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

General RequirementsA.M. Best Rating

a. measure of the financial strength and ability of an insurance carrier to meets its obligations.

b. A- or better.

c. See www.ambest.com for individual carrier ratings.

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

General RequirementsNon-Admitted Carriers

a. Non-admitted carriers are not licensed to do business in NYS, but that doesn’t 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

General Requirements Notice of Cancellation

d. Notice that your contractor is losing his/her insurance.

e. Carrier may not deny coverage to you unless they send notice.

f. Carrier doesn’t want to assume obligation of providing free insurance.

Recent changes to the ACORD form

Responses from insurance agents and brokers

What are we really asking for?

Primary and Non-Contributory Coverage

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

General Requirements Waiver of Subrogation

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

Other Provisions

Remedies– Stop work– Surety

Subcontractors

“Shall endeavor” What is the nature of the subcontractor’s

work?

Deductibles and Self-Insured Retentions (aka SIR’s)

What’s the difference? Why do we need that information? What to do once you have that information

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.

Deductibles and Self-Insured Retentions (aka SIR’s)

What’s the difference? Why do we need that information? What to do once you have that information

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?

Chapter 2 – ManualChapter 2 – ManualInsurance TypesInsurance Types

Refer to Page 4 – Manual

READ THIS DOCUMENT

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

Select the Kinds of Insurance

Crime Marine Protection and Indemnity Garage Liability Umbrella and Excess Liability

FAMILIARIZE YOURSELF WITH THE CONTENTS OF THE SECTION

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.

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.

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.

Types of Insurance Excess (umbrella) Liability Insurance Policy

Page 18 DECRIPTION

Excess over CGL and Auto.

$1 million doesn’t buy what it once did.

Premium is about 25% of CGL premium for up to $5 million.

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

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.

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.

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.

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)

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.

Select Limits that Fit the Contract

Use the Matrix. Bigger projects

carry greater risk. Higher limits for

big contract value.

Matrix Pages

Case Studies

Issues With Contracting

Types of coverage. Limits of Liability. Required

endorsements.

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

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 Contractor’s Equipment coverage for environmental exposures. Railroad Protective Liability (RRPL) coverage will be required as this project will be performed on RR ROW.

Limits of Liability:

General Liability – $5,000,000/$5,000,000 Umbrella (Excess) Liability – As needed to meet CGL limit requirementsAuto Liability – $1,000,000 Combined Single LimitEnvironmental Liability - $5,000,000?OCP - $1,000,000/$2,000,000Builders’ Risk - $11,000,000RRPL – Limits as required by the RRWorkers’ Compensation – Limits as specified by lawNYS Disability – Limits as specified by law

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)

Information Information Technology ServicesTechnology Services

Install/Update Information Systems

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

Issues With Contracting

Types of coverage. Limits of Liability. Required

endorsements.

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

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

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.

Issues With Contracting

Types of coverage. Limits of Liability. Required

endorsements.

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 Contractor’s Equipment coverage.

Limits of Liability:

General Liability – $2,000,000 Workers’ Compensation – Unlimited, by lawNYS Disability – As specified by lawAuto Liability – $1,000,000Environmental Liability - $2,000,000Builders’ Risk – $8,060,000Professional Liability - $2,000,000

OCP - $1,000,000/$2,000,000

Endorsements:

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

Professional ServicesProfessional Services

Outside Counsel for Administrative Boards

and Appeals

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).

Issues With Contracting

Types of coverage. Limits of Liability. Required

endorsements.

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.

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

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.

Issues With Contracting

Types of coverage. Limits of Liability. Required

endorsements.

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.

Insist Upon Proof of Insurance

Nobody starts work until there is compliance proven.

Decide on type of proof- certificate. Proof must match contract requirements.

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

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 –

we’ll discuss this later in the presentation

Model Insurance RequirementsAdditional Insured Protection

In case you get sued because of the contractor’s work.

Need to be endorsed to policy.

Auto and general liability risks.

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.

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.

Supplemental Insurance Questionnaire

Does your contractor have necessary insurance?

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 Don’t forget that the Council of Contracting Agencies

Insurance Committee is also a source of information!

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

Risk Management and InsuranceIn Contracting

Council of Contracting Agencies

Thank You!