Construction projects can be simple, short-term tasks or complex, multi-year endeavors involving billions of dollars. In major projects, numerous outside contractors (and subcontractors) are generally hired, even if the overall project is awarded to a large, well-known engineering or construction firm. Unless the job is insured in a wrap-up program that covers all of these parties under a single policy, management cannot presume that all of its contractors are insured continuously for the duration of the project.

Subcontractors-and the subcontractors they, in turn, hire-work on vital aspects of the job, often performing specialty work outside their areas of expertise. If an injury, death or serious accident occurs, dealing with the consequences can be daunting, even for an experienced, well-capitalized firm. The resulting insurance claims are the responsibility of the contractor and subcontractor, but if a policy has lapsed or carries insufficient limits, the company could be held liable for tens or hundreds of millions of dollars. Contractors involved in the Boston "Big Dig" construction project, for example, settled a claim for $458 million after a tunnel collapse killed a motorist.

Ultimately, the company is responsible for anyone who enters its premises or performs any activities on its behalf, basically leaving them three choices on how to handle that risk: avoid the risk (often not an option), assume all or part of the risk, or transfer the risk. But even if the company has transferred the risk via contract to someone else, such as a vendor or a contractor, it needs to be sure the vendor/contractor has the financial resources to finance that risk, which often is through insurance.

Most companies require proof of insurance prior to beginning a project in the form of an insurance certificate. Unfortunately, many companies stop there and fail to monitor the ongoing coverage status. This can result in policies expiring and not being renewed, changes in limits or other issues later on.