Artisan Contractor Class Stays Strong – Despite Construction Defect Litigation, Hardening Market and

The building boom across much of the country resulting from nearly 10 years of economic expansion has also resulted in a business boom for artisan contractors. As individuals in some of the country’s hottest markets can attest, construction projects are often delayed because there is simply too much work for the existing companies to handle.

The result has been a growing number of mom-and-pop artisan contractor services entering the market to fill the need. While it has spurred an increase in the number of companies that need insurance, it has not always resulted in increased business or premiums for insurance agents and companies.

Some of the factors determining whether agents are writing a lot of artisan contractor business include the region in which they do business, which companies they work with, what those companies consider artisans and whether they write admitted or non-admitted coverages.

In California, artisan contractor coverage is dominated by the non-admitted market, with only a few companies writing significant amounts of admitted business.

Dan Ho, a senior broker with Gray-Stone & Co. in Thousand Oaks, said the propensity of itinerant labor in the artisan contractor field has some effect on admitted carriers not wanting to write the coverage, but it is mostly the nature of the business that keeps them away.

“The main thing is exposure, what the company does,” he said. “It’s just because of the class of business that you don’t find a lot of admitted carriers in California.”

Non-admitted companies have deemed the coverage desirable, however, and have gladly reaped the rewards, seeing increased business and steady premiums in most states. And while artisan contractor coverage has remained competitive, the market is slowly hardening.

“The market is tightening in California, but it seems that artisan contractor coverage-is not tightening as quickly as some other areas,” Ho said.

The expansion of the class among some carriers to include exterminators and even horizontal boring companies has led to diminishing profits.

At Delta General Agency in Houston, the story is somewhat different. Dave Van Tiem, director of programs at Delta General, said the company maintains the traditional classification of artisan contractor.

“We have kept ours to mean the small, less-than-10-employee contractors who are specialized in plumbing, drywall—skills such as these.” That could be why Delta
has not seen the monstrous growth others report. “We’re seeing smaller increases,” Van Tiem said. “We realized about a 20 percent increase in business over the last year.”

That figure is more in line with other general agencies around the country which have experienced steady growth in the artisan contractor class, but have also had to deal with some pretty nasty claims issues, particularly on the West Coast.

“Aside from the western state restrictions, [artisan contractor] is a pretty desirable class,” said Ken Laderout, special risk department manager for Farmington Hills, Mich.-based Burns & Wilcox. “Artisan contractor is still pretty much a class that most carriers want to write except in one case-new residential construction on the West Coast, which has a lot of restrictions because of the Montrose ruling.”

Ho, with Gray-Stone & Co., agreed, saying while multiple residential contractors are hardest hit, Montrose has affected all lines of contractor coverage. And it’s spreading eastward.

Many standard companies have pulled out of the West Coast market; for example, First Financial recently pulled out of the California artisan contractors game. On a national level, Travelers has been tightening up or trying to get out of the artisan contractor market because of what Laderout called the potential for Montrose-type rulings in other regions.

“We’re getting more restrictive, too,” said Laderout, whose comp any, Burns & Wilcox, writes artisan contractor coverage in 45 states including California and Texas. “I think that could spiral across the country.”

Still, as contractor coverages go, artisan contractors are perhaps the most desirable class, Laderout added.

Alex Karsanidi, whose general agency, Karsanidi Group in Ridgefield, Conn., offers artisan contractor through the standard market only, agrees.

“There are still enough markets doing the artisan contractor, though there are certain areas that are drying up faster, such as carpentry,” Karsanidi said. “At least [on the East Coast] some of your major guys won’t write it anymore.” Unlike California, the East Coast market is dominated by the admitted market, Karsanidi said.

Overall, general agencies seem confident that the non-admitted market will remain strong, providing plenty of coverage options for what Delta General’s Van Tiem sees as a potentially bottomless market of artisan contractors in an area that is steadily hardening.

“I think there may be a slight transition in the market,” Van Tiem said. “It’s definitely hardening some, but I think the Texas economy will stay pretty strong. There will still be plenty of artisan contractors needing coverage.”

Ho is somewhat less optimistic about artisan contractor coverage in California. “It’s been steady, but it depends on the economy,” he said. “It also depends on catastrophic perils-those are destructive, so once you get a catastrophe of any magnitude, the artisan contractors are going to be in business.”

Topics Lawsuits California Agencies Pricing Trends Contractors Construction