How is COVID-19 Impacting the Construction Industry?

New pandemic protocols, updated contracts, deferred spending to preserve cash...COVID-19 has changed the way many contractors and construction pros are doing business.

Here are a few of the ways COVID has impacted the construction industry so far.

Construction Considered "Essential"

While many State governments ordered many businesses to shut down to slow the spread of COVID, the construction industry managed to elude ordered shutdowns.

Infrastructure projects, in particular, are noted for their importance. And health and safety risks from COVID-19 vary from project to project. Typically, contractors working outside and not physically close to each other were in a better position to comply with new health and safety regulations and at lower risk of contracting the virus.

In areas where State-of-Emergency was declared, however, not even the construction industry was immune to temporary shutdowns and suspensions.

Not Shutdown, But Slowed Down

Even when contractors received the ok to continue working, many construction projects suffered from delays and supply chain disruptions.

Hiring has also slowed; nearly two-thirds of construction businesses polled stated they ceased hiring during COVID unless they received a loan or government aid.

Re-evaluating Insurance Coverage

Contractors have always relied on contractor insurance to protect their business, but COVID-19 is causing many to rethink the type of coverage they need.

Admin and office staff that previously worked out of the main office space are now remote workers, bringing additional cyber liability risks as they take their work home on company-owned devices and connect to unreliable and or unsecured networks. Contractors are now finding cyber liability coverage to be just as essential as general liability and workers' comp.

Speaking of workers' compensation coverage, the risk of employees getting sick from COVID while on the job leaves many contractors performing audits of their workers' comp insurance, ensuring they have enough coverage to protect employees from a very real on-the-job health risk.

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Reworking Contracts

Because of the slowdowns, delays, and restrictions due to COVID-19, many contractors are updating their current contracts to protect themselves against unforeseeable events better.

Contracts generally have provisions for unforeseen events such as the COVID-19 pandemic. A "force majeure" clause broadly refers to events outside of the affected party's control that were unforeseeable when the contract was entered into, resulting in a party not being able to perform some (or all) of its obligation.

Under many forms of contract, a force majeure event would typically entitle a contractor to an extension of time for critical delay caused by the event, although not to compensation for costs incurred during the delay period, except in agreed-upon circumstances.

Another contractual provision concerning "changes in law" may also protect contractors. When local governments pass laws or regulations that restrict the movements of people or goods, this change in law provision may confer a right to both an extension of time and for unavoidable costs incurred.

New Safety Guidelines

Construction businesses are investing heavily in additional PPE and procedures to keep employees and clients safe. They're sanitizing trucks and tools daily, conducting temperature and oxygen checks on crews, re-scheduling personnel to not overlap with other trades on-site, and finding ways to conduct contactless service calls, among others.

In addition to specific State and local safety guidelines, OSHA has issued two new pieces of enforcement guidance for employers, one for recording COVID-19 cases and the other regarding its plans for onsite inspections.

Spending on Safety, Saving Everywhere Else

While contractors are investing in more PPE and safety equipment, most have hit the brakes on spending everywhere else. With projects slowing and more money being spent on employee safety, some contractors are seeing profit margins dwindle or even disappear. Discretionary and non-essential spending has come to a standstill for most.

The full impact of COVID-19 on the economy and the construction industry is still left to be seen. But savvy construction pros are using slower times to refocus on what they need to do to protect their employees' safety, clients, and bottom line.

 

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