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Risk Resilient: Commercial Building Security

Check out the Commercial Building Security bulletin to learn more about how to protect your premises.

Commercial Building Premises Security

Construction projects have a lot of moving parts, and unexpected challenges are a given. Unfortunately, equipment losses from theft, fire, and transportation and operations are common challenges &mdash;and costly ones. While there is no sure-fire way to guard against equipment loss and damage, construction business owners and contractors can take action to prevent and mitigate risks.&nbsp; Theft Construction equipment is an attractive target to criminals, who can make huge profits selling stolen machines and tools. Job sites can be especially vulnerable to theft and vandalism if they&rsquo;re at a remote location or lack the proper security measures.&nbsp; Mitigating losses starts with administrative controls. Management must be committed to theft prevention and communicate a &ldquo;zero tolerance&rdquo; philosophy, so employees take their efforts seriously. Implementing theft prevention policies and unannounced site inspections can help control losses, particularly from &ldquo;inside jobs&rdquo;, which unfortunately do happen from time to time. On site, there are a wide range of security measures that can be implemented. Premises security can include fencing and gates to minimize access points, lighting, and motion-sensitive video cameras and alarms that are actively monitored.&nbsp; Prevention measures can also be taken with the equipment itself. For example, beyond antitheft marking and tracking devices, small and medium-sized equipment can be protected by using &ldquo;smart&rdquo; keys, locking wheels and trailer hitches. For larger equipment, hidden kill switches, fuel shutoffs, track locks and alarm systems can be installed. Fire Vehicles such as dump trucks and bulldozers have complex mechanical systems and operate under intense conditions, resulting in an above average fire risk. Similarly, off-road vehicles accumulate debris on the frame and under the chassis, creating a greater risk of ignition as they use combustible liquids such as fuel, oil, grease, and hydraulic fluid.1&nbsp;It&rsquo;s likely some or all of these vehicles will find themselves at your construction site, so fire risks and prevention should be top of mind. Fire prevention starts with identifying where fires are most likely to occur, delivering ongoing training, and communicating the plan to everyone on the work site.3 Minimizing the risk of fire involves conducting regular inspections and maintenance to your equipment&rsquo;s high-risk areas, such as the electrical system, engine blocks, turbochargers, and braking systems. It&rsquo;s also important not to overlook the basics, such as routine cleaning of debris.3 In order to fuel your equipment safely, one solution is to engage an outside vendor to provide fuel services. If that&rsquo;s not possible, some considerations for contractors include:
<ul>
<li>locating the onsite fuel supply away from ignition sources</li>
<li>grounding and bonding procedures when handling and dispensing fuel&nbsp;</li>
<li>establishing procedures for immediate cleanup of fuel spills </li>
</ul>
In addition, training all employees in the use of fire extinguishers, which must be available on each piece of equipment, is a must.4
Transportation &amp; Operations Construction equipment can be damaged not only when it&rsquo;s in operation, but also while being transported between jobs and storage sites. Whether in operation or transport, employees should be thoroughly trained on company policies, safety rules and emergency procedures.5 While there are plenty of hauling companies with the right equipment and expertise for successful transport, construction business owners should keep a few key considerations top of mind in order to transport heavy equipment safely:
<ul>
<li>check the owner&rsquo;s manual for specific instructions on how it should be transported</li>
<li>map the most linear route ahead of time, keeping an eye out for road widths, overhead passes and bridges</li>
<li>immobilize equipment wheel components</li>
<li>outfit vehicles with proper banners, signs and lights.6 </li>
</ul>
On the equipment operations side, preventing damage from overturns starts with hiring drivers with a high level of knowledge, skill and experience. In addition, there are specific operating procedures that should be observed, such as load considerations; the environment, including soil conditions and ground irregularities; clearances, including keeping loads low when overhead obstructions are present; and slopes, including avoiding side hill travel.7 While there are no guarantees in any construction project, implementing controls can reduce the likelihood of equipment losses. In addition, construction business owners and contractors should ensure there are no gaps in their insurance coverage, so they can protect their business and keep their construction projects running smoothing.&nbsp; Sources 1 &ldquo;Best practices for construction equipment from fire damage,&rdquo; California Builder and Engineer,&rdquo; Jan. 25 2018.&nbsp; 2 &ldquo;<a href="https://www.surrey.ca/sites/default/files/media/documents/CWCConstructionFireSafetyManual.pdf" target="_blank" rel="noopener">Construction site fire safety: A guide for construction of large buildings,</a>&rdquo; Canadian Wood Council and University of the Fraser Valley, April 2015 3,4,6 Contactors&rsquo; Equipment Guide to Loss Prevention, Inland Marine Underwriters Association, 1998.&nbsp; 5 &ldquo;<a href="https://www.equipmentjournal.com/on-the-job/transporting-heavy-equipment/" target="_blank" rel="noopener">A how-to for transporting equipment,</a>&rdquo; Equipment Journal, Jan. 19, 2019&nbsp; and &ldquo;<a href="https://thompsontractor.com/about/resources-(1)/safe-heavy-load-transport" target="_blank" rel="noopener">How to safely load and transport equipment,&rdquo; Thompson Tractor Co.</a>

