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Are you sending out accurate Certificates of Insurance?


Certificates of Insurance updates and suggestions.  Please take all commentary with a grain of salt depending on the state you perform work in, and because there are exceptions to the majority of what I wrote below...

1.  If an upstream party has a 10 million dollar umbrella, and expects all their subs to carry limits equal to or in excess than that, they need to be flexible about changing subcontracts to reflect a realistic limit requirement that smaller subcontractors carry.  We've found this to be a fairly easy push back when our subs are being asked to carry limits that are excessively high for the type of work they do, or their scope of work for a particular project. If you don't push back, and have a large claim, there can be severe breach of contract problems because you are out of compliance with what you signed.

2.  The standard Acord certificate of insurance has been updated.  There are no more endeaver to's, or 10, 30, 60, or 90 day notice of cancellation fields.  If you're the upstream party, request the downstream party to attach the endorsement on their policy that states their policy's cancellation clause.  Check with your agent/lawyer, and have them update the sample certificate you provide your subs with to comply with the new industry standard version.  The insurance industry is still working out some of the kinks, and this gets complicated because different states have different reporting periods.  Sometimes they can even be different for each line of coverage, so check with your agent.  One big thing to remember, is that the only entity that will be informed of this cancelation is the 1st named insured, usually the cert holder.  So if you have a description of ops listing 15 gov't entities, LLCs, holding companies, architects, owners, and whomever else, the only one that is getting a notification of cancelation is the company whose name is in the cert holder field.

3.  Additional Insured.  If your subcontractors are naming or listing your company as additional insured in the description of ops, do not assume that you are an additional insured without asking for a copy of the AI endorsement on your sub's GL, Auto, and Umbrella policies.  And in CT at least, you cannot be added as additional insured on your sub's work comp policy so stop asking! 

4.  Waiver of Subrogation.  Just like with additional insured status, a sub can't just write in the description of ops that a waiver of subrogation applies in favor of additional insureds and it grants you that waiver.  Ask to see the endorsement on their policy for proof that their policy actually includes this coverage.  Part of this responsibility lies on your agent or broker because they are the primary issuer of you certificates, and if they are writing in coverages that you don't actually have, it could get them in big trouble with their Errors and Omissions carrier, and potentially leave you with an unpaid claim. If your agent is doing this, we'd be happy to be your new agent.

5.  One last thing suggestion that applies to both Additional Insured and Waivers of Subrogation.  If you don't have it already, get both of these coverage added to your policy in a Blanket form and/or "when required by written contract".  There are two reasons for this.  1.  You don't have to worry about adding separate endorsements to your policy every time you grant additional insured status to another party you're contracting with.  2.  It's cheaper and easier to buy a blanket Waiver of Subrogation, than it is to buy it on a project by project basis.  By adding these endorsements in a blanket format, it also eliminates the possibility that you forget to call your insurance carrier or agent to have separate parties added for a specific project which could leave you with either an uninsured claim, a breach of contract, or both.

If you love certificates as much as we do, here's a great resource on best practices and suggestions for compliance. 


Sorry for laying all this on you on a Monday morning.  Give us a call if we can help clarify, or if you need help getting your certificates and risk transfer system working more efficiently.

Back to the Basics: Umbrella/Excess Liability


umbrella insurance, construction risk advisorsPretty sunny here in Connecticut this afternoon.  So sunny that you might need an umbrella.  Do you know what else needs an umbrella?  Your contractor insurance program!  Just like an umbrella protects you, your hair, and your clothes from bad weather, your insurance program’s umbrella goes over several of your lines of coverage to protect your company’s checkbook.  It’s common for construction companies to go their entire lifespan without ever needing their umbrella or excess limits to pay a claim.  I also keep an umbrella in my car, but it too rarely gets used.  But it’s still there if I ever need it. 

(disclaimer: Travelers didn’t pay me to write this)

What is it?

An umbrella goes over a few lines of your insurance coverage to provide additional limits if you exhaust the policy limits of the underlying policy.  In most instances, the umbrella provides additional limits to your Commercial General Liability, Business Auto, and the Employer’s Liability portion of your workers’ comp policy.  Say that you have a 2 million dollar general aggregate on your CGL policy.  You haven’t had any claims yet this year, so your limits are still 100% intact. Let’s say you have a massive claim that has insured costs of 2.4 million dollars.  Your CGL policy will use all of its 2 million dollars worth of limits, and then your umbrella will pick up the additional 400K.  If you didn’t have the umbrella, you could be getting your company’s checkbook out to cover the additional 400K.  If you’ve got an extra 400K lying around, more power to you, but for 99% of contractors, coming up with a few thousand dollars for a few million dollars worth of umbrella coverage often makes a lot more sense.   One caveat to how the umbrella responds, is that it normally has a Self-Insured Retention or deductible.   Something in the ballpark of 5-10K is standard.  10K is nothing to laugh at, but it probably won’t bankrupt your company like a bill for 400K could.

