Insurance Coverages and Descriptions

1
Insurance Coverages and Descriptions

• Chapter 2 provides information relative to
  general requirements pertaining to all forms of
  insurance as well as information that is specific
  to individual lines of coverage.
• Page 5 of the Manual

2
General RequirementsA.M. Best Rating

1. measure of the financial strength and ability of
   an insurance carrier to meets its obligations.
2. A- or better.
3. See www.ambest.com for individual carrier
   ratings.

3
Admitted carriers

• Licensed to do business in NY
• Policy forms have been approved by Insurance Dept
• Covered by insolvency fund in case Carrier
  becomes insolvent

4
General RequirementsNon-Admitted Carriers

• a. Non-admitted carriers are not licensed to do
  business in NYS, but that doesnt make it illegal
  to place insurance.
• b. Affidavit by Producing Broker attests that
  agent/broker sought, but was unable to place,
  coverage with an admitted carrier

5
General Requirements Notice of Cancellation

1. Notice that your contractor is losing his/her
   insurance.
2. Carrier may not deny coverage to you unless they
   send notice.
3. Carrier doesnt want to assume obligation of
   providing free insurance.

6
Recent changes to the ACORD form

• Responses from insurance agents and brokers
• What are we really asking for?

7
Primary and Non-Contributory Coverage

• What does this mean?
• The State is covered and we do not pay.

8
General Requirements Waiver of Subrogation

1. Commonly beneficial where one party is required
   to have property insurance

9
Other Provisions

• Remedies
• Stop work
• Surety

10
Subcontractors

• Shall endeavor
• What is the nature of the subcontractors work?

11
Deductibles and Self-Insured Retentions (aka
SIRs)

• Whats the difference?
• Why do we need that information?
• What to do once you have that information

12
Self-insurance/high deductibles

• Most large contractors retain all or a portion of
  the loss exposure through self-insurance (i.e.,
  no insurance).
• Question of financial responsibility.
• Question of providing protection for claims
  against agency.

13
Deductibles and Self-Insured Retentions (aka
SIRs)

• Whats the difference?
• Why do we need that information?
• What to do once you have that information

14
Occurrence versus Claims-Made policies

• Some policies typically only come on a
  claims-made form
• Why does the agency need coverage after the work
  is done?
• What if a claims-made policy is cancelled or
  non-renewed?

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Chapter 2 ManualInsurance Types

• Refer to Page 4 Manual
• READ THIS DOCUMENT

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Select Kinds of Insurance You NeedSPECIFIC
COVERAGES CH 2

• Commercial General Liability
• Workers Compensation and Disability
• EVERYBODY THAT EMPLOYS WORKERS
• Business Auto
• Railroad protective/ Environmental/ Marine
• Environmental / Pollution Liability
• Builders Risk
• Owners Contractors Protective
• Professional Liability

Disclaimer Disclaimer Disclaimer Disclaimer
17
Select the Kinds of Insurance

• Crime
• Marine Protection and Indemnity
• Garage Liability
• Umbrella and Excess Liability
• FAMILIARIZE YOURSELF WITH THE CONTENTS OF THE
  SECTION

18
Types of Insurance Commercial General Liability
(CGL)

• PAGE 8 11 Description
• Most Common business coverage 90 exposures.
• Loss that an insured becomes legally obligated
  to pay (usually negligence).
• Covers liability assumed by contract in most
  cases.
• Coverage for completed operations.
• Limited coverage for property exposures.
• Considers certain exposures are covered by more
  specific policies.

19
Types of Insurance Workers Compensation and
Disability

• Page 11 Description
• Required by State Finance Law section 142.
• All contractors should have this (exceptions).
• Work near navigable water see 11 Marine
• Protect and Indem. Jones Act.

20
Types of Insurance Commercial Automobile Policy

• Page 12 Description
• Covers liability of registered cars and trucks
  resulting from business use.
• Required anytime that the contracted activity
  requires a vehicle to enter agency property.
• Environmental exposures covered by endorsement.

21
Types of Insurance Excess (umbrella) Liability
Insurance Policy

• Page 18 DECRIPTION
• Excess over CGL and Auto.
• 1 million doesnt buy what it once did.
• Premium is about 25 of CGL premium for up to
  5 million.

22
Types of Insurance Owners Contractors
Protective Liability Policy (OCP) (Highway / Gen.
Bldg)

• Page 16 Description
• Protects the owner and contractor for liability
  exposures from negligent acts.
• Policy bought for Public Entity.
• Site specific.
• Finger pointing less likely with at least some
  contractor involvement.
• Provides primary coverage

23
Types of Insurance Owners Contractors
Protective Liability Policy (OCP)

• Expensive coverage for small projects.
• Duplicate coverage where claim stems from
  contractor work or operations.
• Duplicate coverage where contractor is negligent.
• Less of a gray area for general supervision and
  site conditions.
• Less costly on big jobs where same carrier writes
  the CGL.

