery method. On the other hand, insurance carriers take a broader and more nuanced approach when determining whether a CM is “at-risk.” Carriers are concerned less with the contractual labels and more with the actual risks involved in the CM’s operations. They specifically consider:
Construction managers typically require two main products — General Liability insurance (GL) and Professional Liability insurance (PL). GL protects against third-party claims such as property damage or bodily injury, while PL covers claims of negligence, errors, or omissions in the performance of professional services (think scheduling errors, contract disputes, or project mismanagement). However, CMs often find themselves trying to determine whether a claim falls under GL or PL, which can lead to gaps in coverage. Jencap understands these challenges and has developed a combined General Liability and Professional Liability package, ensuring that whether the claim involves bodily injury on-site (typically a GL issue) or an error in project management (a PL issue), the policy will respond accordingly.
Jencap’s exclusive program is designed with added features that set it apart, including:
Make sure your clients are properly protected. With over 60 years of experience, Jencap and our partners provide expert claims handling for quick and efficient resolutions. Get a quote today.