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How AI is helping tame the devils in the details

A frequently heard comment about the construction industry is “There’s a lot of risk in construction.” Less uttered, but just as true is “There’s a lot of risk in construction contracts and policies.

Construction, like other industries, is largely governed by the fine print of contracts. Contracts play a crucial role in assuming or assigning risks on projects. Relatively few construction contractors’ operational personnel, however, are inclined to wade through reams of documents and identify the risks and obligations they assume when signing a contract. That can cause a variety of problems during the course of a project, from failure to meet certain requirements, to insurance coverage gaps, to assuming potentially massive liabilities, to costly legal disputes.

Speaking, and learning, from experience
Having worked for both construction companies and the risk management/legal industries, we have seen firsthand how time-consuming reviews of owner contracts, subcontractor contracts and insurance policies could be. Until recently, understanding the risks in volumes of documents was a time-consuming process and difficult to do without turning to legal or risk management experts who are familiar with obtuse terms and contract language, but whose services can be costly. Even for the big companies who have built out robust in-house legal or risk management departments, such functions can serve as an informational pinch point (a small few understand these issues and have a hard time translating the subject matter expertise to the greater organization) and such functions serve as overhead which only continues to grow as the business grows

Technology innovations such as artificial intelligence (AI) make it possible to analyze lengthy contracts and derive risk insights and key context in minutes. But AI is not a success overnight. Experience and industry knowledge are vital in tech development, especially AI which needs to be ‘trained’ or taught what to search for. AI technology uses what is called Natural Language Processing (NLP), which can be trained to identify and tag phrases in contracts, insurance policies, and other documents, directing the reviewer to the relevant provisions and language.

For a construction industry-specific AI tool, effective training requires relevant experience in construction contracts, insurance policies, and other project documents that cross a contractor’s desk. Deep training in the specific industry not only customizes the tool for the specific needs of a company but also improves the overall accuracy of the tool. Simply put, the AI engine may catch many of the same things an attorney or risk management professional would catch – and we hope that it would – however it does this at a fraction of the time and cost. Think: key risks identified in seconds versus hours, and with a much lesser financial investment.

According to a recent Bloomberg Law Insight column, “the legal contract review process has already seen major development in tech’s ability to compare and review extensive generic documents. However, until recently these tools required inherent legal knowledge that the everyday consumer simply does not have. Contract review tools are developing toward niche markets that allow for more automated complex clause review.”

Analysis in minutes
And that’s exactly what a pair of construction industry attorneys set out to do when they created Document Crunch™, an AI platform that lets users quickly gain transparency into risks and/or critical issues in prime contract and subcontract agreements, including insurance policies and plans, drawings and specifications. And to provide context to the user as to why such issues may matter to them, thus unlocking subject-matter expertise and making it available to the user.

The construction attorneys recognized that many contractors do not have in-house legal counsel/risk management functions or can’t afford to hire such outside consultants to review every business document. When the attorneys discovered there were AI platforms for contract reviews in massive legal-related use cases (like mergers and acquisitions), but no consumer-facing software product for small and medium-size businesses in construction, they saw an opportunity to build one.

