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Traditional versus Project Insurance

Large construction projects create a mosaic of risks for all project participants—owner, architects, engineers, manufacturers, vendors, and contractors. In the standard form agreements for construction, the owner attempts to shift the risk to the construction manager/general contractor (CM/GC) via various provisions, including indemnification, consequential damages, cost, and schedule, just to name a few.

Despite this attempt to transfer the risks of the project contractually to third parties, the owner still may be liable for certain risks: extra hazardous operations, claims arising in common areas, owner-provided equipment, owner-retained contractors, or owner-provided design, assuming safety responsibilities or other liabilities or obligations in the construction agreement and vicarious liability arising out of the operations of the contractors.

Certain risks on the project are insurable, and the construction agreement requires the CM/GC and their subcontractors to provide certain insurance coverages and a certificate of insurance evidencing that the stated coverages are in force. This approach of having the CM/GC and all subcontractors provide the required insurance is often referred to as the “traditional insurance” approach and is used in many construction projects.

However, larger construction projects, generally over $50 million on commercial projects and $10 million-plus on “for sale” residential projects, lend themselves to be considered for insurance coverage on a project-specific basis, otherwise known as “wrap-up” insurance. Insurable risks that are commonly considered for project-specific coverages include the following.1

  • Commercial general liability and umbrella or excess liability
  • Workers compensation
  • Contractor’s pollution liability
  • Professional liability

The following advantages of project-specific coverage over traditional insurance are well documented.

  • Sponsor retains first-named insured status and more direct control over claims process
  • Completed operations extension or “tail” coverage (GL/XS/CPL/PL)
  • Higher catastrophic insurance limits
  • Broad coverage terms
  • Increases the size of the pool of bidders
  • Increased scrutiny on safety
  • Reduced internal time and expense devoted to insurance compliance
  • Potential for cost savings of the insurance line item by bundling the insurance spend of all the parties

Routinely, an owner is faced with two options to access the advantages of project-specific insurance coverages: the owner can purchase, or “sponsor” the coverage, known as an owner controlled insurance program (OCIP); alternatively, the CM/GC can purchase the coverage, known as a contractor controlled insurance program (CCIP). For purposes of this article, we will be limiting the discussion to OCIP versus CCIP insuring workers compensation and/or general liability/excess liability coverages.

OCIP versus CCIP—an Owner’s Perspective

Many midsized and large contractors have established CCIP programs, and it is common for them to propose utilizing their CCIP coverage for large projects.2 This is a good thing; it provides the owner with the options of relying on traditional insurance, purchasing an OCIP, or paying the CM/GC to provide the project-specific insurance coverage via a CCIP.

Once the owner’s chief financial officer or risk manager becomes aware of the capital project, it is quite common for them to engage their insurance broker or a consultant to prepare a financial pro forma to determine the extent of potential cost savings by sponsoring an OCIP. Routinely, the pro formas generate significant savings to the owner by assuming a large deductible or self-insured retention and controlling the claims expense; however, the owner should be cautious, relying on the projected savings as there are many variables and assumptions that go into the pro forma. This is particularly relevant if the owner is comparing the costs and savings in the OCIP pro forma to the cost of a CCIP.

Ideally, both parties (the owner’s broker or consultant and the CM/GC) will provide OCIP/CCIP cost estimates based on the same set of data, which can either be provided by the owner’s broker or consultant or the CM/GC.

  • Project description
  • Desired lines of coverage and limits
  • Project term (estimated start/end dates)
  • Project budget
  • Workers compensation payroll by workers compensation code

By having both the owner and the CM/GC provide pricing based on the same data set, it will enable the owner to evaluate the costs of both OCIP and CCIP on a consistent basis.

Advantages of a CCIP versus OCIP—an Owner’s Perspective

Bifurcation of construction risks. To me, this is the leading reason to consider project-specific insurance. Because an OCIP or CCIP insures all contractors and the owner under a single policy, it allows the owner to insulate its corporate insurance program from losses arising out of construction operations, which can prevent adverse loss experience arising out of the construction project from driving up insurance rates on its core business. The CCIP accomplishes this bifurcation of construction risk.

