The two types of cranes are mobile cranes and tower cranes.
Some mobile cranes are mounted on trucks while others operate on crawler treads. Some cranes are designed to work in rough terrain and the truck chassis must be specially designed for this purpose. Most cranes are transported to the jobsite by motor vehicles. Once there, they may travel short distances on roads on the project site, but not usually very far.
Tower cranes are transported to the building site in sections. The tower is constructed on the site and the boom is attached on top of the tower. The tower is jacked up as needed to meet the height requirements and needs of the construction project. The boom is not stationary. It moves based on the counterweight relative to the items being lifted. The boom must be properly attached to the tower or it may fail, separate, and collapse.
Mobile cranes are workhorses that can be used in various construction settings. Tower cranes are more specialized and are used almost exclusively in urban areas with high-rise building construction.
Cranes are expensive pieces of equipment that are used for specific purposes. Crane operators are specialists who command high salaries and who must be properly trained and certified. For these reasons, many contractors prefer to rent a crane and its operator from a crane rental operation on an as- needed basis.
John Clarke, senior vice president of marketing at James River Insurance Company, explains, “Key exposures from a third-party standpoint are auto liability, general liability, and riggers liability. From a first-party perspective, the owner of the crane has an inland marine exposure. James River considers all of the relevant third-party liability coverages for mobile cranes, but is not a market for the property itself.”
As between frequency and severity, Mr. Clarke comments, “In general, this class of business is defined by loss severity. These are large pieces of equipment that lift heavy objects around buildings, other equipment, and people. They can cause significant damage if they tip over, drop their load, or collide with someone on the road.”
“Severity is the main issue in this class,” agrees Michael Kravitz, president of Insurance Innovators, Inc. “There are three severity issues: (1) damage to what is being lifted, including bodily injury or property damage as a result of a drop; (2) bodily injury to third parties; and (3) bodily injury to other contractors at the common jobsite or to the insured's employees.” His markets for these risks are Interstate Fire & Casualty and Columbia Casualty.
Patrick Wachter, CPIA, account executive at Ascinsure Specialty Risk, Inc., identifies lifting exposures, auto liability (over the road), damage to items being lifted, and third-party loss of use as key exposures. Ascinsure places general liability and auto with Hudson and uses Allianz/Alterra for inland marine. Both are admitted carriers. Ascinsure’s program, Crane Defender, is offered in 50 states. It addresses many of the coverage areas and issues that are explored in this Cybercast.
All of our experts agree that the recession has had a negative impact on this class. Mr. Kravitz says, “Nearly all insureds have seen their sales decrease dramatically due to the lack of construction work. Exceptions to this are contractors that specialize in work for industries that have experienced growth. A few examples are oil and gas, and erecting wind turbines.”
According to our experts, every crane operator should have auto liability, general liability, and riggers liability. In addition, boom overload and excess liability is recommended. Care, custody and control coverage is recommended for items while being lifted, stored, transported, or installed. Inland marine coverage for the crane and its equipment is important because a crane is an extremely valuable asset.
The marketplace for crane operators is somewhat narrow in scope. According to Mr. Clarke, “Tower cranes have a more limited market, because of their complexity, exposure, and value. The several large losses in this class of business in the last several years that involved multiple deaths may also be having an effect on this class.” Mr. Clarke and Mr. Wachter both state that they do not entertain tower crane exposures.
The major coverage gap for mobile cranes occurs when is the auto policy is used to cover the exposure. All our experts explain that cranes are often incorrectly placed on auto policies. The recommended approach is to use general liability for third-party exposures and inland marine for the first-party exposure. Using the auto policy leaves numerous gaps that often are not discovered until after a loss.
This difficult class is subject to severity losses and suffers from reduced volume, yet rates are still very competitive. Our experts all explain that there is a lot of capacity and many carriers willing to consider this class. Mr. Kravitz adds, “There are several programs that make coverage available to well-run accounts with competitive terms. We expect that, as the sales of customers grow, premiums will grow and the market will stabilize further.”
New York is the only specific geographic concern for crane operators insurance. One reason that Mr. Clarke mentions is the height issues inherent in the New York labor laws.
Mr. Kravitz says, “The retail agent should understand the insured's entire operation and be able to provide coverage from the beginning of the work to the end of the job. This includes the need for continuous coverage for completed operations based on the statutes of the state where the insured works. The producer must understand the coverage extensions required on each policy provided for the insured in order to properly cover its exposures.”
Retail agents should approach this class with caution. “This is a market where the services of a skilled wholesale broker can really help a retail agent,” says Mr. Clarke. “There are not many markets willing to underwrite cranes, and most of this class is placed in the excess and surplus arena. A good wholesale broker can help the retail agent navigate the auto coverage maze as well as the riggers endorsements that are unique to this class of business.”