24
Types of Insurance Builders Risk

• Page 16
• Covers physical damage to buildings in the course
  of construction.
• Must be written on a completed value form.
• The amount of the insurance must be the
  anticipated full value of the completed building.

25
Types of Insurance Professional Liability-
Errors Omissions

• Page 17
• Covers liability for the failure to use the
  degree of skill expected of a person in a
  particular field.
• Professional Liability coverage is required
  whenever any part of the contracted activity
  requires the services of a professional
  consultant.

26
Suggestions

• READ THE MANUAL There is no movie version.
• Become familiar with the contents
• Become familiar with information layout
• Review EXHIBIT E manual
• Policy Samples
• List what the policy covers
• List policy exclusions (better covered elsewhere)
• List policies you would think are required.
• Review requirements of past or similar
  procurements. (similar contracts available
  online)

27
Suggestions - continued

• Review Ch - 2 and Ch 3 MANUAL
• Develop an insurance specification with your
  legal advisor or risk manager before getting bids
  or quotes. (CH 3 Model Language)
• Present specifications in procurement.
• Always assure that you are using a good indemnity
  clause.
• Consider common sense limits that you will
  require for each contract type.

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Select Limits that Fit the Contract

• Use the Matrix.
• Bigger projects carry greater risk.
• Higher limits for big contract value.

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Matrix Pages
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(No Transcript)
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Case Studies
33
Issues With Contracting

• Types of coverage.
• Limits of Liability.
• Required endorsements.

34
Thruway Bridge Replacement

• Replacement of existing mainline bridge
• Bridge spans existing commuter RR tracks
• Project will encroach upon exiting fiber optic
  cable line
• Construction cost expected to be 11.0M

35
Types of Coverage In addition to the standard
General and Auto Liability, Workers
Compensation, NYS Disability, the contract should
also require Builders Risk, Owners
Contractors Protective Liability and possibly
Environmental Liability coverage. Contract
should also require Contractors Equipment
coverage for environmental exposures. Railroad
Protective Liability (RRPL) coverage will be
required as this project will be performed on RR
ROW.
36
Limits of Liability General Liability
5,000,000/5,000,000 Umbrella (Excess)
Liability As needed to meet CGL limit
requirements Auto Liability 1,000,000 Combined
Single Limit Environmental Liability -
5,000,000? OCP - 1,000,000/2,000,000 Builders
Risk - 11,000,000 RRPL Limits as required by
the RR Workers Compensation Limits as
specified by law NYS Disability Limits as
specified by law
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• Required Endorsements
• Deletion of the explosion, collapse and
  underground hazards (XCU) exclusion (from CGL).
• Deletion of Railroad 50 ft. Exclusion (from CGL)
• Additional Insureds Thruway Authority (Agency)
• Per Project Aggregate to the CGL
• MCS-90 is required on Auto Liability coverage
  because the contractor may be hauling
  contaminated soil from the site
• ISO Broadened Pollution Liability Coverage for
  Covered Autos (CA9948)

38
Information Technology Services

• Install/Update Information Systems

39
Need for IT Services

• Install or Update for modernization or new
  feature(s)
• In-house IT may lack certification/experience in
  new software feature
• Agency seeking fully certified specialist in the
  particular product(s)
• Product(s) or update(s) may be proprietary

40
Issues With Contracting

• Types of coverage.
• Limits of Liability.
• Required endorsements.

41
RFP, IFB Requirements

• May state specific product(s) to be installed or
  modernized
• Independent Contractor status of expert vendor
• May restrict use of subcontractors
• Subcontractor use subject to agency approval
• Ownership of non-proprietary work product
• MWBE policy may encourage proposals from small
  firms with minimum threshold of experience.
• Anticipated annual value of contract

42
Considerations

• General Liability
• Limitations relating to contracts
• Errors Omissions coverage
• Individual or Entity Coverage
• Nondisclosure agreements agency and client data,
  CI access
• Exceptions to privacy in contested matters
• Scope of exceptions
• Work Location(s) and Travel
• Minimal coverage for company cars and POVs
• Crime Insurance
• Willful violation of professional standards
• Identity Theft Insurance as rider or separate
  policy
• Cloud Computing Issues
• Small Business Considerations
• Availability and Affordability

43
Tip Top Towers

• Demolition and construction of a 3-story
  residential healthcare facility.
• Includes excavation and removal of contaminated
  soil below the existing structure.
• The general contractor employs a registered
  architect who will design the structure.
• The project has a not-to-exceed design budget of
  495,000 and a not-to-exceed construction budget
  of 8.06M.

44
Issues With Contracting

• Types of coverage.
• Limits of Liability.
• Required endorsements.