Expertise. Owners with large capital expenditure (CapEx) programs may have sponsored OCIPs in the past or may have a “rolling” OCIP program for their CapEx program. However, there are many other owners that build a large project every several years and have limited experience with OCIPs. Internally, they may not have the expertise to evaluate, implement, and manage an OCIP; whereas, the contractor deals with construction risk every day and likely has robust risk management programs and personnel experienced in implementing and administering their CCIP. A common contractor sentiment is “if I have the risk, I should be able to purchase my own insurance to protect my risk.”

Resources. Owners have indicated to me on numerous occasions that, while they are attracted to the potential cost savings of an OCIP, their staff is lean and they lack the capacity to administer an OCIP. While the insurance broker or OCIP administrator provides many of the transactional services of marketing the insurance coverages, providing program documents, enrolling subcontractors, and collecting certificates of insurance and monthly payroll reports, the owner retains certain responsibilities as the sponsor of an OCIP, often within the owner’s risk management department.

  • Selection of broker and/or OCIP administrator
  • Gather and provide underwriting information required to obtain the quotes
  • Review and approve OCIP documents prepared by the broker and/or administrator: underwriting submission, quotes, OCIP contractual addendum, and OCIP manual
  • Select insurer, coverages, and limits of coverage
  • Execute any legal agreements with insurer and post collateral, typically a letter of credit (LOC), if applicable
  • Review periodic OCIP reports
  • Review claims loss runs and participate in claims meetings
  • Make claims settlement decisions

If the contractor has experience sponsoring CCIPs, especially if they have a “rolling” CCIP insuring multiple projects, they have established protocols and experienced risk management and field personnel to manage all aspects of the program.

Collateral requirements. As mentioned above, if the OCIP is written with a large deductible program ($250,000–$500,000 each occurrence is common), the insurer will require the sponsor to post a clean, irrevocable LOC to securitize that claims obligation. If the sponsor does not reimburse the insurer for paid claims, the insurer can present the LOC to the owner’s bank and draw down on the LOC. While LOCs have a cost element (typically .75–1 percent annual rate on the amount of the LOC), the important item to note is that the LOC obligation will likely remain in force by the insurer, generally through the statute of repose, which can be 5–12 years after substantial completion, depending on the state. In the case of a CCIP, the CM/GC holds this obligation.

Upfront insurance premiums. As a sponsor of an OCIP, you will be responsible for paying certain costs upon binding coverage. Typically, the primary insurance coverage will have a deposit premium (25–40 percent), with the remaining balance spread throughout the project. Excess/umbrella insurance coverages are typically paid 100 percent upon binding, and the broker/administrator typically requires an initial installment as well. The CM/GC will also require a payment for the CCIP coverage, sometimes 100 percent upon binding coverage, or it may be spread out as the work is billed.

Known insurance costs. For the lines of insurance provided by the CCIP, the cost of the CCIP is known at the beginning of the project. CMs/GCs typically charge for the CCIP on a percent of construction costs (e.g., 2.5 percent of contract value).3 In addition, if the payroll estimates in the pro forma were lower than the final audited payroll, the owner may be subject to additional premium4—the CM/GC bears this risk under a CCIP.

Drawbacks of a CCIP versus OCIP—an Owner’s Perspective

Loss of first-named insured status. As a sponsor of an OCIP, the owner attains first-named insured status on the general liability/excess or umbrella liability policies. In contrast, some CCIP sponsors and some insurers limit the owner to additional insured status. Their biggest concern is that they do not want the CCIP to inadvertently insure the operations of the owner (e.g., manufacturing or hospital operations) under the OCIP. Suffice it to say, in the event the owner is listed as an additional insured, it must be satisfied that the language in the additional insured endorsement provides it with an adequate mechanism to attain protection under the CCIP.