Advantages of using AI to review contracts include:
  • Automatic flagging of key provisions. Certain contract provisions tend to surface repeatedly, which the curators of Document Crunch™ have found to be particularly important to general contractors and subcontractors. Such provisions include contract price, notice obligations, waivers of consequential damages, waivers of subrogation, indemnity and insurance coverage obligations. Strange as it may seem, without a close reading of the contract documents, contractors and subcontractors might not have a clear idea of who the project owner is or exactly who to notify if problems arise during a project. That is the type of problem the curators observed working with construction operators every day.
  • Historical analysis. Platforms like Document Crunch™ also enable construction industry businesses to conduct a historical analysis of contracts and see risks in current and past projects. A historical view of contractual risks can highlight still-pending risks, such as indemnity and post-completion warranty issues, as well as inform future contract negotiations and risk management practices.
  • Compliance with insurance requirements. AI is helping owners and contractors review and analyze commercial general liability, builder’s risk and construction wrap-up policies to ensure that contractors are aware of and comply with project requirements.
  • Identification of risk-shifting provisions. All contracts can contain risk-shifting provisions, but these can be difficult to spot in the volumes of documents relating to plans, designs and specifications. For example, contractors might inadvertently overlook design responsibility provisions, confidentiality requirements, subcontract flow-down requirements and warranty obligations.
  • Risk insights for underwriting. Contract review and analysis are important to insurance carriers, who assume many of the contractual liabilities of the contractors they insure. AI contract review platforms like Document Crunch™ bring speed and efficiency to understanding the risks that contractors face on specific projects. For a contractor’s insurer, this is a key step in minimizing the assumption of risk that a contractor has no intention of taking on.
AI-powered analysis can quickly call out items that contractors should explore more deeply with their trusted advisers or discuss strategic approaches to mitigating risks in the construction business.

The power of partnership
While AI and platforms like Document Crunch™ make contract analysis much faster, it’s not intended to replace the skills and services of legal and risk management professionals. Rather, AI-powered analysis can quickly call out items that contractors should explore more deeply with their trusted advisers or discuss strategic approaches to mitigating risks in the construction business. Even AI needs to partner with the right people to apply what is learned to company decision-making.

Document Crunch™ is now part of AXA XL’s Construction Ecosystem Tech Library, available at preferred terms to AXA XL construction clients interested in adopting new technology that has potential to reduce risks. The Construction Ecosystem was developed by AXA XL as a way to partner more closely with their clients in their risk management, and it has also been a way to partner with technology providers to help steer and refine new technologies to better solve clients’ problems.

In fact, the Document Crunch™/AXA XL partnership started as a client/insurer relationship, and a strong one at that. Josh Levy, co-founder and Curator of Document Crunch, then an insurance customer of AXA XL, experienced AXA XL’s partnership-oriented approach firsthand while work with Rose Hall on some claims work in her then position as an SDI Risk Engineer. During Josh’s experience with the claims adjustment process, AXA XL displayed their commitment to their core values of Innovation, Flexibility and Service – values they continue to exhibit in the Construction Ecosystem and technology partnership program. Josh and Rose started with a trust-based business relationship and strong rapport, a solid foundation to take the partnership a step further as Josh then co-founded Document Crunch.

Many tech companies are comprised mainly of individuals with strong tech backgrounds, but sometimes less experience in the industries that they are looking to serve. Document Crunch is the opposite of this model, as it was founded by a team with deep subject matter expertise who simply scratched its own itch: the co-founders, long time construction lawyers, simply got tired of reviewing contracts and saw a need for technology to assist. Even though they had the knowledge and skill to review contracts, they saw that there still had to be a way to do it better. And maybe this would pave the way for a more convenient and affordable way for other industry stakeholders who did not have their expertise on staff.

To invest further into the development of the platform, Document Crunch™ just completed its first seed round with a strategic construction-tech investor, Holt Ventures. (Document Crunch™ intends to use these funds to continue iterating on its offerings, and further establish itself as the premier AI partner to the construction industry. Part of the investor’s interest in the Document Crunch™ platform was its already standing partnership with AXA XL. Over and over again, success in developing highly marketable technology has been driven by successful partnerships.

Partnerships play a very powerful role in helping technology firms develop the right technology to meet business needs. Together, we’re building stronger industry partnerships, empowering risk managers to reduce risk to improve their business operations and profitability, while at the same time, advancing tech adoption in the broader construction industry.

About the Authors
Rose Hall is Strategic Operations Manager for Risk Engineering in AXA XL’s North America Construction division. She can be reached at rose.hall@axaxl.com.

Joshua Levy is Co-Founder and Curator, Construction, for Document Crunch™. He can be reached at jlevy@documentcrunch.com.

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