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Construction Industry Trends and Predictions Through 2021 and Beyond: Insurance and Emerging Threats

Client Alert

A 2021 survey identified three key issues impacting the construction industry in 2021: (1) the financial health of contractors; (2) the continuing risk of the pandemic; and (3) technology driving productivity, but also increasing the risk of cybersecurity threats. With this backdrop, insurance premiums in the construction industry are generally on the rise in 2021.

Overmyer Hall Associates, as a Columbus-based commercial insurance broker, provided the following rate outlook for 2021:

Type of Insurance

Rate Increase Outlook

Property

+5% to 10%

Contractors Equipment

Flat to +10%

General Liability

+5% to 15%

Builders Risk

Flat to +5%

Builders Risk – Frame

+10% to 20%

Umbrella/Excess

+10% to 20%

Executive Risk – EPL, Crime, Fiduciary, Cyber

+10% to 25%

Overmyer explained that builders risk insurance rates related to large frame projects (e.g. large hotels, multifamily complexes) have been on the rise because, generally, the number of carriers in the marketplace is shrinking. Moreover, there are an increased number of terms and conditions placed on larger frame projects by underwriters, such as specific and intensive security guidelines. Overmyer does not project the builders risk insurance in large frame projects will change anytime in the near future.

Another area of coverage with rates on the rise is cybersecurity. With the adoption and integration of technology in the construction industry, there has been an uptick in cyberattacks. For example, in early 2020, Bird Construction, a major Canadian Military Contractor, was a victim of a Maze ransomware attack in which hackers demanded approximately $9MM in exchange for a decryption key. Cyberattacks can result in, among other things: downtime on a project, breach of intellectual property, breach of bid data, and potential property damage. As these attacks become more widespread and sophisticated, cybersecurity insurance rates continue to rise at a higher rate.

To prevent cybersecurity threats and/or potential attacks, contractors are encouraged to have a risk assessment conducted by an IT professional, which can sometimes be coordinated through the contractor’s CPA. Other internal measures that contractors can take to defend against cybersecurity threats include: (1) providing training and information about cybersecurity to employees; (2) implementing multifactor authentication (MFA) to mitigate exposure when employees do make mistakes; (3) protecting sensitive data against back-end access in web applications; and (4) having a comprehensive, multifaceted strategy for addressing security needs. Even with the rise in rates, those in the construction industry should obtain and maintain cybersecurity insurance in the event of a potentially crippling cyberattack. 

For additional questions, please contact Construction Law Attorney Krista D. Warren at kdwarren@bmdllc.com.


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.