Speaking of “insureds,” It is also important for an owner to confirm that there is no “insured versus insured” or “cross-liability” exclusion on the CCIP. This provision, which prevents one insured from suing another insured, is common on wrap-up programs, particularly those placed in the excess and surplus lines market, and may prevent the owner from suing the CM/GC. Some of the endorsements restrict “named insureds” from suing other “named insureds” and other versions restrict suits between any insured under the policy. In either case, if requested, the underwriters will typically carve out an exception to the exclusion by allowing cross-suits between the owner and CM/GC.

Indirect involvement in claims. OCIPs can be an effective tool for owners to address liability claims that arise from members of the public. Because the programs often have large deductibles, the owner has input in the claims settlement process, particularly when the value of the claim falls within the deductible. Municipalities, healthcare facilities, universities, and others with a sensitivity to public liability exposure prefer more direct involvement in the claims process. In contrast, when the project is insured under a CCIP, the CM/GC is the party directing the claims and has the financial incentive to minimize claims payments.

Project with multiple CM/GCs. If the project utilizes a multiprime delivery model or involves multiple CM/GCs, an OCIP lends itself better to drive consistent insurance coverage, administrative protocols, and claims management across the entire project.

CCIP may cost more than an OCIP or traditional coverage. The cost of the CCIP, established between the owner and CM/GC, may cost more than an OCIP or traditional insurance. In most cases, the OCIP cost is not known until the end of the project because the two greatest variables in the savings formula are the amount of insurance credits or deductions from the GC/CM and subcontractor bids along with favorable claims experience. Of course, if either of these elements is deficient, the OCIP can cost more than a CCIP or traditional insurance.

Additionally, the cost of the CCIP may include an array of services such as an on-site medical trailer, claims management services, CCIP administration, and internal administrative time, which may not be fully accounted for in an OCIP pro forma.

Loss of statutory immunity. In certain states, there is established case law that a sponsor of an OCIP (i.e., the owner) enjoys statutory immunity protection from civil claims from employees of contractors insured under the OCIP. This owner benefit is negated under a CCIP.

Loss of completed operations coverage. One of the greatest coverage benefits of an OCIP or CCIP is the dedicated single limit and the extension of time the general liability and excess/umbrella policies will insure bodily injury and property damage included in the products-completed operations (PCO) hazard, typically out through the statute of repose. This is accomplished via a completed operations extension endorsement, or it may be included in a wrap-up endorsement on the policy.

Each insurer has specific language in their policies that address when the coverage is effective and under what conditions the coverage is void. Common terms that void the PCO coverage extension include (varies by insurer) the following.

  • The policy is canceled or nonrenewed for any reason prior to the policy expiration date.
  • There is a failure to pay premiums, audits, or deductible losses when due.
  • The work is not complete or abandoned prior to the policy expiration date.
  • There is a material misrepresentation by the sponsor.
  • There is a failure to comply with loss control recommendations or peer reviews.
  • There is a failure to provide requested enrollment documentation.

These same exclusions are also commonly found in OCIP policies. However, in an OCIP, the owner has control over these variables. In the case of a CCIP, the owner has limited control and may be surprised if the PCO is canceled. If the PCO coverage is canceled, either due to one of the conditions stated on the policy or the CM/GC is replaced with another CM/GC, it will be very difficult to find an insurer to assume the PCO liability during the middle or the end of a construction project.

It is suggested that the reasons for cancelling the PCO extension be minimized and that the owner requires the CM/GC to warrant that the CCIP coverage remains in force both during construction and during the PCO extension period. The owner will also be well served by requiring the CCIP policies are endorsed to provide 30- or 60-days’ notice to the owner for nonpayment or cancellation.

Conclusion

Owners should weigh all available options available to them to ensure the risks arising out of construction projects are adequately protected. Project-specific insurance coverage, OCIP or CCIP, offers many coverage benefits over the traditional approach of having the CM/GC and subcontractors providing their respective insurance protection. Either OCIP or CCIP allows the owner to bifurcate its construction risk away from its core insurance program loss experience.

A CCIP affords the owner the opportunity to capture many of the protections of project-specific coverage without the internal time, expertise, expense, and resources required to administer an OCIP. That said, owners should also be aware of the drawbacks to the CCIP approach and address insurance coverage concerns during the decision process.


