For most people, the return of summer typically brings to mind days at the beach, holiday barbecues, and family vacations. For those contractors and developers along the East Coast and Gulf Coast, it also potentially means having to deal with hurricanes and severe tropical weather. Hurricanes Harvey, Irma, and Michael all serve as recent reminders of the damage these storms can inflict and the financial impact they can have on a construction project.
Fortunately, it’s not too late for project stakeholders to prepare for hurricane season, and several cost-effective steps can be taken now to minimize the financial risks associated with storms. First, if you have not already done so, break out the hurricane plan agreed to at the beginning of a project. Don’t have one? You weren’t expecting your project to extend into hurricane season? Good news is that there is still an opportunity to put a plan in place before storm season reaches its peak in late summer.
While each project presents different risks, a hurricane plan should, at minimum, outline how a project will be safely secured leading up to, during, and after a storm. The plan needs to lay out time lines for site preparation, site safety protocols, methods, and locations for securing equipment and materials, and a process for safely returning to work. To avoid confusion and inefficiency, project personnel should be assigned specific storm-related tasks so they know who is responsible for what.
Make sure that among those specific tasks is the job of interacting with local building departments and emergency management personnel. More detailed plans can also address specifics like storing extra fuel for generators or dealing with stormwater management. It may also be helpful to identify your claims teams now, which will include some combination of project staff, attorneys, delay experts, claims consultants, and accountants.
Next, try a practice run. Do not wait until a storm is on its way to implement a plan for the first time. Under those circumstances, there will be fewer resources, more stress, and more opportunity for mistakes. Not only may key staff have multiple jobs to secure, they will likely have their own families and homes to prepare. A test run can minimize mistakes and help identify gaps. With this information, stakeholders can address shortcomings before it’s too late.
Take time to document the project’s status as a storm approaches. Record the progress of the work with video or pictures, note the condition of equipment on site, and inventory stored materials. Pre-storm information like this can be invaluable for establishing an insurance claim to recover resulting losses.
Speaking of insurance, review the project builder’s risk policy. Give yourself a refresher or a first look at the notice requirements, the claim documentation requirements, and understand the requirements for dealing with significant storm damage. Remember also that windstorm coverage typically has a higher deductible. If your contract makes you responsible for that deductible, check that capital reserves are available to cover what could be a significant out-of-pocket expense.
If the project has invested in “soft cost coverage” under the builder’s risk policy to deal with the financial impact of a delay, then project schedules need to be updated. If scheduling requirements have been ignored or are lagging behind, the schedules need to be brought up to date. A hurricane can cause delay before, during, and after the actual storm passes.
With a direct hit, it could be months before a project returns to full capacity. Considering the cost of the delay coverage itself and the financial harm associated with an extended delay, it is incumbent on stakeholders to update and maintain accurate project schedules to maximize any potential insurance recovery.
Finally, start post-storm damage assessment and recovery as soon as it is safe to return and occupy the project. Designated personnel should evaluate safety conditions, measure damage, and determine cleanup requirements. Specifically track the time spent on storm-related activities, and record the damage with video and pictures. This evidence will be essential to supporting a storm-related claim. Also, remember that some damage may not be visible right away, so post-storm assessment needs to be a going concern until the project is restored to pre-storm conditions.
Dealing with severe weather is an unfortunate, but known, risk for the construction industry in certain parts of the county. However, known risks can be dealt with through prudent planning and insurance, and knowing that, it is up project stakeholders to have their jobs ready to face the upcoming storm season.