How contractors can avoid equipment losses

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As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance&rsquo;s annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/toronto/eduard-lecker" title="" target="">Eduard Lecker</a>, Senior Underwriter, &nbsp;Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape.&nbsp;
What were the key loss trends and exposures you saw in 2024?
The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).1 These legal actions&mdash;which can be initiated by consumers, shareholders and investors, and environmental advocacy groups&mdash;are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks.&nbsp;
What are some emerging risks to keep an eye out for in 2025?&nbsp;
One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there&rsquo;s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI&rsquo;s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn&rsquo;t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making&mdash;when, in reality, there&rsquo;s still a lot of human oversight involved. If AI tools generate inaccurate reports&mdash;like pulling up the wrong numbers&mdash;and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.
There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S. &nbsp;leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes.&nbsp;
With the current trade war between the U.S. and Canada, there&rsquo;s growing sentiment around &lsquo;Buy Canadian,&rdquo; but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn&rsquo;t meet legal definitions of terms like &lsquo;Product of Canada&rsquo; or &lsquo;Made in Canada,&rsquo; this could lead to claims. &nbsp; For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract.&nbsp;
We&rsquo;re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level. &nbsp;
How can organizations mitigate these risks?&nbsp;
For AI, it really comes down to transparency. Don&rsquo;t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It&rsquo;s similar to how companies should approach environmental strategies&mdash;be transparent about your actions and results. Like the saying goes, &lsquo;understate, overperform.&rsquo;
For the developments that we&rsquo;re watching in the U.S., it&rsquo;s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it&rsquo;s important to be aware of the legal requirements. Transparency is key here, too&mdash;if there&rsquo;s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you&rsquo;re not misrepresenting your actions, you&rsquo;re far less likely to face legal issues.&nbsp;
Sources 1 Jan. 31, 2025: Moodys, &ldquo;D&amp;O series &ndash; Evolving risks in the boardroom: A new era of D&amp;O liability &ndash; Part 3&rdquo; 1 Aug. 22, 2024: McCarthy Tetrault &ldquo;Greenwashing and AI Washing: Emerging Trends in D&amp;O Claims Across North America&rdquo; 1 Oct. 22, 2024: &ldquo;The Insurer: Greenhushing &ndash; An emerging D&amp;O liability?&rdquo;

Loss trends and emerging risks in 2025: Management liability 

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As businesses continue to rely on essential machinery and equipment, the risk of damage and breakdowns remains a significant concern. These incidents can disrupt operations, lead to costly repairs and result in extended downtime. &nbsp; As part of our annual Q&amp;A series, <a href="https://www.sovereigninsurance.ca/our-team/calgary/razvan-ionescu">Razvan Ionescu</a>, Manager, Equipment Breakdown Underwriting, Large Accounts &amp; Operations at Sovereign Insurance, shares insights into key loss trends from 2024 and emerging risks that organizations should be aware of in 2025.&nbsp; What were the key loss trends and exposures you saw in 2024? If we were to look for trends in the equipment breakdown insurance industry, the most notable phases would be the heating season and the cooling season. In colder months when heating systems are activated, for example, boilers that are used for heating buildings might experience breakdowns. This happens because they haven&rsquo;t been used for an extended period and when they&rsquo;re restarted, can fail due to improper shutdowns or lack of maintenance during the off-season. Similarly, with cooling systems, a lack of ongoing use and maintenance can lead to mechanical failures. In addition to seasonal concerns, we continue to see typical breakdowns of production machinery, transformers, and other equipment that businesses rely on day in and day out. This can be caused by issues like aging equipment, wear and tear, and lack of preventative maintenance.&nbsp; What are some emerging risks to keep an eye out for in 2025? One emerging risk I&rsquo;ve seen is a shift from traditional generators to electric or lithium-ion batteries as backup power sources or to reduce the on-peak service use. While generators have been in use for a long time, some businesses are turning to electric batteries. This shift brings new risks, especially when it comes to maintenance and exposure. With traditional generators, you typically need a mechanical specialist on-site to keep things running smoothly. But with electric batteries, the high-capacity maintenance is usually handled by the OEM (original equipment manufacturer), who monitors the battery&rsquo;s performance in various ways, for instance, through remote monitoring. So, the whole approach to upkeep is different. A big concern here is fire risks. Batteries are prone to something called thermal runaway, which is a chemical reaction inside the battery that causes it to overheat and potentially catch fire. This can happen without the presence of oxygen, which makes it more dangerous than other types of fires. If a thermal runaway event happens, it could damage the entire battery system, which might cost a company hundreds of thousands to replace. And of course, there are significant human safety risks with any type of fire. In contrast, if something in a backup generator breaks down, it&rsquo;s typically a mechanical issue that can be fixed &ndash; similar to how you would repair a car. How can organizations mitigate these risks? To keep machinery and equipment running smoothly and safely, the best approach is to follow the OEM recommendations. For example, if the OEM advises performing thermal scanning on batteries on a regular basis, it&rsquo;s important to stick to that schedule. There&rsquo;s a well-known saying: &ldquo;If you don&rsquo;t schedule maintenance, your equipment will schedule it for you.&rdquo; By regularly scheduling maintenance, you can ensure it&rsquo;s completed on time and reduce the chances of delays in sourcing spare parts. When it comes to batteries, there are also specific best practices to follow around proper use, storage, transportation, and disposal. Organizations should familiarize themselves with these guidelines to minimize risks. For any type of equipment, preventative maintenance is essential. Although insurance policies are designed to cover profit losses during downtime, the key is to maintain uninterrupted service to customers.

