FILLING HOLES IN CONTRACTORS LIABILITY INSURANCE PROGRAMS

Transcription

1 Workshop W8 Wednesday, November 12 1:30 2:45 p.m. and 3:05 4:20 p.m. FILLING HOLES IN CONTRACTORS LIABILITY INSURANCE PROGRAMS Workshop W8 Presented by Jeffrey A Segall Senior Vice President Willis This fast-moving session will pinpoint common problems that can result in gaps in contractors general and umbrella liability coverage. Often, there are relatively easy fixes that can close holes in the basic policy form and avoid unexpected gaps in coverage. Find out how to maximize the value of your liability insurance program (or your client s) and protect the company balance sheet from a potentially devastating uninsurable loss. Even where gaps cannot be closed, knowing what they are allows contractors to make informed decisions about alternative methods of managing these risks. To print on both sides of the page, set your printer for duplex printing. Copyright 2014 International Risk Management Institute, Inc. 1

2 Gary seeks contractor with safety obsession. We have a lot in common. In fact, we go together like hot wings and football. You and I both want your project done safely and on time. So, when you break ground for your next construction project, remember I m 100% in this game. And I have the resources to cover you from design to dedication, anywhere in North America. Get to know me. Text GaryXL to is a trademark of XL Group plc companies. In the US, the insurance companies of XL Group plc are Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance Company of New York, Inc., XL Insurance America, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions.

3 Jeffrey A Segall Senior Vice President Willis Mr. Segall is senior vice president, Willis, with responsibility for delivering best practices to Willis s contractor clients based in Florida. Prior to joining Willis, Mr. Segall was vice president, E&S, of CNA Global Specialty Lines. In this capacity he was responsible for the underwriting of programs, nonadmitted liability lines, and for-hire trucking accounts. Previously, as vice president of Construction at CNA, Mr. Segall was responsible for developing strategy and best practices for the construction segment. He has presented at the IRMI Construction Risk Conference on a variety of insurance topics, including general liability, builders risk, and workers compensation. His commitment to education is demonstrated both by the numerous certifications and credentials he has earned and in Conference attendees consistent praise for the way he freely shares his knowledge and experience. Mr. Segall is an important construction industry resource, sharing his expertise not only as an IRMI speaker but also as a presenter at other industry conferences and by contributing to numerous trade publications. Workshop W8 Mr. Segall holds a bachelor s degree in business administration from the University of Texas in El Paso. His professional insurance designations include Associates in both Underwriting and Risk Management, Certified Insurance Counselor, Chartered Property Casualty Underwriter, and Certified Risk Manager, and the Construction Risk and Insurance Specialist (CRIS) certification. He is recipient of the Continuing Professional Development program award and the IRMI WOW (Words of Wisdom) award for his previous contributions to IRMI. 3

4 Notes 4

5 Filling Holes in Contractors Liability Insurance Programs Basic Coverage Forms ISO Company specific Non-standard, may be surplus lines 5 Workshop W8 Presented By: Jeffrey A Segall SVP Willis Construction

6 Holes, Gaps, and Traps Where they reside Primary places to look; Exclusions Definitions Contracts you sign Nice to have, if it applies to you Watch for endorsements that sneak in Exclusions Expected or intended injury Contractual Liability also definition Pollution Fungi, Bacteria, Mold, all kinds of modifications Aircraft, Auto or Watercraft Mobile Equipment - also definition Damage to Property Damage to your Product also definition Damage to your Work Electronic Data Liability 6

7 Expected or intended injury Section I COVERAGES, COVERAGE A, BODILY INJURY AND PROPERTY DAMAGE LIABILITY, 2. Exclusions, a. Expected or Intended Injury is deleted and replaced with the following: a. Expected Or Intended Injury Bodily injury or property damage expected or intended form the standpoint of the insured. This exclusion does not apply to bodily injury or property damage resulting from the use of reasonable force to protect persons or property." Workshop W8 Contractual Liability Personal Liability Option 1 remove exclusion Option 2 This exclusion doesn't apply to liability for damages assumed in an insured contract Option 3 - endorsement 7

8 Aircraft, Auto, Watercraft Option 1 remove exclusion or attach endorsement Option 2 Increased Non-Owned over 26 * Consider Drones as well Damage to Property Section I COVERAGES, COVERAGE A, BODILY INJURY AND PROPERTY DAMAGE LIABILITY, 2. Exclusions, j. Damage to Property, paragraphs (5) and (6) are amended as follows: Exclusion j.(5) and j.(6) are clarified as follows: The language "that particular part" in Exclusions j.(5) and j.(6) precludes coverage only for damage to the segregated portion of the property on which the insured, or its contractors or subcontractors working on its behalf, are actively performing work at the time of the loss. The language "that particular part" does not mean the entire project regardless of whether or not the insured is acting as a construction manager or a general contractor." 8