1Builders risk insurance is also commonly written on a project-specific basis.

2The owner will sometimes request the CM/GC provide pricing for a CCIP as part of their proposal to construct the project.

3The cost of the CCIP varies by contractor,  on the services provided, premiums, the state in which the project is located, limits, and project type.

4The OCIP insurer may offer a guarantee not to charge additional premium if the audited payroll is no greater than 10 percent of the payroll used to calculate the deposit premium.

Source: www.irmi.com


Is Cyber Insurance Right for Your Business?

Have you considered cyber insurance for your business? Here are a few reasons why it might be smart to do so.

Cyber insurance is finding its way onto the agendas of businesses everywhere, but it’s still a relatively misunderstood class of insurance. Because of this, many companies find themselves confused about how cyber insurance actually works and are skeptical about whether it makes sense for their business to purchase a policy. We hear you. In an effort to answer some of your big questions and put your concerns to rest, here are six big reasons why buying a standalone cyber policy may be a smart decision for your business.

  1. You get cybersecurity tools and support, for freeFor most small-to-medium sized businesses, having a robust in-house IT security team isn’t always possible, or even necessary. But this can leave you without a place to turn in the event that the worst does happen. Would you know what to do if you walked into the office one morning and your systems had been disabled? Cyber insurance is a highly cost-effective way to gain access to the support you need in order to both prevent and respond to cyber events.Most cyber policies come with a number of proactive risk management tools, such as employee cybersecurity training programs, which help reduce successful phishing attacks, and dark web monitoring, which scans the dark web for signs that data relating to your business has been compromised. Most importantly, when it comes to responding to a cyber event, a good policy will give you access to IT experts, forensic specialists, PR firms, lawyers, and more, and often with a nil deductible.
  2. Over half of all cyberattacks are aimed at small-to-medium sized businessesWhile the headlines focus on major security breaches at major companies, over half* of all cyber attacks are aimed at small businesses. What you don’t often hear about is the local law firm that mistakenly transfers $100,000 to a fraudster after being duped by a social engineering scam or the doctor’s office unable to use their computer systems for days because of a destructive malware attack. Just because events like these aren’t reported in the mainstream media doesn’t mean they aren’t happening.Cybercriminals see smaller organizations as low hanging fruit because they often lack the resources necessary to invest in IT security or provide cybersecurity training for their staff, making them an easier target.
  3. Your employees will probably click on something they shouldn’tApproximately three quarters of the cyber claims we deal with involve some kind of easily-preventable human error. Theft of funds, ransomware, extortion and non-malicious data breaches usually start with a human error or oversight such as clicking on a phishing link, which then allows cybercriminals to access your systems from the inside.The fact remains that humans are the weakest link in the cybersecurity chain no matter how hard we try. Cyber insurance is a cost-effective way to not only get access to risk management tools like phishing-focused employee training programs, but also to cover the financial loss if someone makes a mistake.
  4. You aren’t covered under other lines of insuranceCyber cover in traditional lines of insurance often falls very short of the cover found in a standalone cyber policy. Property policies were designed to cover your bricks and mortar, not your digital assets; crime policies rarely cover social engineering scams – a huge source of financial losses for businesses of all sizes – without onerous terms and conditions; and professional liability policies generally don’t cover the first party costs associated with responding to a cyber event.So, while there may be elements of cyber cover existing within traditional insurance policies, it tends to be only partial cover at best. A good standalone cyber policy, on the other hand, is designed to cover the gaps left by traditional insurance policies, and importantly, comes with access to expert cyber claims handlers who are trained to get your business back on track with minimum disruption and financial impact.
  5. Cyber insurance covers far more than just data privacyTwo of the most common sources of cyber claims we see aren’t related to privacy at all – funds transfer fraud is often carried out by criminals using fraudulent emails to divert the transfer of funds from a legitimate account to their own, while ransomware can cripple any organization by freezing or damaging business-critical computer systems. Neither of these types of incidents would be considered a data breach, but both can lead to severe financial damage and are insurable under a cyber policy.Many businesses think that cyber insurance won’t be useful to them because they don’t collect sensitive data. However, more than 50% of our cyber claims come from events unrelated to breaches of privacy, and any business that uses technology to operate will have a range of other cyber exposures which a cyber policy can address.
  6. Cyber insurance pays more claims than any other type of insuranceCFC has paid more than 1,500 cyber claims in the last 12 months, a number that eclipses previous years and is steadily growing, and the vast majority of these are from small and medium sized business. The industry as a whole is showing similar trends and low declinature rates. In fact, it was recently revealed that 99% of cyber insurance claims were paid in 2018, which means cyber has one of the highest claims acceptance rates across all insurance products.**Information like this shows that cyber policies are doing what they set out to do, which is provide broad coverage for a range of technology and privacy-related risks affecting modern businesses, all backed up by proactive risk management and expert incident response and claims handling.

