Colorado Municipal League

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1 Recovery Colorado Municipal League Comprehensive Audit Of Municipal Christopher Mosley, Esq. I. Introduction A. Background Chris Mosley/Sherman & Howard Recovery Group B. Scope Of Presentation 1. General Overview Of To Be Considered 2. Issues Related To Construction Claims 3. Handling Claims 4. Saving Money - Key Issues To Reduce Expenses 5. Role Of The Broker C. Three Questions From The Crowd 1

General Overview Of To Be Considered 2. Issues Related To Construction Claims 3. Handling Claims 4.

2 Page 2 II. Basic Types Of - General Overview A. Property 1. Purpose - To Protect Physical Assets And Related Losses 2. Types a) Physical Damage - Coverage For Buildings b) Business Interruption - Coverage For Lost Income c) Electronic Data - All Risk Property For Electronic Data Processing Equipment (Computers), Computer Programs, And Data d) Boiler & Machinery - Coverage For Electrical Equipment Failure (Including Water Heaters, Generators, Etc.) e) Auto f) Crime 3. Key Issues a) Confirm All Buildings Properly Listed On b) Confirm Correct Property Value Listed In Policy 2

Electronic Data Processing Equipment (Computers), Computer Programs, And Data d) Boiler & Machinery - Coverage For Electrical Equipment Failure

3 Page 3 B. Liability 1. Purpose Lawsuit a) Pay Legal Fees b) Pay Settlement/Judgment 2. Types a) Commercial General Liability (Bodily Injury/Property Damage Coverage) (1) Potholes/Obscured Signs/Etc. (Roads/Sidewalks Account For 2/3 Of Municipal Liability Claims - Typically Personal Injury Alleging Faulty Design/Maintenance) (2) Construction Projects b) Errors & Omissions (Professional Liability) c) Directors & Officers/Public Liability (Protection For Individuals In Leadership Positions) d) Environmental Liability e) Auto Liability f) Aviation Liability (Police Aircraft, Etc.) 3

(Roads/Sidewalks Account For 2/3 Of Municipal Liability Claims - Typically Personal Injury Alleging Faulty Design/Maintenance) (2) Construction

4 Page 4 C. Other 1. Health 2. Workers Compensation 3. Social Media (Cover Defamation Claims, Etc. Which May Arise From Social Media Outlets Such As Facebook, Etc.) 4. Cyber Liability (Protection From Claims Involving Loss Of Consumer Information From Various Causes Including Hackers) 4

Which May Arise From Social Media Outlets Such As Facebook, Etc.) 4.

5 Page 5 III. Issues Related To Construction Claims A. Key Issues 1. Protecting Your Investment During Construction 2. Protecting Your Investment After Construction 3. Discussion - How Can Achieve Those Goals B. Before Construction - The Construction Contract 1. Most Common Problems With Typical Contract Provisions a) Vague/Ambiguous Language b) Outdated Language c) Illegal Language (Notice Of Cancellation) 2. Solution a) Make Sure Required By Contract Is Available In Marketplace b) Engage Broker And/Or Experienced Coverage Attorney To Assist In Drafting Provisions 3. Require Contractor To Provide Copies Of Policies Upon Request 5

Most Common Problems With Typical Contract Provisions a) Vague/Ambiguous Language b) Outdated Language c) Illegal Language (Notice Of Cancellation) 2.

6 Page 6 C. During Construction 1. Builders' Risk Policy a) Make Sure Policy Has Sufficient Limits b) Be Aware Of Key Exclusions - Wind/Rain/Etc. 2. Surety Bond Purchase Bond From A Quality Bonding Company (I.E., Pays Claims) 3. Other Risk Management Factors a) Choose A Well-Qualified Contractor b) Manage Project Appropriately c) Take Good (Not Adequate) Safety Measures D. After Construction 1. Contractor's General Liability Policy a) Confirm Policy Covers Construction Defect Claims b) Most Important Issues (1) Completed Operations Coverage (2) Policy Limits - Sufficient To Make Repairs 6

Other Risk Management Factors a) Choose A Well-Qualified Contractor b) Manage Project Appropriately c) Take Good (Not Adequate) Safety Measures D.