Why should my construction company should carry it?

For our commercial construction clients, it is not that rare their upstream parties to require  $3,000,000-5,000,000 limit worth of general liability limits. Very few Commercial General Liability policies will offer limits higher than $2,000,000 so to comply with their contracts, most of our clients buy an umbrella to split the difference.  We advise that you buy an umbrella that will satisfy the majority of your contractual obligations.  If most of the contracts you sign require a $5,000,000 limit, buy your regular CGL and a $3 MM umbrella.  If most of the contracts you sign require a $10MM umbrella, either the upstream party is making you have the same limits as them even though they’re 20x your size, or you’re a huge contractor working on huge, high-profile jobs. The other reason for purchasing umbrella coverage is that it’s relatively inexpensive for the amount of coverage dollars it affords.  Once you buy the first million, the subsequent millions go down in price substantially.  Again, spend a few grand up front, and save your checkbook for payroll and new equipment instead of insurance claims.

Types of Claims:

The types of claims that trigger umbrellas are usually the same claims that trigger news stories, trips to the hospital, and immediate OSHA visits.  I don’t mean that in a joking way, but if your company is responsible for a claim that costs five million dollars, people are going to know about it and odds are good that significant property damage has occurred.  When we’re talking to clients about their umbrella, we often bring up the make believe scenario of “imagine what the claim would cost if one of your dump trucks crashes into a bus full of nuns, orphans, and their puppies.” 

Loss Control Suggestions:

Any loss prevention strategies that work for CGL and Business Auto also apply to your umbrella.  The umbrella doesn't cover your property because the property is insured to a specific value and maximum claim costs are predicted and insured for. It also doesn't respond to workers' comp injuries because workers' comp injuries don't have limits.  The checks keep coming until the injured worker is back at 100% or compensated for any permanent disability. We hope you always buy an umbrella but never ever, ever, ever have to use it.

About the author:

Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues.  If you want to connect on twitter, he's at @fixyourrisk and here on Facebook

dan phelan litchfield insurance group

Back to the Basics: Contractor Commercial Property Insurance


property insurance claimDay 3 of “Back to the Basics” is going to cover Contractor Commercial Property coverage.  While there are several lines of coverage that cover various types of property and equipment, today’s post will specifically cover your buildings that you operate out of and store your machinery and equipment in.  Later in our 13 part series, we’ll be addressing contractors equipment, property in transit, inland marine exposures, and builders risk.





What is it?

Contractor commercial property insurance is designed to cover damage to your existing buildings and the property inside and within 100 feet of these buildings. This policy covers claims for losses or damages in connection with the physical aspects of your facilities.  And this coverage will only pay on losses for direct physical loss or damage from a covered cause to covered property that is located at the premises covered in your policy.  Builders risk will be discussed next week to address property that is still under contruction.

Why should my construction company carry it?

We all show up to our offices every morning with the expectation that the office and everything inside of it will be just like we left it the night before.  However, pesky things like fires, wind, falling trees,  lightning, hail, smoke damage, vandalism, leaky sprinklers, and collapse(from specified causes) can sometimes disrupt this.  And that’s where property insurance comes in.  Several of the perils that property insurance covers are due to mother nature, and she has been consistently known to thwart even the most comprehensive loss prevention strategies.  There are things that can happen to your building which most property policies will not cover.  Such as wear and tear, mechanical breakdown, boiler explosion, FLOOD, sewer backup, snow/water damage to property outside,  theft of building materials, off premises utility service interruption, and others depending on who your company has as an insurance carrier.  Some of these exclusions can be added to a policy by endorsement or another insurance product.  Give your agent or broker a call to discuss what your options are.


Types of Claims:

Each policy is different.  And each policy will cover and exclude different perils (causes of loss).  Property coverage has many nuances and options depending on where you are located, so please review your own policy, covered perils and exclusions with your agent.  Please note also, that property and contents coverage usually has low limits on currency, software, intellectual property, and DOES NOT COVER EMPLOYEE THEFT OR DISHONESTY.  Other insurance products are available to cover some of these risks, but do not assume that your property policy fully covers every piece of property under your roof.


Loss Control Suggestions:

Sprinklers are great for stopping fires from spreading and to get a discount on your property insurance.  Security systems and exterior lighting are great for thwarting thefts and vandals and also help with insurance discounts.  Don’t allow employees to smoke inside or burn candles, incense, etc.  Use caution during the colder months when utilizing space heaters.  If snow is building up on your roof like it was in Connecticut this year, clean it off periodically.  If you have combustible materials in your shop or garage, make sure they are disposed of and stored properly.  Common sense goes a long way in preventing many property losses.  If you wouldn’t do it at home, don’t do it at work.  A parting tip for you is to read the property section of your insurance policy.  As far as insurance policies go, the perils and exclusions section of most commercial property policies are the most straight forward and easy to read.  Most are clear on what is and what isn't covered.  Questions on whether you have coverage for a certain peril?  Call your agent.  We're here to help, and preventing uncovered claims is a lot more fun than telling our clients they are going to have to pay for a  new building with their own checkbook rather than the insurance company's.

Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues.  If you want to connect on twitter, he's at @fixyourrisk and here on Facebook

dan phelan litchfield insurance group

It's great that Osama bin Laden is dead, but the folks in the South still need a lot of help!

Back to the Basics: Contractors Business Automobile


Dump Truck Accident resized 600Day 2 of “Back to the Basics” is going to cover Business Automobile coverage.  Some of this could be old hat for the readers that have a large fleet and have been buying this coverage forever, but for our younger contractors and those acquiring their first or second company vehicle might glean some knowledge.


What is it?

Much like the car insurance you purchase, this coverage covers you for bodily injury, property damage, theft, and other incidental things that the combination of comprehensive and collision covers. It also indemnifies(makes you whole again) if you are hit or injured by an uninsured driver.

Collision covers losses caused by an accidental collision or overturn with another object or vehicle.

Comprehensive covers everything that happens to a vehicle that isn’t a collision or overturn.  Theft of contents in the car or a broken windshield from a rock would be examples of what comprehensive covers.


Why should my construction company carry it?

I worry that many contractors don’t take business auto coverage serious enough.  If you have any heavy vehicles on the road, there is potential to exhaust your limits and finally need to use your umbrella in auto coverage more than other coverage lines (with exceptions.)  If you’re a Connecticut contractor reading this, you’re well aware of what happened when the brakes failed on a poorly maintained dump truck and it collided with rush hour traffic at the bottom of Avon Mountain; killing 4 people, and injuring another 11.  Accidents of this severity are rare, but still too common. 


Types of Claims:

Collisions.  Car on Car.  Car into building.  Car flips into ditch.

Comprehensive .  Car is stolen.  Car is broken into.  Windshield is smashed.


Loss Control Suggestions:

Defensive Driving Training

Annual MVRs for all personnel operating company vehicles.

Drug testing.  Pre-hire and ongoing.

NO CELL PHONE USE IN COMPANY VEHICLES (especially in states where it is illegal)

Schedule all vehicles under Symbol 1.  This will cover every vehicle for highway/roadway use that your company has, and will automatically add any vehicle that you purchase throughout the course of the insurance policy term. Otherwise, if you purchase a vehicle and neglect to update your agent or broker, the vehicle could potentially be operating without insurance.


One last thing…there is a bit of ambiguity on some vehicles as to whether they should be covered by a Commercial General Liability policy or a Business Auto Policy.  Some pieces of equipment can be considered automobiles one minute and mobile equipment the next.  The answer to how to cover this exposure is “it depends”.  If you’re driving a cherry picker to the job site, it’s an automobile.  But as soon as it is parked and is being used to service a power line, it becomes mobile equipment.   We find that insuring it as both a vehicle and as well as scheduling it on your mobile equipment helps to cover all your bases and claim scenarios.

Check back this afternoon for another exciting blog post about Commercial Property Coverage!

About the Author:

Dan Phelan runs the marketing department at Construction Risk Advisors when he's not out helping his clients with risk management and insurance issues.  If you want to connect on twitter, he's at @fixyourrisk and here on Facebook

dan phelan litchfield insurance group

Data Breach Coverage & Cyber Liability for Contractors


cyberliabilityRecently, Sony has been in the news because of a massive data breach on its PlayStation Network.  Initial reports are saying that credit card info for as many as 77 million people worldwide may have been stolen and compromised.  In addition to the credit card implications, the hackers also obtained names, birthdays, email addresses, and login/password information from users on the network.  At this point, the breach could cost Sony as much as 24 billion, not to mention to serious harm it could do to its PlayStation franchise and trust consumers have in the Sony brand.

It's safe to assume that Sony isn't in a standard insurance program, and will probably end up paying significant amounts of the notification costs for identity theft out of pocket.  However, if you store any personal, private data on your website, either password protected or otherwise, you have vulnerabilities that could result in a claim.


Article detailing the Sony databreach

It's also fairly safe to assume that most contractors don't have a website with any personal info about clients, employees, or vendors. And therefore, don't have a significant data breach exposure that would necessitate the need to purchase a cyber liability product. However, as more and more contractors are using social media and learning how to leverage the power of the internet to maximize their sales and marketing dollar, the need to protect your company and information from hackers will become more of a necessity instead of just a "nice to have".  The majority of insurance carriers that write contractors have rolled out cyberliability programs in the last year or two and can be added to many general liabilities policies without a significant increase in premium.

Talk to your agent or broker, find out if you have an exposure, and cover your risk appropriately.  It's a lot cheaper than dealing with the fallout of a databreach.



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