Builders Risk: Minimizing Uncertainty at Bid Time

At the bid preparation stage, contractors often do not have full information on the builders risk insurance that will be provided by the project owner. The insurance requirements may be unclear or missing altogether. This often results in misunderstandings down the road. But it does not have to be that way.

The clarity and completeness of builders risk insurance requirements can and do vary considerably. I have encountered bid documents that do not contain builders risk requirements at all. I have also seen builders risk insurance addressed by a single sentence. These are actual examples:

  • “Owner will provide builders risk coverage.”
  • “The Owner shall provide property insurance upon the Work, but Contractor is responsible for all deductibles and uninsured losses.”
  • “Intentionally left blank.”

These examples all have one thing in common: The contractors are left to speculate on what, if any, coverage will be provided to them in the event of damage to the project. This is not a good way to start a project.

On the other hand, the insurance requirements may be complete and each contractor knows what risks are transferred to the builders risk insurer. This removes uncertainty … and any time you remove uncertainty, bid pricing is more favorable for the project owner. (Owners, please take heed.)

Why Aren’t Insurance Requirements Clear?

Insurance requirements may not be clear for two reasons. First, if model contract forms are used (e.g., American Institute of Architects, ConsensusDocs, Engineers Joint Contracts Documents Committee, Design-Build Institute of America), the builders risk provisions may be unclear or lacking to begin with. Many people assume that if a provision is contained in a model contract form, it must be appropriate. This is not true. Depending on circumstances, some provisions may be inappropriate. Other important loss exposures may not be addressed at all.1

For example, the standard builders risk insurance requirement in one model contract form requires coverage on an “all risks” basis. This is desirable, but in the section that lists the causes of loss that must be covered, there is no reference to ensuing loss exceptions. Many say that the most commonly litigated provisions in builders risk policies are the exclusions applicable to faulty design, workmanship, and materials. The breadth of coverage is very different between a policy that has these exclusions and another that has these exclusions followed by ” … unless direct physical loss or damage by an insured cause of loss ensue and then this policy insures only such ensuing loss or damage.” The latter example has an ensuing loss provision, which is very beneficial to all those entities insured by a builders risk policy.

The second reason for unclear insurance requirements is that the drafter may not have the technical or practical experience necessary to properly structure the requirements. We have all reviewed insurance provisions that are poorly conceived and executed. Enough said.

What Can Contractors Do?

The construction bid process generally provides opportunities for a contractor to obtain clarifications or answers to questions. These are set forth in the bid documents and may include pre-bid meetings or procedures for submitting questions. With private work, a contractor may also qualify its bid to include certain assumptions regarding insurance.

Many contractors wisely seek additional information and answers to their questions. Others may know there are potential problems but hope for the best, and still others are not aware of the issues.

Checklist Tool

It is suggested that contractors compile a builders risk insurance checklist and request the owner to confirm what is contemplated/provided by the builders risk policy. A sample checklist is reproduced below. This template should be customized by the contractor to suit its needs. Regular use of a checklist can minimize uncertainty for all parties and further risk management programs.

