Is Construction Too Risky?

Have the construction slowdown and other issues increased exposures?
By: | November 1, 2013 • 4 min read

Point: Industry is Well Positioned to Manage Growth Safely

The construction industry is finally getting back to work.

Thanks to the recovery of the housing market, overall construction spending increased 2.2 percent in the second quarter of 2013, compared to the previous quarter, according to Carter Machinery’s Quarterly Construction Report. Total private residential construction spending increased 3.3 percent.


Anne Freedman, Senior Editor, Risk & Insurance®

The report noted the construction market is projected to grow 8 percent in 2014, due to “rapid” residential and nonresidential construction.

That’s good for the economy, the industry and the workers, but it also means risks will be increasing in this high-hazard field.

The industry is one of the most dangerous fields to work in, accounting for the highest number of fatal work injuries in any industry sector in 2012, according to the U.S. Bureau of Labor Statistics. Fatal injuries increased 5 percent, while the total hours worked in the industry increased 1 percent last year.

We know from the performance of one of our 2013 Teddy Award winners that builders are looking at their workers in a much more progressive way, going so far in some cases as to refer to them as “industrial athletes.”

And more good news: Fatal construction injuries have decreased nearly 40 percent since 2006, which indicates risk managers and owners are more sophisticated, and workers are being better trained.

The contraction in the industry has given the owners and project managers time to review and revisit some exposures. One recent innovation is design/build, which puts designers and builders together from the very beginning of a project so there is much better coordination.

In addition, owner controlled “wrap-up” insurance, with one carrier is in greater use now on larger projects. That provides much easier administration and gives the owner more risk management control over subcontractors.

We know that builders are looking at their workers in a much more progressive way, providing them with stretching regimens to reduce injury.

Project owners and contractors are also retaining more risk than in the past, so they are much more sensitive to the need for safety and quality.

Many in the industry are also beginning to understand the need for safety training to be done in both English and Spanish. That has seen some results. Fatal work injuries declined 5 percent for Hispanic and Latino workers in 2012. The natural process of contraction and rebalancing has resulted in an industry that is well positioned to manage the anticipated growth.

Counterpoint: Construction Risk is Getting Harder to Manage

A superficial reading of the finance pages shows a domestic construction industry that is making a tentative comeback. But underneath those hopeful reports lurks a darker truth, the industry is not in a good position to manage risk as business activity increases.


Dan Reynolds, Editor-in-Chief, Risk & Insurance®

To gain perspective, understand that the industry saw tens of billions of dollars of opportunity evaporate during the downturn. One major carrier told us that contractors that once needed to bid eight to 10 jobs to land one are now bidding 30 to 40 to get work.

Price cutting is rampant and contractors are working on much thinner margins. That inevitably means safety corners are being cut.

In addition, the burgeoning urban lifestyle developments in sunbelt states are being built using wood framing rather than metal infrastructure. Why? Because from a labor and materials perspective, wood framing is cheaper to build with than metal. That’s a readily apparent indication of the way the industry is cutting costs. What worries us are the cost-cutting initiatives that are not as visible.

Another factor adding to risk exposures is the loss of experienced talent from the construction industry when the bottom fell out of it in 2008. That means companies that used to pay three people to manage safety are now paying one person — a less experienced person — to do the same work. And the workers themselves are less experienced and have less ingrained knowledge of safe behaviors.

Proof of this shortcoming is showing up in the data. An August report detailed that fatalities in the industry are ticking back up, to as many as 775 reported construction fatalities in 2012.

From a safety perspective, the U.S. Bureau of Labor Statistics ranks construction laborer as the 10th riskiest job in the country. The risk management ranks of the industry were decimated by the economic downturn. Couple that with the fact that it is using cheaper labor to perform the same risky tasks. That is not a good combination.

In some areas of the country, particularly New York, standard market carriers have pulled back from construction risks in droves due to liberal interpretations of labor laws that are allowing workers to sue employers outside of workers’ compensation’s exclusive remedy.

That’s another visible indication that construction risks are getting harder to manage.


