Transcript Contractual Insurance Requirements - Avoiding Pitfalls and

CONTRACTUAL INSURANCE
REQUIREMENTS
Avoiding Pitfalls & Potholes
Dan Cretella
O&G Industries, Inc.
Frank Armstrong
Willis North America
September 16, 2014
Willis Construction Risk Management Conference – Dallas, TX
Agenda
 General Principles
 Coverage Lines and Common Pitfalls
 Process, including Verification / Compliance
Contractual Insurance Requirements | 1
General Principles
Definition of “good” contractual insurance requirements:
When a claim event takes place, the insurance coverage responds as intended.
Exposure Identification
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Project Delivery Method
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Construction Risk Considerations: Project Value, Adjacent Properties, Existing Structures, Partial Occupancy, Public
Liability, Professional, Environmental
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Jurisdictional Risk Considerations: Anti-indemnity/AI, Upstream Immunity, Duty to Defend (AI), Statute of Repose,
Faulty Work as an “Occurrence” (GL)
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Lender Requirements
Intent – Required Coverage / Terms
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Risk Transfer / Allocation
Contractual wording aligned with intent
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Clear, unequivocal
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When available, specify terms subject to standard forms (ISO) or “equivalent”
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Commercially reasonable terms
Verification / Compliance
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Coverage
Possible Requirements
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Workers’ Compensation
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General Liability
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Auto Liability
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Excess / Umbrella Liability
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Builders Risk
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Professional Liability
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Pollution Liability
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Contractors Equipment
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Riggers Liability
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Railroad Protective Liability
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Owners and Contractors Protective
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Coverage
WC Considerations
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USL&H, Harborworkers, Maritime
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Alternative Employer Endorsement
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Sole proprietors or others not statutorily maintain WC
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Separate EL from statutory requirements with specified limits:
 BI by acc – each acc
 BI by disease – policy limit
 BI by disease – each employee
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Coverage
General Liability Considerations
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Avoid outdated terms (“broad form property damage”, “XCU”, etc.)
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Specify ISO Form CG 0001 (2004 edition or later) or equivalent
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Limits: minimum of / no less than and/or single combined limit with excess/umbrella; vary by subcontractor
trade?
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Additional Insured Terms – scope and length of requirement
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Additional Insured – Primary/Non-Contributory (ISO CG 2001)
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Project specific aggregate (operations)
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Completed operations
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Amendatory Endorsement: Limited Contractual Liability for Covg Personal & Advertising injury (ISO CG 2274)
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Amendatory Endorsement: Waiver of Rights of Recovery (ISO CG 2404)
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Amendatory Endorsement: Contractual Liability – Railroad (ISO CG 2417)
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Unacceptable Exclusions (e.g. residential)
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Project Specific (GL only Wrap)?
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Coverage
CGL / Additional Insured Considerations
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ISO AI Endorsements: CG 2010 (operations) and CG 2037 (completed operations)
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Edition dates matter:
 10/01 – “arising out of”;
 07/04 – “caused in whole or in part”;
 04/13 – additional terms
 To the extent permitted by law
 Scope of coverage no broader than required by contract
 Limits of coverage no broader than required by contract
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“Saving” clause: To the maximum extent permitted by law
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Avoid “tying” AI requirements to indemnity provisions
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Priority of Coverage (Excess/Umbrella)
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Contract Privity: ISO CG 2033 vs. CG 2038
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Coverage
Auto Liability
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ISO Form CA 0001
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“Any Auto”, include owned, hired or otherwise operated by/on behalf of
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MCS 90
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Broadened Pollution Liability (CA 9948)
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Coverage
Excess / Umbrella Considerations
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“minimum of” or “no less than”; and/or combined single limit with primary
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Follow-form
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Amend “other insurance” provisions to assure vertical exhaustion (AI)
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Include EL in underlying
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Coverage
Builders Risk
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Who is procuring the coverage?
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All Risk
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Who are Insureds?
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Delay
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Transit
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Offsite
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Existing Structures
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Partial Occupancy
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Coverage
Other Insurance Related Considerations
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Waivers of Right to Recovery
 Typical: “…to the extent of available insurance”
 Consider: “…to the extent of available insurance, [including or excluding] any applicable deductible”
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Contractual Indemnity: Align with CGL Contractual Liability Coverage?
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Consequential Damages
 Mutual waiver
 To the extent of available insurance
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Liquidated Damages
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Flow Down Provisions (except limits?)
 Sub-subcontractor
 Employee Leasing Companies
 Alternate Employer Endorsement
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SIR’s and deductibles
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Notice of Cancellation
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Reserve right to obtain certified copies of policies
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Insurers – Authorized / Financial Rating (AM Best A- VII)
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Compliance failure constitutes default, with allowance to terminate for cause, withhold payment and/or purchase
the required insurance at downstream party’s expense
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Process
Practical Considerations
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Streamline the process
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Pre-bid / Post Bid
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Who is negotiating?
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Risk professional (and/or their respective brokers) should communicate
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Pay attention to insurers
Verification / Compliance Considerations
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Do nothing and hope coverage is there when needed
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COI’s
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COI’s with key endorsements (AI, WOS, XS PNC)
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COI’s with verification addendums
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Review policies
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Completed operations period
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Questions
Contractual Insurance Requirements | 12