Coverage or Feature Minimum Requirement/Comments
1 Owner Responsibilities
Insurer selection AM Best “A X” or better
Naming of insureds Owner, general contractor, subcontractors of all tiers
Premiums and deductibles Owner is responsible
Policy format Inland marine policy and forms
Provide copy of policy Within 60 days of project start
Policy term In compliance with the contract
Partial occupancy prior to project completion Secure approval of insurer
2 Covered Property Replacement cost; no coinsurance
Work at project site Full contract value and modifications; owner’s supplied property
Property in transit Limits to be agreed upon
Property at off-site locations Limits to be agreed upon
3 Covered Causes of Loss/Other Features
“All risks” Full policy limit
Wind Full policy limit
Collapse Full policy limit
Water damage (incl. sewer backup and sprinkler leakage Full policy limit
Collapse Full policy limit
Faulty design, workmanship, materials (resulting damage) Full policy limit
Terrorism Full policy limit
Flood Limits to be agreed upon
Earth movement Limits to be agreed upon
Equipment breakdown Limits to be agreed upon
Hot testing Limits to be agreed upon
Debris removal Limits to be agreed upon
Pollution, mold, fungus Limits to be agreed upon
Additional costs due to building laws Limits to be agreed upon
Extra expense (contractors) Limits to be agreed upon
Waivers of subrogation In compliance with contracts

Source: www.irmi.com


1 For a detailed analysis of builders risk insurance requirements in different standardized contract forms, refer to The Builders Risk Book, by Steven A. Coombs and Donald S. Malecki, published by International Risk Management Institute, Inc., in 2010.


What the Accomod8u Data Leak Shows About Student Housing

Here’s the background you need in order to understand the data hack, what it says about student housing, and what’s being done about it, as published by CBC News.

Earlier this month, an anonymous Reddit user wrote a post titled: “Massive Data Leak of Accommod8u Maintenance Requests Over the Last Two Years.” In a public Google document, the author said they managed to log into Accommod8u’s online tenant portal and access two years worth of maintenance requests. (Reddit)

Leaked information from the popular student rental company Accommod8u appears to paint a picture of apartments plagued with vermin, mould and broken heating systems.

But some say the problem with student housing in Waterloo goes beyond just one company.

Here’s the background you need to understand the data hack, what it says about student housing, and what’s being done about it.

What was the leak?

Earlier this month, an anonymous Reddit user wrote a post titled: “Massive Data Leak of Accommod8u Maintenance Requests Over the Last Two Years.”

In a public Google document, the author said they managed to log into Accommod8u’s online tenant portal and access two years worth of maintenance requests.

“A close look at the 6000+ entries reveals an egregious disregard for the rights and wellbeing of the residents,” the user wrote in the post.

The report describes requests from tenants for help dealing with mold, vermin, carbon monoxide and fire alarm issues and faulty heating systems. It also criticizes Accommod8u’s response time, alleging that users often put in multiple requests for help that were ignored.

Who is involved?

The company

On its website, Accommod8u describes itself as a high-end apartment brand with eight high-rise buildings under its ownership. The web copy says each rental suite is clean, secure and “maintained to the highest standard.”

The company has been criticized before, after tenants had their move-in dates at an Accommod8u property delayed for weeks because construction wasn’t finished. Once the building was occupied, tenants said they still encountered problems with air conditioning, garbage chutes and laundry machines.

Student move-ins delayed again, this time for TheHub in Waterloo
CBC has reached out to Accommod8u for comment and has not yet heard back.

The company has been criticized before, after tenants had their move-in dates at an Accommod8u property delayed for weeks because construction wasn’t finished. (Submitted by Brooke Willis)

The hacker

In a Google document titled “Contact Information,” the person or people behind the hack said they will not reveal their identity, or whether one or multiple people were involved. CBC has not spoken to those responsible for the data breach.

The police

The Waterloo Regional Police Service has confirmed that they are investigating the hack, but have not said whether any charges are pending.

What the leak shows

Students at the University of Waterloo say the hack shows what many of them knew already: that students are easily taken advantage of, and often don’t know what recourse they have when that happens.

Colin Chu was one of about 20 students who joined a meeting of the Waterloo Undergraduate Students’ Association Sunday, where the Accommod8U hack was on the agenda.

