Strengthening Loss Prevention in LBM Businesses to Avoid Costly Litigation

By Sean Briscoe, Vice President – Loss Control, Courtney Flanagan, Vice President – Claims

Costs of insurance claims continue to skyrocket due to nuclear verdicts – leaving business owners in high-severity niches like lumber at risk of losing it all. In today’s litigious landscape, plaintiff attorneys are casting a wider net to determine which parties can be held liable when an accident occurs. For lumber and building materials (LBM) businesses, this adds another layer of risk to daily operations. Routine tasks like operating forklifts through busy yards, transporting heavy loads, and offering installation services, can lead to an incident that could not only result in a costly insurance claim, but financially devastating litigation.

Fortunately, proactive loss control and clear contract language can help safeguard LBM businesses from being held liable in the event of litigation. But it requires a consistent commitment throughout an entire organization.

During recent visits with customers, we identified some key vulnerabilities related to risk transfer and addressing daily operational hazards. Consider these best practices to help your LBM business address those vulnerabilities and avoid costly litigation.

Risk Transfer

Poorly considered risk transfer is often at the root of construction-related claims that end up in litigation. In our experience, these claims are commonly the result of long-term exposures, where a project was completed several months, even years before a claim was filed. Plaintiff attorneys often cite problems like water intrusion related to windows, doors and siding, to somehow stem from the materials used or the installation process. In these cases, plaintiff attorneys will opt to involve as many entities involved in a project as possible to get the most favorable outcome for their clients. Simply supplying a product or engaging in subcontracted work can be enough to bring an LBM business into litigation.

The most important line of defense LBM businesses can leverage to avoid being involved in litigation is thorough risk transfer. The LBM industry is a relationship business, and it can be tempting to rely on a trusted colleague’s track record without an iron-clad contract. But if an incident occurs and that contractor does not have adequate insurance coverage, the business that hired them could be held liable. Thorough contracts that appropriately transfer risk, certificates of insurance, hold-harmless provisions and more are critical to establishing responsibilities before a claim arises.

Risk Control

Our recent visits with PLM insureds have also enabled us to reinforce the importance of daily loss prevention. Inadequate training and inconsistent procedures create risk exposure that can lead to serious bodily harm, costly insurance claims and of course, lawsuits.

Throughout our visits, PLM representatives emphasize effective loss prevention across daily operations. Clear procedures for tasks such as load securement, loading and unloading and forklift operations in an LBM business establish clear expectations for employees to follow and lay the foundation for a strong safety culture. Training can help reinforce expectations, prevent tenured employees from becoming too comfortable, and ensure new hires understand how to safely do their jobs. More broadly, LBM leaders should routinely survey their operations to ensure procedures are being followed and to address any gaps before an accident occurs.

While LBM businesses cannot eliminate their risk exposure, they can take steps to mitigate their risk. Proactive loss control and clear contractual language around risk transfer help to address vulnerabilities and better support an LBM business’s resiliency. To learn more about how PLM can help improve your organization’s loss control practices or to schedule a site visit, visit the PLM Loss Control Center at www.plmins.com/loss-control.