Costly Insurance Determined Unnecessary

One of Washington State’s largest general contractors decided to compete in the bidding for a large dam project in California. As we typically do, Parker, Smith & Feek was asked to review the project specifications and bid documentation to determine the insurance requirements for the project.

One of the insurance coverages specified as a requirement was United States Longshore and Harbor Worker’s Compensation (USL&H). This coverage is arguably one of the most misunderstood worker’s compensation issues for employers – and insurance agents.  At prevailing rates the cost of this insurance would have potentially added an additional $2 million to the total project cost.

In our experience, the construction site – a land-locked recreational lake – did not seem to merit the requirement for USL&H insurance and began researching the issue on the contractor’s behalf. During the investigation Parker, Smith & Feek consulted with the Coast Guard and Corps of Engineers and established that USL&H coverage was only necessary when the body of water was:

1) for marine trade (status)
2) and was navigable (siteus)

The land-locked recreational lake did not meet the criteria for “marine trade” and applying the prevailing legal definition of navigable as being “applied to the sea, to arms of the sea, and to rivers in which the tide flows and reflows” we were able to confirm that the USL&H insurance was not necessary.

The contractor left the cost of this insurance out of their bid. They went on to win this contract by less than the estimated cost of the USL&H insurance.

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