He said poor maintenance — along with disputed leases and other problems — is an ongoing problem at many of the rental companies that target students in Waterloo.

“Especially a lot of international students that are coming into the region for the first time and don’t have a really good handle on renting procedures or ways that they can be scammed or misled,” said Chu.

Chu said many students don’t know what their rights are, or that agencies like the Landlord and Tenant Board exist, and hopes they’ll become more active in learning about possible scams and ways to get help.

What officials are saying

Tenille Bonoguore, who represents much of the university area as a city councillor for uptown Waterloo, called the contents of the Accomod8u report “disturbing.”

“The kinds of issues that were being dealt with and the long time it was taking to deal with these issues give me concerns both for residents’ health and for their mental health,” said Bonoguore.

Bonoguore and her fellow councillors discussed the leak at a committee meeting this week, and questioned city staff about what the municipality’s responsibility is.

Shayne Turner, the city’s director of municipal enforcement services, said the city doesn’t have the power to investigate buildings without first being invited by a tenant.

But if tenants are having problems with their unit and aren’t getting anywhere with their landlord, they can contact the property standards office, which will check to see if there’s really a problem.

An inspector can issue a work order requiring property owners to fix problems, or hire someone to make repairs and add the bill to the property owner’s taxes.

What’s next

The undergraduate students association says it will set up a committee to research student housing in Waterloo, and to look into the possibility of a class-action lawsuit against housing companies on behalf of students.

Turner said his team will be in touch with the universities to ensure students understand how his office works, and what they can offer to tenants.

And Bonoguore said she plans to speak to students about their housing rights during a scheduled day upcoming where she was planning to go door-to-door talking about street parties.

“I’m hopeful that residents and tenants become so aware of their rights and what’s expected and how to get help that they end up being able to very successfully advocate for their own health and safety,” said Bonoguore.

“I think anyone who has lived in rental accommodation knows that your state of living is as good as your landlord is,” said uptown Waterloo councillor Tenille Bonoguore.

Author: Paula Duhatschek · CBC News ·


How Well Does That Blanket Cover Your Client?

Blanket additional insured endorsements are useful tools for preventing administrative oversights and reducing paperwork, but they also carry risks for both the named and additional insureds. Discover methods contractors and subcontractors can use to minimize the risks of breaching their contracts when using blanket AI endorsements.

One of the age-old problems in obtaining additional insured status under a contractor’s or subcontractor’s insurance policy is making sure the appropriate actions have been taken to effect the required coverage. Certificates of insurance are commonly used to verify that the certificate holder has been added as an additional insured, but because they are not part of the policy, information contained on certificates may not be binding on the insurer. This article examines the use of blanket endorsements to effect additional insured status as a means of overcoming at least some of the imperfections of the process.

Additional insured status is a common and effective tool for protecting one party from certain risks arising out of another party’s activities. For example, municipalities typically require additional insured status from anyone holding a public event on city property, such as concerts, parades, and carnivals. The rationale behind this requirement is that the activities expose the city to certain risks that would not otherwise exist, so the person or organization that creates the risk should assume responsibility for any losses incurred as a result of the activities. In the case of a public concert, for example, if someone is injured when the crowd gets unruly, both the city and the concert sponsor will likely be sued. As an additional insured under the sponsor’s policy, the city can tender the claim under that policy instead of having to file the claim under its own insurance. The risk has been effectively transferred to the concert sponsor (assuming the available policy limits are sufficient to cover the claim.)

On a construction project, the owner typically requires additional insured status under the general contractor’s liability insurance policies; general contractors may do likewise with subcontractors. As in the example above, the rationale is that the construction activities create certain risks that would not otherwise exist and increase the magnitude of certain other risks. For example, a construction project in a retail district carries the risk that a pedestrian will be injured from flying debris, collapsed scaffolding, or a tool dropped from several stories up. These risks are directly related to the contractor’s operations on the site. Further, goes the rationale, the contractor (or subcontractor) performing the work is generally in the best position to prevent or control losses arising out of the work, and should therefore bear the corresponding financial risk.

