2021 Homebuilding Trends and Builders Insurance Implications

All throughout Massachusetts—particularly in Boston’s suburbs—the demand for single-family housing is sky high. Looking ahead, 2021 homebuilding trends that will continue to drive this demand include:

• More Boomers opting to “age in place” (tying up more of the state’s existing home supply)
• Younger families fleeing cities, thanks to Covid-prompted telework options
• Historically low mortgage rates, enticing more renters and first-time home buyers

Combined, these trends translate into the lowest supply of available homes since 1963. Meanwhile, according to the National Association of Home Builders (NAHB), construction of single-family homes is at its highest pace since 2007.

For many builders and remodeling contractors, the net result is that 2021’s project calendars are jam- packed. A good problem to have, so long as you remain mindful of the insurance implications during a building boom market. For example:

Hidden Costs of the Skilled Labor Shortage

You’re busy. You need good help. But good help is hard to find. Nearly half of all MA construction jobs (43%) remain unfilled after one and a half months, highlighting a skilled labor shortage that has serious implications for builders in the Bay State. In fact, according to the Worcester Business Journal, Massachusetts has the largest construction labor shortage in the country.

This shortage is more than inconvenient. Inexperienced workers are prone to faulty workmanship. And the general liability portion of your Massachusetts business insurance typically does not cover faulty work. Moreover, problems that don’t manifest in the short term can become completed operations claims years and years after the fact. Underwriters are familiar with this pattern, and may write your account accordingly.

All told, you’re not only self-insuring against the failures of novice employees, you may be costing yourself better rates—thanks to long-tail claims and a trailing history of claims—for future terms, as well.

One possible solution? Consider that several local trade groups— NARI, BRAGB, and HBRACC—have all made significant efforts to develop relationships with Massachusetts trade schools, conventional high schools, state programs, and veterans assistance groups, to help connect contractors with skilled carpenters and trade contractors.  Business owners can reach out to these association officers to make a connection with a career-minded apprentice or even an experienced skilled laborer.

Better Protection for Today’s Hiring & Firing Decisions

We’ve all been under the gun—at one time or another—to hire someone quickly in order to fill a much-needed role. But hiring the wrong man/woman for the job doesn’t just put your company at risk for unhappy clients or reputational damage. When you eventually have to part ways with the lackluster employee, you could expose your company to a wrongful termination claim.

Unless you have carefully outlined specific job duties/expectations, and then documented the employee’s subpar work along the way, he or she may be able to fill in any number of (unlawful) reasons why the termination occurred, triggering your employment practices liability insurance to respond. Do you have EPLI coverage, by the way?

If yes, that’s a good start. But the terms of coverage are still worth reviewing—especially since employment practices are among the fastest-growing areas of litigation in the U.S. We’ve seen builders whose EPLI programs offer a paltry $10K in coverage—with a $5K deductible, no less. Unfortunately, the average cost to defend and settle an EPLI claim now stands at $160,000, according to the Society for Human Resources Management (SHRM).

The solution here is to review your EPLI coverage limits and policy terms annually. While it’s true that Massachusetts is an “at-will” employment state (meaning, you can fire an employee for no reason at all), there are still cases to be made by employees who allege that discrimination (based on race, gender, national origin, age, sexual orientation, disability, or genetic disposition) was a factor in the termination.

Workers Comp Concerns When Timelines Are Tight

In a fast-paced market, you might be extending your season longer than you normally would, or decreasing the margins in your schedule, in order to tackle all possible contracts. But powering through extra work days, particularly during the winter months, can lead to bad results—namely injuries and workers’ comp claims.

In 2014, U.S. workers suffered nearly 42,500 significant injuries due to ice, sleet, or snow, according to the Bureau of Labor Statistics. Other common causes of winter-related workers’ comp claims include cold stress, falls on icy surfaces, and winter-weather driving hazards. We can see, for example, workers’ comp claims for drivers and off-site employees tend to increase between December and March.

You already know how important your experience modification factor is, both from an insurance premium perspective and a competitive bidding one. When you’re going after a large commercial, industrial, municipal, or academic job, your ex-mod needs to illustrate good practices. Literally then, it pays to be safe. One sure way to improve on safety is to leverage your insurance partner for support; a good agent will have loss control options available that remove the heavy lifting and yield measurable results.

We know the vast majority of Massachusetts builders and contractors are conscientious about the end products they deliver. Still, we also know owners are feeling the pressure because of today’s overflowing consumer demands. We hope this post reinforces your commitment to quality craftsmanship and good safety practices—both of which will help you avoid heightened insurance costs due to increased claims.

Got questions about your business’ insurance program, heading into 2021? Fire away: 508.339.2951.