Loss trends and emerging risks in 2025: Equipment breakdown

From distracted driving on busy highways to the explosive rise of quick e-commerce deliveries on city streets, the landscape of risk is rapidly shifting for the transportation sector. As part of Sovereign&rsquo;s 2025 Q&amp;A series, Kevin Dutchak, Senior Risk Specialist, Commercial Auto, provides insights into the key loss trends of 2024 and offers practical advice on how businesses can mitigate risks to protect their operations this year and beyond.
<h4>What were the loss trends and key exposures you saw in 2024?</h4>
Distracted driving is still a big issue and it&rsquo;s becoming even more significant with the growing use of technology in the industry. Technology can be great, but it can also be distracting. For example, some drivers try to map out routes on the fly, and in the e-commerce delivery space, drivers are constantly looking at addresses along residential streets. These kinds of distractions may lead to a lot of loss incidents.
Additionally, traffic seems to get busier all the time. During rush hour and with ongoing construction, it&rsquo;s like that old video game, Frogger, with drivers switching lanes back and forth, speeding, suddenly cutting in front of other drivers, and trying to get ahead of everyone. Statistics show that road travel continues to be the riskiest form of transportation, from property loss and minor fender benders to serious injuries and fatalities. When you add distracted driving and traffic congestion into the mix, it can increase the risk significantly.
Driver controls are another ongoing issue. For example, there are cases where drivers took short cuts to try to save time. But that winding two-lane highway with limited passing lanes, for instance, can put you more at risk, especially in winter conditions.
<h4>What emerging risks should businesses be aware of in 2025?</h4>
Climate change and severe weather events are becoming more of an issue for the transportation sector. We&rsquo;re seeing more frequent storms and extreme temperatures, which can cause delays and put drivers in unsafe situations.
While cybercrime is becoming more of a risk in many industries, I don&rsquo;t see much of that in trucking yet. But as more companies integrate artificial intelligence into their operations, they should ask what they&rsquo;re doing to protect themselves so people can&rsquo;t hack into that and use it to their advantage.
<h4>How can organizations effectively mitigate these risks?</h4>
When it comes to distracted driving, the key to mitigation is the constant reminder that driving is your job 100% of the time. You can&rsquo;t afford to compartmentalize your thinking&mdash;you have to concentrate on the road because it&rsquo;s such a fluid situation.
Sound defensive driving practices are also critical. I&rsquo;m surprised at the number of fleets that don&rsquo;t provide that training, assuming that because their drivers have a licence, they don&rsquo;t need it. But despite our best efforts, we can all become complacent, distracted and forgetful. So, companies need to get the focus back on training. It&rsquo;s an investment in your drivers that can pay dividends.
In terms of driver controls, trip management programs can mitigate risks. Managers should have discussions with drivers to outline expectations: Here is when we expect you to be on the road, this is the route we expect you to take, here&rsquo;s when we expect you to stop. When there is an interruption to the plan due to situations such as poor road and weather conditions, traffic delays on route and driver fatigue, protocols should be in place for drivers to communicate with dispatch and operations staff to keep them advised, which in turn can be communicated to their clients. The safety of drivers and other road users is always the top priority. Telematics can also be used to monitor drivers&rsquo; routes and ensure drivers are following the proper procedures, such as speed limits and safety protocols.
If a driver does have a significant loss event, it&rsquo;s critical for companies to take effective corrective action, such as retraining or a driver interview. Often, a lack of corrective action can lead to further and more significant losses.
For weather events, fleet operations should focus on forecasting models, if they aren&rsquo;t doing so already. When severe weather conditions are imminent, companies should consider shutting down operations in the affected areas; all drivers should find the first safe place to park, advise dispatch of their status and stay in place until the shutdown order is lifted.

Risk Resilient: Commercial Building Security

Risk Resilient: Commercial Building Security

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