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Insurance costs may impact on Olympic developments

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Construction industry seeks insurance changes from provincial government

The B.C. Construction Association is warning that the construction of Olympic facilities could be delayed and costs increased if the provincial government delays changes to insurance liability for the construction industry.

"First of all, as everyone knows, the insurance industry is hitting all sectors, looking at reducing its exposure and risk, and charging substantially more," said Mike Geoghegan, president of the B.C. Construction Association.

"Companies are finding it extremely difficult to even get insurance coverage, and when they do they’re paying three times, four times, sometimes even 10 times as much."

Not only do these costs raise the cost of construction across all sectors, Geoghegan worries that these premiums indicate the possibility that B.C. insurance companies will abandon the construction industry altogether.

"We’re already getting signals that because of the business climate and changes to the building code, insurance companies are deciding whether to even be in this business," said Geoghegan.

Attorney-General Geoff Plant is looking to change the rules for builders in B.C. to bring them in line with regulations in most other provinces and across the U.S. According to Geoghegan, the changes were originally supposed to happen in the spring, and were pushed back to the fall, and again to spring of 2004.

"There hasn’t been a review of liability laws for the construction industry in 30 years, and the Attorney-General has to be applauded for initiating this. We’re going public because we want to make sure this does happen by the spring of 2004," said Geohegan.

At fault is the same law that drew public attention during the leaky condo scandals in Vancouver.

According to provincial liability laws, even if your construction company was only 10 per cent liable for an error, you can be held 100 per cent liable if you are the only insured company still in existence that was involved in the project. That assumption of liability scares insurance companies operating in B.C., said Geoghegan. In other provinces and the U.S., you are only liable for the work that you were responsible for.

In addition, B.C. construction companies are held responsible for 30 years for their work, compared to just 10 years in most other jurisdictions. That’s too long for contractors and insurance companies, said Geoghegan.

"Say I’m a 50-year-old contractor, I have to go out in this climate and find an insurance company that is willing to cover me for 30 years. If there’s a legal issue on a 25-year-old contract, good luck trying to remember everything you did, and good luck trying to come up with documentation for work you did a quarter century ago," Geoghegan said.

Bringing B.C.’s liability laws into step with laws that are already widely accepted in other provinces and the U.S. will help to keep insurance rates stable in the province, "and keep the insurance company from picking up and walking out the door," said Geoghegan.

That in turn will keep the cost of Olympic venues, some of which are slated for construction as early as 2004, in scope with projections.

According to Geoghegan, the failure to address these insurance concerns could raise costs of Olympic developments. "It will do this in two ways," he said.

"First, it will decrease the number of companies out there that are able to bid on the work. Secondly, the bids are going to be higher because the companies have all these higher insurance premiums to cover."

Changing the rules will also help to keep the rising costs of building condominiums, homes and commercial buildings stable, which is better for businesses and the public.

According to Sam Corea of the Vancouver 2010 Transition Organizing Committee, $510 million has already been allotted for the construction of Olympic facilities, although the final costs have yet to be determined for individual projects.

The federal and provincial governments have already decided on that number, said Corea, and it will be up to the Organizing Committee of the Olympic Games to stay within that framework.

He could not comment on what effect higher insurance rates and construction costs could have on the development of the Games.

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