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Coverage Concerns Excavation risk Disruption of service points to need for greater attention to excavation risk By Roy C. McCormick Picture this scenario: Telephone service from the central business section of a city to suburbs is terminated for approximately 30 hours. The cause: damage to underground telephone equipment at a major intersection where road improvements are being made. The resulting sudden and prolonged inability to communicate causes economic havoc. Credit card equipment, operating on telephone facilities in stores and businesses, fails. Pressure is increasing to remove utility lines from poles and install the equipment underground. Danger from fallen lines and poles and the accident potential from poles located too close to busy roads have prompted this movement. In addition, the expense of maintaining and repairing equipment above ground is substantial, especially where severe weather is common. All of these factors affect utility rates. Though converting to underground cable and equipment is costly, much lower maintenance costs are a big plus. We can expect a substantial increase in the place-ment of utility and cable under ground, a challenge for insurance agents, brokers and customer service representatives, as well as contractors. Agents, brokers and companies can be of great service on two counts when they insure contractors who are likely to perform excavation work. First, they can discuss the availability and nature of liability insurance; and second, they can make certain that the insured becomes familiar with and follows loss prevention procedures. It is essential to review the exposure with the insured and assess the need for coverage of the underground liability hazard. Is the insured likely to perform or be responsible for excavation work? Company claim files and courtroom experience attest to the need for understanding and careful underwriting. General liability insurance usually includes coverage for underground damage to utility equipment. Some insurers add it by endorsement. In any event, it may be eliminated at the discretion of the insured because of cost or by the insurer for underwriting reasons. If the insured wants this coverage and it is not available from the primary insurer, refer to The Insurance Marketplace published by The Rough Notes Company. Commercial general liability insurance drafted by the Insurance Services Office, for example, includes the subject hazard. However, it may be eliminated by one of two endorsements. Endorsement CG 21 42 eliminates coverage for the underground hazard at the location(s) and operations specified. Endorsement CG 21 43 may be attached to exclude underground coverage for all designated locations except those that are specified. Loss prevention Loss prevention is the second subject that agents, brokers and service representatives can discuss with insureds. The utility communication system is an effective loss prevention measure. Every state has a utility communications system that will inform contractors about the presence of hidden utility lines, pipes and equipment. Although established contractors are familiar with the utility communication system, the unprecedented building boom has led many workers to enter contracting activities on their own. They need guidance. The intent and function of the system is similar in all of the states in that it helps contractors comply with a requirement, where established by law, or meet an obligation to notify utilities before they begin excavation. There are variations in particular requirements among the states—for example, the number of days before excavation that notice must be given by a contractor. Most states require builders and contractors to call a central office for such information. Statutory requirements in Michigan demonstrate the importance of a one-call system. The procedure begins when a contractor calls the Michigan utility system’s central office. Details regarding the nature of the work, the precise location and when digging will begin are entered into a computer. These particulars are transmitted to participating utilities. Those with underground cables or pipes in the area will send representatives to identify their facilities with color-coded stakes, markers and/or paint using a color code. In Michigan, for example, the colors are red for electric power; yellow for gas, oil and dangerous materials; orange for telephone, police and fire communications and cable television; blue for water; brown for sewer; green for storm drains and pink for land survey. A national toll-free number makes it possible for a contractor to obtain the phone number of the utility communi-cation system office in any state or Canadian province. That number is (888) 258-0808. The contractor may obtain requirements for work done outside of the state of residence. * The author |
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