Shielding livelihoods: The crucial role of E&O for contractors

In 2024 it’s estimated the US construction industry is short of half a million workers, and the fact construction has an aging workforce worldwide means this labor shortage isn’t going away any time soon. Contractors will be expected to do more and more with less, potentially increasing errors, delays and safety concerns. The effects of climate change and geopolitical factors add further strain, driving the cost of material goods and making budget management more difficult.

No matter the strain on the workforce, anyone paid for their services is expected to provide a certain level of care and skill—and be held liable for their work or advice. Failure to deliver this care can result in a negligence claim, showcasing why E&O insurance is a must-have for contractors in this space.

In attempt to combat rising material and workforce costs, contractors are looking to work more productively and efficiently through the use of technology tools. We have drones surveying, mapping and inspecting far faster than humans, construction robots taking on repetitive tasks like bricklaying and welding, and project management software enabling more accurate cost predictions and resource allocation.

On the flip side, introducing new technologies into ways of working—particularly when done at speed—also brings new risks. Malfunctioning robots can damage property or harm workers. Errors in 3D-printed building components can lead to catastrophic failures. Computer systems are vulnerable to downtime. So not only are contractors facing a multitude of traditional E&O exposures, but they’re facing more technological and cyber exposures than ever before.

Workforce shortages are increasing both employment costs for contractors and the volume of payouts for work-related injuries, bringing safety concerns in workplace environments to the fore. At the same time contractors are expected to comply with evolving and escalating energy standards, working while being mindful of their environment.

When pursuing or defending a claim, legal expenses can mount up quickly, resulting in a significant cost for the contractor even if you ultimately were not liable and the lawsuit is dismissed. Having E&O insurance in place means contractors can receive cover for this financial loss, helping to protect their livelihoods. Many contractors are turning to technology to tackle these obstacles too, from wearable devices such as GPS to track and pre-empt hazards, to smart building tech to make projects more sustainable. As above, these tools introduce technology exposures which can be addressed with the right E&O insurance policy.

In construction cybercrime-related losses are one of the most common forms of incident we see. Often companies deal with a number of different vendors when purchasing raw materials, renting machinery and so on. These transfers can be intercepted by cybercriminals, or re-directed to an account owned by the criminal group. The same goes for the business’s customers being tricked into sending their payments to fraudulent accounts.

Data breaches are also a real possibility, as well as the reputational damage and lawsuits they often entail. Not to mention the risk of downtime if systems are crippled through ransomware, causing financial loss that can be difficult to recover from. Fortunately, all of the above can be covered under a package policy with a cybercrime add-on.

E&O insurance has evolved to keep pace with this fast-changing landscape. At CFC our contractors E&O policy combines E&O, technology errors, cyber and cybercrime coverage under a single package form, so that it’s never been easier for contractors to mitigate new and evolving risks.