Editor’s note: The opinions stated in the Zurich Point of Action are provided for informational purposes only and are solely those of Zurich in North America.
The Zurich Point of Action opinions are not legal advice and Zurich assumes no liability concerning the information above. The Point and Counterpoint opinions are those of Risk & Insurance® and are completely independent of Zurich.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Emerging Risks

Stadium Safety

Soft targets, such as sports stadiums, must increase measures to protect lives and their business.
By: | January 10, 2018 • 8 min read

Acts of violence and terror can break out in even the unlikeliest of places.

Look at the 2013 Boston Marathon, where two bombs went off, killing three and injuring dozens of others in a terrorist attack. Or consider the Orlando Pulse nightclub, where 49 people were killed and 58 wounded. Most recently in Las Vegas, a gunman killed 58 and injured hundreds of others.


The world is not inherently evil, but these evil acts still find a way into places like churches, schools, concerts and stadiums.

“We didn’t see these kinds of attacks 20 years ago,” said Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services.

As a society, we have advanced through technology, he said. Technology’s platform has enabled the message of terror to spread further faster.

“But it’s not just with technology. Our cultures, our personal grievances, have brought people out of their comfort zones.”

Chavious said that people still had these grievances 20 years ago but were less likely to act out. Tech has linked people around the globe to other like-minded individuals, allowing for others to join in on messages of terror.

“The progression of terrorist acts over the last 10 years has very much been central to the emergence of ‘lone wolf’ actors. As was the case in both Manchester and Las Vegas, the ‘lone wolf’ dynamic presents an altogether unique set of challenges for law enforcement and event service professionals,” said John

Glenn Chavious, managing director, global sports & recreation practice leader, Industria Risk & Insurance Services

Tomlinson, senior vice president, head of entertainment, Lockton.

As more violent outbreaks take place in public spaces, risk managers learn from and better understand what attackers want. Each new event enables risk managers to see what works and what can be improved upon to better protect people and places.

But the fact remains that the nature and pattern of attacks are changing.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility, in terms of behavioral patterns or threat recognition, thus making it virtually impossible to maintain any elements of anticipation by security officials,” said Tomlinson.

With vehicles driving into crowds, active shooters and the random nature of attacks, it’s hard to gauge what might come next, said Warren Harper, global sports & events practice leader, Marsh.

Public spaces like sporting arenas are particularly vulnerable because they are considered ‘soft targets.’ They are areas where people gather in large numbers for recreation. They are welcoming to their patrons and visitors, much like a hospital, and the crowds that attend come in droves.

NFL football stadiums, for example, can hold anywhere from 25,000 to 93,000 people at maximum capacity — and that number doesn’t include workers, players or other behind-the-scenes personnel.

“Attacks are a big risk management issue,” said Chavious. “Insurance is the last resort we want to rely upon. We’d rather be preventing it to avoid such events.”

Preparing for Danger

The second half of 2017 proved a trying few months for the insurance industry, facing hurricanes, earthquakes, wildfires and — unfortunately — multiple mass shootings.

The industry was estimated to take a more than $1 billion hit from the Las Vegas massacre in October 2017. A few years back, the Boston Marathon bombings cost businesses around $333 million each day the city was shut down following the attack. Officials were on a manhunt for the suspects in question, and Boston was on lockdown.

“Many of these actions are devised in complete obscurity and on impulse, and are carried out by individuals with little to no prior visibility.” — John Tomlinson, senior vice president, head of entertainment, Lockton

“Fortunately, we have not had a complete stadium go down,” said Harper. But a mass casualty event at a stadium can lead to the death or injury of athletes, spectators and guests; psychological trauma; potential workers’ comp claims from injured employees; lawsuits; significant reputational damage; property damage and prolonged business interruption losses.

The physical damage, said Harper, might be something risk managers can gauge beforehand, but loss of life is immeasurable.


The best practice then, said Chavious, is awareness and education.

“A lot of preparedness comes from education. [Stadiums] need a risk management plan.”

First and foremost, Chavious said, stadiums need to perform a security risk assessment. Find out where vulnerable spots are, decide where education can be improved upon and develop other safety measures over time.

Areas outside the stadium are soft targets, said Harper. The parking lot, the ticketing and access areas and even the metro transit areas where guests mingle before and after a game are targeted more often than inside.

Last year, for example, a stadium in Manchester was the target of a bomb, which detonated outside the venue as concert-goers left. In 2015, the Stade de France in Paris was the target of suicide bombers and active shooters, who struck the outside of the stadium while a soccer match was held inside.

