Thirty years ago, Calgary was considered a mid-sized city with a population of about 795,000. Today, its population is 1.336 million. That’s an increase of nearly 60%, and the city’s surge in growth is not expected to slow down. People are arriving from other parts of the country and the world every day to all parts of Alberta. In fact, the province’s population rose to 4,756,408 last year, an increase of 4.3%.
A population boom generally leads to a construction boom as well. With regards to residential buildings, according to the Alberta Economic Dashboard, the province recorded 3,679 housing starts in February 2024, an increase of 65.5% compared to February 2023.
Throughout history, heightened levels of non-residential investment are mainly linked to Alberta’s oil and gas sector, which is a prime target for capital construction investments.
The construction sector represents 7.2% of Alberta’s GDP (2021), 9.1% of its employment (2022) and 2.6% of its investment (2022). For January 2024, investment in building starts stood at $2.6 billion.
Types of construction insurance imperative for those in the industry include professional liability insurance (otherwise known as errors and omissions insurance) and contract surety bonds.
How to cover construction delays
Everyone knows that construction delays are the industry’s Achilles heel. It is very rare that any project finishes on time, despite the most careful of planning. The most common (and maddening) reasons for delays include:
- Inclement or severe weather, which is almost a guarantee in Calgary
- Permitting and regulatory issues, or just general red tape
- Material shortages, which can significantly impact project timelines
- Design changes that occur after construction has begun
- A shortage of skilled labour or key personnel
- Funding shortages or delays in financing
- Site conditions such as soil instability, environmental issues, or archaeological discoveries
- Disputes, bankruptcy, or performance issues with contractors or subcontractors
And, of course, there is always that category of “unforeseen circumstances” that may be the most disruptive of all.
Professional liability insurance
Professional liability insurance (otherwise known as errors and omissions insurance) safeguards against financial losses and legal expenses resulting from incidences such as design flaws and inaccurate plans that are no fault of the construction company and that result in project delays. It is a crucial form of liability coverage for individuals and businesses that provide professional construction services or advice.
The coverage provided by professional liability insurance typically includes legal defense costs, settlements, and judgments arising from covered claims. Policies can be tailored to specific professions and may offer additional features such as coverage for disciplinary proceedings, copyright infringement, or breach of contract.
One of the key benefits of professional liability insurance is that it provides peace of mind and financial protection against unforeseen risks. Even the most diligent professionals can make mistakes, and defending against a lawsuit can be costly and time-consuming.
What are construction surety bonds?
A surety bond is a financial instrument that serves as a form of insurance on a performance contract, and they protect the bond holder (known as the “obligee”) in the event that the entity under contract (the “principal”) fails to honour their contractual obligations. For example, if a property developer hires a construction company to build a strip mall, a surety bond would cover the developer’s resultant financial losses if the construction company failed to complete construction.
There are three main types of construction surety bonds:
- Labour & material bonds
- Performance bonds
- Bid bonds
Each of these bonds covers specific circumstances. Understanding the difference between the various types of construction surety bonds means ensuring you’re getting the right coverage.
Type 1: Labour and material bonds
These construction surety bonds shield subcontractors and suppliers if the principal fails to compensate them fully or partially for their labour and material expenses. While other recourses exist, such as legal action, surety bonds offer comprehensive protection mechanisms.
Type 2: Performance bonds
Performance bonds are intricate instruments designed to shield the obligee from financial losses if the principal fails to meet contractual obligations, such as a delay in construction or principal insolvency or project delays, can trigger claims under these bonds. These are a complicated type of bond that requires the expertise of a knowledgeable insurance broker to ensure that your coverage aligns with your specific needs.
Type 3: Bid bonds
Bid bonds play a pivotal role in the initial stages of construction projects by ensuring bidding contractors possess the necessary resources and capabilities to undertake the job. They deter ill-equipped companies from bidding on projects beyond their capacities.
Understanding the technicalities and nuances of bid bonds is crucial for construction contractors to ensure adequate protection before tendering bids.
Your experienced resource for construction insurance
At Lane’s Insurance, we offer highly competitive rates on all types of construction insurance and work hard to make sure you get the right coverage for the right price. We work for you, not the insurance companies. Contact us and we’ll be happy to discuss your specific needs in detail. Our goal is to provide each and every one of our clients with personalized service and the kind of affordable, enhanced protection that you deserve.