9 Damage to Property Rented Section I COVERAGES, COVERAGE A, BODILY INJURY AND PROPERTY DAMAGE LIABILITY, 2. Exclusions, last paragraph is deleted and replaced with the following: Exclusions c. through n. do not apply to damage to premises while rented to you or temporarily occupied by you with permission of the owner arising caused by: fire, lighting, explosion, windstorm or hail; smoke, aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment, weight of snow, ice or sleet; or water damage. Workshop W8 A separate limit of insurance applies to this coverage as described in Section III Limits Of Insurance. Standard limit is $300,000 Try for all risk Damage to Property Alienated Premises ALIENATION OF PREMISES MODIFICATION TURNKEY JOBS Broad Exception for "your work." It is agreed that paragraph (2) of exclusion j. of Coverage A (Section I) of this policy does not apply if the premises are "your work." Limited Exception for "your work." It is agreed that paragraph (2) of exclusion j. of Coverage A (Section I) of this policy does not apply if the premises are "your work" and were not occupied, rented or held for rental by you for more than 12 months after completion. 9

10 Damage to Your Work Exclusions, I. Damage to Your Work, is deleted and replaced with the following: l. Damage to Your Work Property damage to that particular part of your work arising out of it or any part of it and included in the productscompleted operations hazard. The language that particular part means only the segregated portion or component part of the property which must be restored, repaired or replaced because your work was incorrectly performed on it. This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a contractor or subcontractor. Definitions Who is an insured Insured Contract Mobile Equipment Bodily Injury Personal Injury Occurrence 10

11 Who should be an Insured The term Named Insured includes, in addition to the person or organization designated in the Declarations as the Named Insured, any subsidiary, associated, affiliated, allied or acquired company or corporation (including subsidiaries thereof) of which any Named Insureds has, during the policy period, a 50% or more ownership interest in, or exercises management or financial control of, or any entity for which the Named Insured is obligated to provide insurance pursuant to a contract or agreement. Workshop W8 Who should be an Insured 2 You are an insured for your liability arising our of the conduct of any current of past partnership, joint venture, limited liability company (or similar entities) of which you are (or were) a partner or member, even though such partnership, joint venture, limited liability company (or similar entity) is not shown as a Named Insured in the Declarations. If 1) you are obligated to provide insurance or 2) the entity is listed as a Named Insured on this policy. This coverage is excess over any other available liability insurance. 11

12 Who should be an Insured 3 C. Section II, paragraph 3 is deleted. D. The following language in Section II ""Who is an Insured"" is deleted: No person or organization is an insured with respect to the conduct of any current or past partnership, joint venture or limited liability company that is not shown as a Named Insured in the Declarations." Who else should be an Insured Employees As Insureds - Co-Employees Section II - WHO IS AN INSURED, Paragraph 2.a.(1)(a) is deleted. To address risk of employee vs employee claims Employees As Insureds - Health Care Professionals Section II - WHO IS AN INSURED, Paragraph 2.a.(1)(d) is deleted. To address circumstances where contractor employs a nurse, doctor or other healthcare professional. Standard terms would provide coverage for the insured, but not the healthcare professional. 12

13 Bodily Injury Section V - DEFINITIONS, paragraph 3. is deleted and replaced with the following: 3. "Bodily injury" means bodily injury, mental anguish, shock, mental injury, fright, emotional trauma, disability, sickness or disease sustained by a person, including death resulting from any of these at any time. Workshop W8 Personal Injury "Section V - DEFINITIONS, paragraph 14. is amended as follows: ADD: h. "Discrimination or humiliation that results in injury to the feelings or reputation of a natural person, but only if such discrimination or humiliation is not done intentionally by or at the direction of the insured or any "executive officer", director, stockholder, partner, member or manager of the insured and not directly or indirectly related to the employment, prospective employment, past employment or termination of employment of any person or persons by any insured. 13

14 Occurrence "Section V - DEFINITIONS, paragraph 13. is amended as follows: ADD: an occurrence shall include any circumstance where a defect or deficiency in your work results in damages because of property damage so long as the property damage was not intended by you, and including, but not limited to, when your work was performed pursuant to a contract or where damages because of property damage arise out of a contract. Conditions created via Contract Other Insurance Waiver of Subrogation Additional Insureds Engineers, Architects or surveyors Lessor of equipment Managers or lessors of premises Mortgagees Owners or other contractors Ongoing Completed Operations Limits applying per location or per project 14

15 Other Insurance This policy is excess Section IV - Commercial General Liability Conditions, Paragraph 4.b.(1) (b) is deleted and replaced with the following: b. Excess Insurance(1) This insurance is excess over: (b) Any other insurance, whether primary, umbrella, excess, contingent or on any other basis, available to you covering liability for damages arising out of the premises or operations, or the product or completed operations, for which you have been added as an additional insured. Workshop W8 Additional Insureds Engineers, Architects or Surveyors CG 2031 engaged CG 2032 Not Lessor of Equipment CG 2028/34 Managers or Lessors of Premises CG 2011 Mortgagees CG 2018 Owners and Other Contractors Ongoing CG 2010/33 Completed Operations CG