However, requiring additional insured status does not necessarily guarantee that you will get it. The named insured (contractor or subcontractor) must notify the insurance company of the request, and absent a provision to the contrary, the person or entity requesting additional insured status must be listed, or “scheduled”, by name on an endorsement that is attached to the policy.

Because this requirement is so common in construction contracts, some contractors may handle hundreds of requests for additional insured status in a given year. Further, because the contracting process is often drawn out, and the insurance requirements given little more than a cursory review, this method of providing additional insured status carries inherent risks of error and oversight. Whether the result of failing to forward the request for additional insured status to the broker or insurer, failing to ensure additional insured status under a new or renewal policy, or some other oversight, a contractor (or subcontractor) can easily find itself in breach of a contract, among other unpleasant outcomes. Likewise, the would-be additional insured may find itself embroiled in a coverage dispute with the insurer and a contract dispute with the named insured contractor; meanwhile, it may be forced to tender the claim to its own insurer (or, if self-insured, fund its own defense). All of these possible outcomes frustrate the intent of the contracting parties.

Blanket additional insured endorsements were introduced as a means of avoiding administrative errors and oversights in providing additional insured status. These endorsements typically contain language indicating that additional insured status is automatically provided when the named insured agrees to provide such status. To avoid overly broad grants of coverage, these endorsements typically limit their application to certain types of written contracts, such as construction contracts or equipment rental agreements.

The obvious benefits of blanket, or automatic, additional insured endorsements are that they protect against failure to add a party as an additional insured in accordance with the contractual agreement, and reduce the administrative burden of making each request individually. However, from the additional insured’s perspective, there are also some potential drawbacks to obtaining additional insured status in this manner. First, in the past, blanket additional insured endorsements had to be manuscripted as no standard endorsements were available. Because they are not standardized, manuscript endorsements can differ from one policy to the next. Consequently, they offer less predictability in terms of scope of coverage, as well as how a court might interpret the language of the endorsement.

Because blanket additional insured endorsements typically require a contractual obligation on the part of the named insured to provide such status, those who obtain additional insured status through such an endorsement must retain proof of the contractual requirement to effect coverage. Even when the additional insured’s coverage does not apply to completed operations, claims arising out of occurrences that took place during the course of construction may not surface until years later. Some additional insureds assume that a certificate of insurance showing additional insured status at the time of the occurrence will be sufficient to trigger the insurer’s duty to defend and indemnify. That is not necessarily true. The additional insured will also need evidence that there was in fact a contract requiring such coverage. While a certificate of insurance indicating that the certificate holder has been added as an additional insured is evidence of a contractual requirement, a better approach may be to require the certificate to refer to the contract requirement. For example, the following language could be required on the certificate:

“In compliance with the contract requirements, certificate holder is an additional insured under the policy.”

If possible, the contracts themselves should be retained. (This should not impose a significant additional burden in most instances, as construction contracts are typically retained for access to indemnity and other provisions that may come into play well after the project is completed.)

Finally, blanket additional insured endorsements restrict insurers ability to provide notice of cancellation to additional insureds. Most insurance policies require such notice to be provided only to the named insured. Additional insureds often try to obtain a guarantee of notice of cancellation by modifying the certificate language, but this is an unreliable approach.

Summary

Blanket additional insured endorsements are useful tools for preventing administrative oversights and reducing paperwork, but they also carry some risks for both the named insured and the additional insured. Fortunately, these risks can be managed fairly effectively.

Owners and contractors requiring additional insured status should make certain the additional insured requirement is part of a written and properly executed contract, and retain copies of these contracts (as well as the certificates of insurance) for an appropriate period of time—at least 3-5 years if completed-operations coverage was required and included in the additional insured’s coverage. Further, they should stipulate in the contract insurance requirements a minimum scope of coverage to be provided to them as an additional insured.

Contractors and subcontractors using blanket additional insured endorsements to provide contractually required coverage can minimize the risks of breaching their contracts by sticking with language that has been tested, and making sure the endorsement extends the contractually required scope of coverage.

Source: irmi.com


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