45
Types of Coverage In addition to the standard
General Liability, Workers Compensation, NYS
Disability and Auto, the contract should also
require Environmental Liability, Builders Risk,
Professional Liability. Owners Contractors
Protective may be required, depending on the
Agency involved. Contract should also mention
Contractors Equipment coverage.
Limits of Liability General Liability
2,000,000 Workers Compensation Unlimited,
by law NYS Disability As specified by law Auto
Liability 1,000,000 Environmental Liability -
2,000,000 Builders Risk 8,060,000 Professiona
l Liability - 2,000,000 OCP -
1,000,000/2,000,000
46

• Endorsements
• MCS-90 is required on Auto Liability coverage
  because the contractor will be hauling
  contaminated soil from the site.

47
Professional Services

• Outside Counsel for Administrative Boards and
  Appeals

48
Need for Outside Counsel

• Agencies frequently require legal services to
  represent employers before administrative boards
  and for appeals of administrative decisions.
• Outside Counsel may be needed for Unemployment,
  Workers Compensation, Disability, Human Rights
  Law, Employment Law, or where conflict of
  interest may exist for in-house counsel.
• Consider the type of firm (sole practitioner,
  partnership, professional corporation, limited
  liability entity).

49
Issues With Contracting

• Types of coverage.
• Limits of Liability.
• Required endorsements.

50
RFP, IFB Requirements

• Represent employers before Administrative Boards
  and Courts.
• Counsel as Independent Contractor.
• Retaining Attorney(s) , not subcontractors.
• Subcontractor use subject to agency approval
• MWBE policy may encourage proposals from small
  firms with minimum threshold of experience.

51
Considerations

• Compare Professional Liability and Errors
  Omissions coverage
• Individual or Entity Coverage
• Nondisclosure agreements agency and client data,
  CI access
• Exceptions to privacy in contested matters
• Scope of exceptions
• Work Location(s) and Travel
• Minimal coverage for company cars and POVs
• Crime Insurance
• Willful violation of professional standards
• Identity Theft Insurance as rider or separate
  policy
• General Liability
• Limitations relating to contracts
• Small Business Considerations
• Availability and Affordability

52
Shaky Movers

• Solicitation for moving services including
  planning and preparation, moving, disassembly,
  assembly, and other general activities related to
  relocation of tenant agencies.
• Insurance requirements were attached to the
  solicitation.

53
Issues With Contracting

• Types of coverage.
• Limits of Liability.
• Required endorsements.

54
Contract Administration

• Before work begins.
• During the course of the work, documents should
  be monitored for renewal/expiration dates.
• If not maintained or is cancelled. Follow
  internal procedures to notify the necessary
  departments/individuals.
• How long do you have to keep insurance records?
  Consult with your agency regarding its records
  retention policies.

55
Insist Upon Proof of Insurance

• Nobody starts work until there is compliance
  proven.
• Decide on type of proof- certificate.
• Proof must match contract requirements.

56
Certificates of Insurance

• ACORD and individual carrier forms
• Workers Compensation and NYS Disability forms
• Original documents your agency needs to decide
• The Named Insured it needs to match the name
  on the contract
• A signed document

57
Additional Insureds

• must be referenced on the certificate and in the
  contract
• The written contractual obligation
• Be sure the Certificate includes the contract
  (and project) number as applicable
• The Supplemental Insurance Certificate well
  discuss this later in the presentation

58
Model Insurance RequirementsAdditional Insured
Protection

• In case you get sued because of the contractors
  work.
• Need to be endorsed to policy.
• Auto and general liability risks.

59
ACORD Certificate of Insurance

• Association for Cooperative Operations Research
  and Development.
• The insurance industry's nonprofit standards
  developer.
• Check types of insurance, limits, expiration date
  and that you are named as certificate holder.
• Additional insured endorsement is a separate
  form.
• Use of questionnaire or different form (high
  volume) are alternatives but no certificate will
  create coverage.

60
Workers Comp. Disability Certificates

• NY Workers Compensation Board requires that
  separate certificate be used.
• Workers Compensation Law Section 57 requires
  public agency to collect proof of coverage.
• Disability insurance is also required.
• Construction contractors will not be exempt.
• Out-of-state vendors will be exempt.

61
Supplemental Insurance Questionnaire
62
Does your contractor have necessary insurance?
63
The Glossary

• Not an all encompassing document but we hope it
  helps.
• Includes terms that are frequently encountered in
  insurance-related discussions or reading. Terms
  are not limited to those used in this manual.
• Not the only source of information
• Many electronic sources
• Dont forget that the Council of Contracting
  Agencies Insurance Committee is also a source of
  information!

64
The Exhibits

• Certificate of Insurance forms
• The Supplemental Insurance Certificate
• NOT intended to change or alter the coverage that
  is provided in the insurance policy. The form is
  intended ONLY to provide additional information.
  
• Helps to identify red flags that should be
  brought to the attention of the Insurance Analyst
  for further information or guidance.
• Endorsement forms

65
Risk Management and InsuranceIn Contracting
Council of Contracting Agencies
Thank You!