16 Application of Limits Amendment of limits per project or premises CG2501 Per Location Aggregate CG 2503 Per Project Aggregate CG 2504 General Liability Nice to have Wrap-up Excess/DIC Stop Gap also see Employers Liability Coverage Territory Re-work Knowledge of Occurrence Duties in the event of occurrence Unintentional failure to disclose Increased limits of supplemental payments Choice of Law most favorable state 16

17 Wrap-Up Excess/DIC This endorsement modifies insurance provided under the following: Notwithstanding any other terms or conditions under this insurance: This insurance is excess over any other valid and collectible primary and excess insurance available to you or any other insured through a Consolidated (Wrap-Up) Insurance Program, and if this insurance provides broader coverage for any exposures at or from a project insured under a Consolidated (Wrap-Up) Insurance Program, and such broader coverage is not provided by a separate Consolidated (Wrap-Up) Insurance Program, then this insurance will provide primary coverage as respects those exposures." Workshop W8 Stop Gap Employers Liability In monopolistic states, the fund covers only injury to the employee Employer s Liability can be added to General Liability or Worker s Compensation policies CG (ND), CG (OH) CG (WA), CG (WY) 17

18 Re-Work Coverage is generally intended to pay for repair, replacement, alteration or removal of your product or your work that is structurally unsound or otherwise cannot be put to its intended use. It typically applies to elements of the work considered as structural (as opposed to more cosmetic). It will typically be subject to a sub limit, have a separate deductible or retention, or be excess over all other insurance including property, builder's risk, professional etc.. Knowledge of Occurrence "Not withstanding any other terms or conditions under this insurance: Knowledge of an accident, occurrence, offense, injury, claim, or suit by your agent, servant, or employee will not be considered to be your knowledge of the accident, occurrence, offense, injury, claim, or suit unless the following person or person in the following position(s) shall have knowledge of the accident, occurrence, offense, injury, claim, or suit : Person or position: Vice President, Risk Management" 18

19 Duties in the Event of an Occurrence "Section IV - COMMERCIAL GENERAL LIABILITY CONDITIONS, Paragraph 2. is amended as follows: ADD e. The failure to comply with any condition under this insurance, including but not limited to, giving notice of, or providing information and documents in connection with, an accident, occurrence, offense, injury, claim, or suit shall not invalidate any claim made by the insured, injured person or any other claimant, if it was not reasonably possible to comply with such condition, or the failure to comply with such condition has not prejudiced us. The burden to prove such prejudice shall be on us." Workshop W8 Unintentional Failure to Disclose "Section IV - COMMERCIAL GENERAL LIABILITY CONDITIONS, Paragraph 6. is amended as follows: ADD: d. Your failure to disclose all hazards or prior "occurrences" existing as of the inception date of the policy shall not prejudice the coverage afforded by this policy provided such failure to disclose all hazards or prior "occurrences" is not intentional. 19

20 Increased Limits Supplemental Payments Section I - Coverages, Supplementary Payments - Coverages A and B is amended as follows: Up to $2,500 for cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which the Bodily Injury Liability Coverage applies. We do not have to furnish these bonds. All reasonable expenses incurred by the insured at our request to assist us in the investigation or defense of the claim or "suit", including actual loss of earnings up to $750 a day because of time off from work. Choice of Law SECTION IV. Conditions is amended to include the following additional provision: Most Favorable State The law of the state most favorable to the Named Insured shall govern the terms and conditions of the policy, provided that such state is a part of the United States of America including its territories and possessions; and (1) has a substantial relationship to the Named Insured; or (2) has a substantial relationship to the state in which such claim or Suit is brought; or (3) is the state in which "we" are incorporated, or "we" have our principal place of business, or where this insurance contract was delivered to the Named Insured. All other terms, conditions, and exclusions shall remain the same. 20

21 Liberalization Clause If we adopt a change in our forms or rules which would broaden coverage without an additional premium charge, this policy will automatically provide the broadened coverage as of the date the revision is adopted. Standard wording in Auto policy 3. Liberalization If we revise this Coverage Form to provide more coverage without additional premium charge, your policy will automatically provide the additional coverage as of the day the revision is effective in your state. Workshop W8 Added endorsements to watch out for Residential work EIFS Marine and Airport work Work performed by a subcontractor IS your work CG 2294 Construction management CG 2234 Contractors professional liability CG 2279 /

22 Residential Work Each company defines residential differently Are apartments, dormitories, or military housing considered residential? Are any coverages voided if past projects are converted to residential use? Consider past work when agreeing to new exclusions Marine &/or Airport Work Exclusions have ben seen 22

23 Contact Information office cell Workshop W8 23

24 Notes 24