By Melissa Morton
Million dollar waterproofing lawsuits are chilling the waterproofing industry. Insurance companies are tightening their belts and raising rates so high that it is forcing waterproofing companies to "trade in" the trade.
When Steve Foyster, Wellman Water-proofing, Oklahoma City, OK, learned his insurance wouldn't cover his waterproofing company unless he dropped "waterproofing" completely out of the company name, he changed the name to Wellman Services, Inc. Now Foyster doesn't even provide waterproofing services. "We are a roofing company," he says.
|BLOOMING MOLD: A mold flower, close up, growing on the door casing of a structural repair jobsite in Detroit, MI. Mold is a liability for builders and subcontractors, especially waterproofers, so much so that some insurance companies have stopped covering mold in policies, says Andras, chair of NAWSRC's insurance program.|
Foyster frankly doesn't know how waterproofers stay in business. "If they are getting insurance, they are paying a lot for it," he says.
Consider there are over 4,000 waterproofing companies in the U.S.—plus that many more structural repair companies. Many of these companies either have expensive premiums with limited coverage or don't carry insurance. Sometimes these companies start with insurance and then the insurance company just drops them. Some of the smaller waterproofing companies that were dropped didn't even have claims against them.
Part of the problem is that insurance companies don't want to deal with mold and mildew claims so they exclude this coverage from plans all together. Others offer a separate, very expensive mold insurance plan. When we say expensive, "We are talking about premiums in the $20-30,000 area— and it isn't good coverage," says David Kleifgen, retired owner, Waterproofing Inc., Blaine, MN. "But people buy it because they aren't going to operate without it," he says.
There is light at the end of the tunnel. Last June, the National Association of Waterproofing and Structural Repair Contractors (NAWSRC) formed a committee to investigate a private insurance program option that would lighten premiums and fill the holes in the current policies. "A lot of people are satisfied with their insurance, but a lot of people are not," says Steve Andras, president, Pioneer Basement Systems, Westport, MA. Andras is chairing the NAWSRC committee to organize a captive insurance program. "This would just give us another option," he says.
Captive insurance insures the risks of its owners who are not in the business of insurance. In this case, the owner is the NAWSRC Insurance Trust, which is made up of the association's members who are insured through the program. The members pay premiums to the association peer review committee and the committee manages the risks.
The program appeals to these waterproofers because there is no risk to them. Individuals can't have access to captive insurance. You have to do it through an association." This is the ultimate everyone wins situation, says Andras. "Even the insurance company wins. They don't have to worry because we are managing the risk underneath."
Another benefit to this insurance is that the people who are in the industry are in charge of making the claim decisions.When there is a claim the association insurance board is a partner with the field representative investigator."They are on my side to help save me money," says Andras. "It is a lot better than having underwriters who don't have a fool's clue about waterproofing."
There is actually a strong chance members will be further benefited than just being insured. If the companies are safe and efficient in a particular year and don't have any big claims, then they make a surplus. That surplus is then put back into the association and rebated to the members. "Instead of the insurance companies making money, the association benefits," Andras says. The program is patterned after a similar program created by the Concrete Sawing & Drilling Association, says Andras. "The CSDA makes a surplus every year."
Ironically, prior to incorporating the captive insurance program, the NAWSRC did a feasibility study on its member waterproofing companies' losses for the last five years. The study showed that the losses weren't as high as previously thought. There are no major problems. "The industry itself is a pretty safe industry," Andras says. "In fact, we see the insurance companies making a huge profit."
Even if a waterproofing company doesn't join in this program, it makes sense to still support it. One way to do so is to contribute to the study. "Just add your numbers to the data base," Andras suggests. "If more companies are involved, then the database is more substantial."
"Everyone is doing it" may not be the best excuse to jump on board, but when 95% of Fortune 500 companies use captive insurance, it makes you believe that this is a big deal, says Andras. "GMC, McDonalds, Marriot are not part of the commercial insurance market," he insists. "Everyone knows that the insurance system is not working. That is why the big players are self-insured."
Waterproofing companies should watch for this new insurance option by January 2006. That is when the program is expected to take lift off. "There are many people like myself who are my size, less than $50,000 a year, that are going to jump right in," insists Andras, who has been in the waterproofing business for 22 years."I am not about to get into something I don't have full confidence in."
Then, too,by having another option,Andras says the insurance companies will not be able treat waterproofers with distain."I have a feeling that this will change things a bit," he says. "Insurance companies will think twice about canceling people for no reason." WATERPROOFING BLOOMING MOLD: A mold flower, close up, growing on the door casing of a structural repair jobsite in Detroit, MI. Mold is a liability for builders and subcontractors, especially waterproofers, so much so that some insurance companies have stopped covering mold in policies, says Andras, chair of NAWSRC's insurance program.