Security, therefore, needs to be ready to react both inside and outside the vicinity. Reviewing past events and seeing what works has helped risk mangers improve safety strategies.

“A lot of places are getting into table-top exercises” to make sure their people are really trained, added Harper.

In these exercises, employees from various departments come together to brainstorm and work through a hypothetical terrorist situation.

A facilitator will propose the scenario — an active shooter has been spotted right before the game begins, someone has called in a bomb threat, a driver has fled on foot after driving into a crowd — and the stadium’s staff is asked how they should respond.

“People tend to act on assumptions, which may be wrong, but this is a great setting for them to brainstorm and learn,” said Harper.

Technology and Safety

In addition to education, stadiums are ahead of the game, implementing high-tech security cameras and closed-circuit TV monitoring, requiring game-day audiences to use clear/see-through bags when entering the arena, upping employee training on safety protocols and utilizing vapor wake dogs.

Drones are also adding a protective layer.

John Tomlinson, senior vice president, head of entertainment, Lockton

“Drones are helpful in surveying an area and can alert security to any potential threat,” said Chavious.

“Many stadiums have an area between a city’s metro and the stadium itself. If there’s a disturbance there, and you don’t have a camera in that area, you could use the drone instead of moving physical assets.”

Chavious added that “the overhead view will pick up potential crowd concentration, see if there are too many people in one crowd, or drones can fly overhead and be used to assess situations like a vehicle that’s in a place it shouldn’t be.”

But like with all new technology, drones too have their downsides. There’s the expense of owning, maintaining and operating the drone. Weather conditions can affect how and when a drone is used, so it isn’t a reliable source. And what if that drone gets hacked?

“The evolution of venue security protocols most certainly includes the increased usage of unmanned aerial systems (UAS), including drones, as the scope and territorial vastness provided by UAS, from a monitoring perspective, is much more expansive than ground-based apparatus,” said Tomlinson.

“That said,” he continued, “there have been many documented instances in which the intrusion of unauthorized drones at live events have posed major security concerns and have actually heightened the risk of injury to participants and attendees.”

Still, many experts, including Tomlinson, see drones playing a significant role in safety at stadiums moving forward.

“I believe the utilization of drones will continue to be on the forefront of risk mitigation innovation in the live event space, albeit with some very tight operating controls,” he said.


In response to the terrorist attacks on Sept. 11, 2001, U.S. Homeland Security enacted the Support Anti-Terrorism by Fostering Effective

Warren Harper, global sports & events practice leader, Marsh

Technologies Act (SAFETY Act).

The primary purpose of the SAFETY Act was to encourage potential manufacturers or sellers of anti-terrorism technologies to continue to develop and commercialize these technologies (like video monitoring or drones).

There was a worry that the threat of liability in such an event would deter and prevent sellers from pursing these technologies, which are aimed at saving lives. Instead, the SAFETY Act provides incentive by adding a system of risk and litigation management.

“[The SAFETY Act] is geared toward claims arising out of acts of terrorism,” said Harper.

Bottom line: It’s added financial protection. Businesses both large and small can apply for the SAFETY designation — in fact, many NFL teams push for the designation. So far, four have reached SAFETY certification: Lambeau Field, MetLife Stadium, University of Phoenix Stadium and Gillette Stadium.


To become certified, reviewers with the SAFETY Act assess stadiums for their compliance with the most up-to-date terrorism products. They look at their built-in emergency response plans, cyber security measures, hiring and training of employees, among other criteria.

The process can take over a year, but once certified, stadiums benefit because liability for an event is lessened. One thing to remember, however, is that the added SAFETY Act protection only holds weight when a catastrophic event is classified as an act of terrorism.

“Generally speaking, I think the SAFETY Act has been instrumental in paving the way for an accelerated development of anti-terrorism products and services,” said Tomlinson.

“The benefit of gaining elements of impunity from third-party liability related matters has served as a catalyst for developers to continue to push the envelope, so to speak, in terms of ideas and innovation.”

So while attackers are changing their methods and trying to stay ahead of safety protocols at stadiums, the SAFETY Act, as well as risk managers and stadium owners, keep stadiums investing in newer, more secure safety measures. &

Autumn Heisler is a staff writer at Risk & Insurance. She can be reached at [email protected]