7 Page 7 2. Professional Liability a) Covers Architect/Engineer Liability b) Key Issues (1) Liability Limitation (a) Typical In A/E Contract (b) Generally Enforceable (c) Appropriate Recovery From A/E May Be Foreclosed If Contractual Limit Of Liability Is Too Low (2) Policy Limits (a) Typically An E&O Policy (b) E&O Policies Have Declining Limits Thus, Legal Expenses Reduce The Policy Limit 7

Limitation (a) Typical In A/E Contract (b) Generally Enforceable (c) Appropriate Recovery From A/E

8 Page 8 E. Other Issues - Additional Insured Coverage/Certificates Of /Ocip 1. Additional Insured Coverage a) Important If You Are Constructing Building b) Key Issue - Completed Operations (Vs Ongoing Operations) 2. Certificates Of a) Legal Effect b) Notice Of Cancellation Provisions (1) Insurers Do Not Provide As A Matter Of Course (2) Some Insurers Will Agree To Provide Notice Need To Confirm With Appropriate Policy Endorsement (3) Another Option Require Contractor To Provide Notice 3. OCIP a) Project Specific Policy Providing Coverage For All Entities Involved In A Project (Owner/Contractor/Subcontractors) b) Benefits (1) Everyone Covered Under The Same Policy (2) Single Limit Dedicated To The Project c) Downsides (1) Must Confirm Coverage Is Appropriate - Other Policies Likely Have Wrap Exclusions 8

Certificates Of a) Legal Effect b) Notice Of Cancellation Provisions (1) Insurers Do Not Provide As A Matter Of Course (2) Some Insurers Will Agree To Provide Notice Need To Confirm With Appropriate

9 Page 9 IV. Handling The Claim A. Tender Promptly B. Keep Insurer Informed C. Get Professional Assistance From A Broker And Experienced Coverage Lawyer 9

10 Page 10 V. Saving Money - Key Issues To Reduce Expenses A. Self- 1. Purpose - Reduce Premiums 2. Trade Off - Manage Own Risk 3. Various Options To Manage a) High Deductible b) Captive & Microcaptives (Discuss With Broker) B. Make Sure Property Values Listed On Policies Are Accurate 1. Property Values Have Declined 2. Replacement Costs Have Declined 3. Accurately Reflecting These Reduced Costs On The Policy May Reduce The Policy Premium C. Worker s Compensation Increase Deductible 1. Small Claims Impact Experience Mods 2. Consider Whether Small Claims Better Handled Internally May Reduce Premiums D. Risk Management 1. Take Risk Management Seriously Will Reduce Losses And Premiums 10

Property Values Have Declined 2. Replacement Costs Have Declined 3. Accurately Reflecting These Reduced Costs On The Policy May Reduce The Policy Premium C.

11 Page 11 VI. Role Of The Broker A. Assist In Many Areas 1. Identifying Risks 2. Obtaining Proper Coverages 3. Pursuing Claims (Working With Outside Coverage Counsel) B. Brokers Specialize (Just Like Lawyers) 1. Construction 2. Employee Benefits 3. Municipal Exposures 4. Others C. Top Ten List (Handout) VII. Conclusion If you have any questions regarding this information or its possible impact on your activities and operations, please contact Chris Mosley at (303) or established in 1892, is the oldest law firm in Denver. The Firm assists its clients in most aspects of law affecting businesses and public institutions. Sherman & Howard's approximately 190 attorneys currently practice law from offices in Denver, Colorado Springs, Steamboat Springs, Aspen and Vail, Colorado; Phoenix and Scottsdale, Arizona; Reno and Las Vegas, Nevada; Casper, Wyoming; and St. Louis, Missouri. For more information, please visit our website. 11

Conclusion If you have any questions regarding this information or its possible impact on your activities and operations, please contact Chris Mosley at (303) 299-8466 or cmosley@shermanhoward.

Insurance and the Construction Failure

Insurance and the Construction Failure 18 th Annual Construction SuperConference December 12, 2003 San Francisco, California James D. Hollyday hollydaj@pepperlaw.com 1 Introduction 1. Contract Drafting