Oregon Construction Contractors (CCB) Practice Test

What might a surge in lawsuits regarding construction defects lead to for the industry?

1. Improved training programs for contractors

2. Increase in project completion timelines

3. Higher insurance premiums and bonding costs

4. Reduction in the number of construction companies

The correct answer is: Higher insurance premiums and bonding costs

A surge in lawsuits regarding construction defects typically leads to higher insurance premiums and bonding costs for contractors. When there is an increase in claims, insurers respond by raising premiums to cover the increased risk and potential payouts. As a result, construction companies may face higher operational costs to ensure they are adequately protected against these claims. This financial pressure can affect their budgeting and overall project management strategies. Furthermore, higher insurance costs can also impact new entrants into the market, as they may find it financially challenging to obtain the necessary coverage, leading to a potential decrease in competition. While other factors like training programs, project timelines, and the number of construction companies may be indirectly affected, the most immediate and direct consequence of increased lawsuit activity in construction defects is the rise in insurance and bonding costs.