In considering possible damage by fire, it is not sufficient merely to have in mind such damage as would result from a fire about the work itself. Adjoining property may burn and the exposure to this risk may be serious. The possibility of a great conflagration may exist in the section where work is in progress.

INSURANCE IN FORCE. The amount of insurance to be purchased from time to time is determined from a valuation of the work completed and of materials stored on the site.

Insurance should cover the replacement value of property destroyed. Consideration must often be given to the effect produced by a rising or a falling market. The architect's fees are sometimes included in determining the amount to be carried, dependent upon whether the form attached to the policy permits it.

The value of the contractor's equipment should also be included in the policy unless separately covered by floater insurance, a form of fire insurance.

When insurance is placed at intervals of four weeks or more, consideration must be given to the amount of work that will be performed between two placement dates. If insurance is only taken out every four weeks, the contractor may be greatly underinsured at the end of any succeeding week, if the amount in force is based only on the value of work up to the time the insurance was last placed.

MATERIALS PREPARED BUT NOT DELIVERED. A contractor sometimes pays a subcontractor for materials fabricated prior to their delivery to the job. Necessary insurance to protect contractor's interest while the material is in the subcontractor's shops or a warehouse should be obtained from the subcontractor before payments are made.

Material purchased f. o. b. shipping point is sometimes insured while in transit.

PREMIUMS CHARGED. Premiums are calculated at a rate per $100 of insurance in force.

HAZARDS NOT COVERED. Policies should be read when received. Certain hazards are excluded by the printed matter. The form (or rider) attached should be studied to see that it properly and fully describes any and all property on which coverage is sought. This is most important.

FIRE LOSS. There is only one thing for a contractor to do when a fire occurs, namely, to get out his policy and follow exactly the procedure given in it about notifying the insurance company, preparing and filing proof of loss, guarding property from further loss or damage, etc. The procedure required by the policy is the result of years of study and experience. The printed matter has generally been approved by the officials of the state in which the insurance is effective, and has been generally passed upon by the courts.

ASSIGNMENT TO OWNERS. At the completion of an operation, the fire insurance policies are frequently assigned to and paid for by the owner on a prorata basis, thus avoiding expensive short-rate cancellations.

FLOATER INSURANCE. A contractor sometimes has a special form of policy, called "floater," which covers his equipment wherever located or while in transit. These policies generally limit the amount of insurance effective in any one location to a definitely stated percentage of the total coverage given by the policy.

The premiums charged for floater insurance are calculated at a rate per $100 of insurance in force.

Workmen's Compensation Insurance

Workmen's compensation insurance protects a contractor against the liability that the laws of many states place upon

him for accidental injuries to, or death of, any of his employees arising out of and in the course of employment; and in some states, for occupational diseases..

The injured employee is paid such a proportion of his average weekly earnings and for as many weeks as the state awards him, either by statute, state commission, or otherwise.

The laws provide that when a workman's injuries result in his death, certain payments are to be made to such of his dependents as the law designates. The sums given a widow vary at different times, depending upon her not remarrying and upon the ages of her children.

While workmen's compensation is primarily payable by the direct employer, some states place an obligation upon the general contractor to see that his subcontractors insure their workmen's compensation liability in authorized companies under the penalty of being liable for any unpaid compensation.

It is this provision in some compensation laws that necessitates extreme care being taken to see that proper insurance is carried by every subcontractor or firm having employees doing work at the job site.

Contractors are obliged, in some states, to post a notice in prominent places on jobs, accepting the provisions of the Workmen's Compensation Law and stating that insurance has been taken out as required by law.

COMPULSORY STATE INSURANCE. The statutes of some states do not permit insurance companies to underwrite workmen's compensation risks. Insurance must be taken out in a state fund, although usually an employer with adequate financial resources may get authority from the state to act as a self-insurer.

PREMIUMS CHARGED. When a contractor takes out insurance in an insurance company, the company makes the

required payments to the workmen, or their heirs, and pays all statutory medical and other expenses.

For this service the insurance company charges the contractor a premium based on each $100 of wages earned by the workmen. Different rates are established for the various classes of work done according to the exposure to possible accident of the workmen engaged therein. The greater the hazard, the higher the rate charged. Basic rates for the various classifications of work are contained in rate manuals issued from time to time by insurance companies and state commissions.

The insurance companies and state funds are permitted to give a contractor an "experience rating" in accordance with a definite state-approved plan. Reductions in manual rates are permitted, based upon the actual losses sustained compared with average losses sustained on similar risks.

The rate for each classification is named in the policy. To calculate the premiums due the insurance company, it is necessary first to analyze the contractor's payroll and to distribute the total wages paid by him to laborers and mechanics over the classifications named in the policies. When this distribution has been completed, the amount of wages earned under each classification is multiplied by the policy rate per $100.

Insurance policies subdivide the cost of construction being done into various classifications for different kinds of work. A definite provision should be inserted in the schedule attached to the policy stating an intent to fully insure all work done by the contractor, as otherwise only such trades as are specifically named are covered, and the contractor has no insurance covering work he may do that is not mentioned in schedule.

REPORTS TO AND AUDIT BY CARRIER. Reports should be submitted periodically to carriers for workmen's compensa

tion, employer's liability, public liability, and teams insurance. They are prepared monthly, quarterly, semiannually, or annually. Insurance companies employ payroll auditors to examine the assured's payrolls and other records and verify all premiums reported under all policies.

Em
Employer's Liability

In a few states where workmen's compensation laws have not been enacted, the contractor has a common law liability for accidental injuries to, or the death of, any of his workmen, if he is guilty of negligence. The amount recoverable by the workman or his heirs is determined by court trial or by agreement.

This liability of the contractor is covered by employer's liability insurance.

POLICY LIMITS. No policy is written for limits below $5,000/$10,000. This provides for insurance for limits of $5,000 for any one person injured or killed, and, subject to that amount for each person, a total limit of $10,000 for any number of persons injured or killed in the same accident.

By way of illustration, assume that an accident injures or kills three persons. The limit that any one of the three could recover from the insurance carrier would be $5,000. The limit that all three or their heirs collectively could recover would be $10,000. Any damages awarded by a court in excess of these limits would have to be paid by the

contractor.

PREMIUMS CHARGED. The method of arriving at the premiums paid for employer's liability insurance is exactly the same as that for workmen's compensation insurance. Rates for each classification of work are stated in the policy and premiums are calculated after an analysis of the workmen's payrolls.