The U.S. construction industry is facing significant challenges due to renewed immigration crackdowns. As fears of deportation rise, many immigrant workers, especially those without documentation, are staying away from job sites. This situation is highlighted in a recent article by the New York Times, which sheds light on the labor shortages affecting the industry.
Stephanie Beninati, an insurance consultant who works with builders and contractors, emphasizes the immediate effects on risk management. Insurance companies are responding to the labor crisis by limiting coverage options. Beninati warns that this is a repeat of past issues that did not yield positive outcomes.
Many experienced business owners are choosing to retire early rather than deal with the uncertainty in the industry. This trend leads to fewer available workers, increased construction defect claims, and stricter insurance guidelines. Insurers are becoming more cautious, particularly regarding high-risk construction projects.
Beninati recalls warnings from clients in the concrete business about the potential for widespread construction defects due to the loss of skilled subcontractors. By 2020 and 2021, her predictions came true, with a surge in defect claims reported monthly. The backlog caused by COVID-19 has exacerbated these issues, with some defect claims taking nearly five years to resolve, resulting in payouts between $700,000 and $800,000.
As the risks of construction defects rise, so do the legal costs, particularly for high-end projects. With luxury homes costing between $5 million and $10 million, clients are often hiring lawyers at high hourly rates. Insurers are reacting by capping coverage amounts, starting with $5 million and gradually lowering the limit.
Beninati advises business owners and agents to be vigilant when reviewing insurance policies. Even minor changes in coverage can leave them exposed to liability issues.
While larger construction firms might not feel the immediate impact, smaller subcontractors, who often employ undocumented workers, could face long-term consequences. Beninati highlights that the issue extends beyond just insurance; it concerns the future of skilled labor in the industry and the potential fallout from its decline.