EXCESS LIABILITY COVERAGE: HOW MUCH DO PUMPERS NEED?

A Guide for Concrete Pump Company Owners, Part 3

by Travis Bennett, Associate Director, and Stephen Frew, Loss Control Engineer, National Casualty Loss Control at Risk Strategies

Editor’s note: Based on the comprehensive “Navigating a Hard Insurance Market” presentation at ACPA’s 2024 OSM Conference, this is the third article in a series to help concrete pump business owners facing rising insurance costs.

In today’s climate of heightened legal liability, construction-related nuclear verdicts (judgments exceeding $10 million) are becoming increasingly common. For concrete pumping companies, these massive payouts present a serious risk. A single equipment failure, truck accident or onsite mishap could unleash a flood of lawsuits, cutting into productivity, profits and future contract prospects. As the stakes grow higher, ensuring you have the right amount of liability insurance is no longer optional — it’s a strategic safeguard for your company’s survival.

Excess liability insurance is an added layer of financial protection that extends the coverage limits of a designated liability policy, such as general liability insurance. It kicks in when a claim exceeds the limits of the primary policy. Determining the right amount of excess liability coverage has always been a challenge. Unlike property coverage, where you can identify a specific replacement value, figuring out the appropriate liability limit is more subjective.

WHY EXCESS LIABILITY IS BECOMING ESSENTIAL

While California, Florida, New York and Texas collectively produce half of the nation’s nuclear verdicts, no region is immune from increasing liabilities. Companies in every state face the risk of awards exceeding $1 million, $5 million or even $10 million. The verdicts are influenced by changing social attitudes toward corporate liability, also known as social inflation, which when combined with economic inflation pushes settlements and awards to unprecedented levels.

Compounding the issue is the rise of “litigation funding,” where attorneys and third parties finance lawsuits in exchange for a share of the settlement or award. This practice enables plaintiffs to pursue higher-dollar claims without requiring personal financial resources, significantly increasing the likelihood of lawsuits being filed. These factors are reshaping the legal landscape and creating heightened financial risks for businesses.

HOW TO DETERMINE COVERAGE NEEDS

Given the rising cost of auto, general liability and umbrella premiums, purchasing higher limits might not be an easy budget decision for most concrete pumping companies. The following approaches can help guide your decisions.

Benchmarking. Looking at data from businesses similar in size, location and scope is a practical starting point. Benchmarking can provide useful insights into how much coverage similar companies typically carry. However, while it’s helpful to know many peers may have $5 million in limits, it’s essential to evaluate whether that amount would fully protect your business after a catastrophic loss.

Financial metrics and risk retention. Another way to gauge coverage needs is by measuring how much financial loss your company can survive without major disruption. The Insurance and Risk Management Institute (IRMI) provides thresholds for how much loss a company might withstand based on various financial indicators:

• Working capital: 2%–5%
• Total current assets: 1%–5%
• Operating income (pre-tax earnings): 1%–8%
• Annual revenues: 1%–2%
• Operating cash flow: 2%–5%

Keep in mind, these percentages do not calculate how much total coverage to buy. Instead, they reflect how much financial loss a company could likely absorb internally in the event of a liability claim. For example, if your fleet of 20 concrete pump trucks is worth $200,000 per truck, your critical assets total $4 million — not including additional equipment, property, liquid assets or intangible assets. If a claim surpasses the policy limits, these assets could be exposed and become part of the loss you will have to absorb.

External factors. The choice of limits is often influenced by outside factors beyond the control of the concrete pumping industry. Major external factors include client contract requirements mandating specific insurance limits and the current insurance market’s available limits and pricing structures.

Interestingly, higher limits often come with cost efficiencies. The price per million dollars of additional coverage typically decreases at higher levels. For instance, adding $10 million to a $50 million limit may cost less per million than adding the same amount to a $40 million limit. On the other hand, some insurers have minimum premiums that make additional limits impractical. The only way to reasonably assess the pricing structure is to request quotes for different limits.

REALWORLD CLAIM EXAMPLES

The best way to finalize a coverage decision is to examine actual claim data — both from within the concrete pumping industry and from the broader construction market. Seeing how settlements or verdicts can quickly escalate underscores how small incidents can lead to immense financial consequences.

For instance, the U.S. Chamber of Commerce reported that between 2020 and 2023, half of all truck-related claims were closed for $314,000 or less. But when large claims were factored in, the average claim value jumped to a staggering $31,862,776.

After a crane collapse in Texas in 2019, the jury awarded $860 million to a family for the loss of a relative. In a South Carolina case, a jury awarded 220 homeowners $22 million for defective workmanship on a subdivision. Such examples demonstrate how even $5 million or $10 million in coverage may be easily outstripped in severe situations.

BUYING WHAT YOU NEED

Ultimately, the decision on how much excess liability coverage your pumping company should carry hinges on the nature of projects and risk tolerance. Analyze contracts, review your exposure to large-scale pours, consider potential litigation costs and resist the urge to settle for the bare minimum. By collaborating with experienced brokers and legal advisors, pumpers can determine coverage levels that provide meaningful protection. After all, securing su icient coverage is not just about checking a box; it’s about safeguarding your company’s financial health and reputation.  

See other articles in this series:

• “Navigating Rising Insurance Costs in a Hard Market” (including steps to implement a staff accountability strategy), Concrete Pumping, Fall 2024 issue, page 22.
• “10 Best-in-Class Safety Practices to Lower Insurance,” Concrete Pumping, Winter 2025 issue, page 30.