From an insurance perspective, properly securing a development project site is more important today than ever before. Exposures to arson events, political protests, rioting, and looting have forced insurance carriers to pause and reconsider their underwriting requirements for site security. But since every insurer seems to be taking a different approach, it is critical for developers and contractors to keep up with the ever-changing requirements, as well as the penalties for not complying.
The builder’s risk market, especially for larger (over $30 million in hard costs) wood frame projects, is undergoing a massive transformation in what insurance carriers consider “best practices” for securing a project site. The days of setting up a few flood lights and flimsy fencing around the perimeter of a project are gone. The security measures and protections that carriers are now requiring are sophisticated, dynamic and extremely expensive.
Exposures
The market has been inundated with claims for fires (construction and arson-related), vandalism, theft and rioting/looting. But the most frequent claim on construction projects is for water damage, and carriers have been crushed in recent years by the volume of these claims.
Carriers are limited to increasing premium, raising the deductible and/or restricting coverage, so many site protection requirements today reflect a dual-pronged approach by requiring methods that can reduce fire and water events.
Carriers may also impose new underwriting requirements prior to issuing the policy and include language stipulating that if the insured doesn’t comply, the policy is either voided or cancelled or the claim recovery is limited. It is critical to carefully examine the carrier’s policy language, as it can be extremely restrictive.
The following is a summary of enhanced site security and prevention measures in the current market.
Fencing
The first line of defense at a project site is the fence, and carriers want to make sure it is formidable. Site fencing requirements typically include the following.
- A 6- to 10-foot fence (depending on the location and characteristics of the project) that completely surrounds the project site with no openings unless they are gated.
- All gates to such fences must be closed and locked, to secure against entry to the jobsite during all non-working hours.
- Some carriers seek to add a requirement for barbed/razor wire on top of the fencing. However, this can be challenging because many jurisdictions restrict such wiring on construction sites. This is where an insurance requirement can actually be in conflict with a local law or ordinance, and it may require specific negotiation with the carrier to remove or waive the requirement.
Lighting
A flood light here and there won’t pass muster anymore. Site lighting now typically means the following.
- The project site has exterior lighting that illuminates the entire perimeter of the site and is operational during all non-daylight hours.
- Similar to the barbed wire fencing requirement, this illumination requirement can conflict with local ordinances that specify the permissible degree of illumination on a project site to limit the impact on neighboring buildings and residents during off hours.
Sophisticated Camera Systems
One or two security cameras also won’t cut it anymore. Carriers are strict with camera surveillance and only permit use of a handful of pre-approved equipment vendors. Requirements typically stipulate that the surveillance system has the following qualities.
- It covers 100% of the site perimeter.
- It operates in low-light conditions using Infrared Radiation (IR) illumination or thermal imaging cameras.
- It detects and discriminates, in real-time, the intrusion of persons or vehicles along the site perimeter, using automatic visual content analytic capabilities and zone calibration functionality to reduce false alerts. An alert is sent to the monitoring station to verify the intrusion and trigger an immediate response.
- It is equipped with live, audible voice-over capabilities to “talk down” an intruder at any point along the site perimeter, and a strobe or lighting feature as a visual indication to intruders that the system has detected them.
- It notifies the monitoring center to verify possible intrusions and trigger an immediate response in the event of a trespasser.
- It includes a battery backup capable of running the entire system for four hours in the event of an AC power loss. AC power losses exceeding 30 minutes will prompt an alert from the monitoring center to dispatch site personnel to investigate the issue.
- It includes response-enabling monitoring that is activated during all non-working hours. Additionally, the system must have a fail-safe method to activate itself based on a pre-determined time schedule.
- It must have 24/7 real-time detection of events relating to a loss of AC power, cellular/wireless connectivity, device tampering or video camera connectivity and focus. The monitoring center must also monitor the system for these issues.
Watchpersons/Guards
Gone are the days of a single guard, sitting alone in a guard box at the front entrance watching YouTube videos on his or her phone all night. Today, insurers want to see active engagement from the guards on the site, including constant surveillance of the perimeter of the structures and active walking throughout the project as its being constructed.
Having a security service requirement typically means the watchperson(s) is making no less than hourly rounds of the entire jobsite during non-working hours and maintaining appropriate logs of such hourly rounds. Additionally, this service is typically required once the erection of exterior walls has commenced on any structure at the site.
Water and Fire Prevention Requirements
Carriers are requiring water flow detection devices that are: connected to the existing fire system main and domestic water lines (installed before water is turned on); sized to fit pipes where sensors are installed; and activated to provide notification when there is an overflow or unwanted inundation of water. In addition, carriers want onsite fire suppression vehicles equipped with first suppression spray, so site security guards can fight a fire in the initial minutes of a blaze, before the fire department arrives.
Carriers are also encouraging, and in some cases mandating, the use of fire suppression powders and sprays for wood-framing projects. There are companies that, as a project goes vertical, will spray a special formula of fire retardant liquid/spray onto the wood framing that significantly slows down the burn rate and spread of a fire.
While this is good in concept, some architects and contractors are hesitant to embrace its application because the formula was never considered in the initial project plans and it is unclear how the formula will interact with other building materials.
Developers/contractors need to be aware of these sprays and powders, because it is a mandatory requirement on some large wood frame projects. Teams will need to familiarize themselves with the product, how it is applied and how it may interact with other materials.
Trash chutes and scaffolding
Some requirements are getting as granular as trash chutes. Carriers don’t like to see trash chutes made of combustible materials, so plan accordingly and replace traditional wood-framed trash chutes.
Lastly, because carriers are concerned about vandalism, rioting and the risk of people tossing flammable items into a project site, wrapping project scaffolding in screen netting is a preventative measure that can be taken to help combat this risk.
Planning ahead
It’s critical for developers/contractors to keep up with these new and emerging project site protections. But it’s not just about remaining vigilant on compliance; developers/contractors must be familiar with the insurance policies for the site, as well as the penalties and exclusions that may apply to non-compliance.
It’s also important for developers/contractors to bid out security and protection measures early, so budgets can be adjusted and refined over time. Early in a project’s life cycle, insureds won’t know which carrier(s) will be on their project, so they won’t know the exact security requirements until formal quotes have been produced.
Typically, quote negotiations do not commence until within 90 days of a project’s start date, and frequently, carriers release quotes within 30 days of the project’s start date.
Therefore, it is crucial to keep abreast of current industry requirements so that project teams can plan in advance.
