Good afternoon. Welcome to PCI's webinar series. Today's presentation is Don't Be Caught Unprotected. Does your insurance program cover all the insurance requirements in the contracts you're signing? This webinar is in partnership with Assured Partners. My name is Nicole Clow, Marketing Coordinator at PCI, and I will be your moderator for this session. Before I turn the controls over to your presenters for today, I have a few introductory items to note. Earlier today, we sent a reminder email to all registered attendees that included a handout of today's presentation. That handout for this webinar can also be found in the handout section of your webinar pane. If you cannot download the handout, please email PCI Marketing at marketing at PCI dot org. Please note that all attendee lines are muted. The GoToWebinar Toolbox has an area for you to raise your hand. If you raise your hand, you will receive a private chat message from me. If you have a question, please type it into the questions pane where I will be keeping track of them and will read the questions to the presenters during the Q&A period. Also, a pop up survey will appear after the webinar ends. Today's presentation will be recorded and uploaded to the PCI eLearning Center. Questions related to specific products or publications will be addressed at the end of the presentation. PCI is a registered provider of AIA-CS, but today's presentation does not contain content that has been endorsed by AIA. Today's presentation is non-CEU. Our presenters for today are Gary Sommer, Executive Vice President and Construction Practice Leader at Assured Partners. Joining Gary is Justin Schneider, Construction Practice Attorney at Assured Partners. I'll now hand the controls over so we can begin our presentation. Thanks, Nicole, for those kind introductions. I'm Gary Sommer, Executive Vice President and Construction Practice Leader at Assured Partners. I've got my colleague, Justin Schneider, with us. He is our Construction Practice Attorney on staff for Assured Partners as well. Assured Partners is the endorsed insurance broker risk management consultant for PCI. We've had a relationship for about three and a half years now. We've done previous webinars, articles, et cetera, from an education risk management standpoint. Today, the objective of this webinar is to examine common insurance requirements that are in construction contracts and how to deal with them from an insurance risk management standpoint so we can avoid uncovered exposures that could lead to breach of contract claims and possible litigation. We're going to run through a number of things that we see commonly in our construction practice. It will vary by parts of the country. As Nicole mentioned, as questions come up, just put them in the chat and we'll address them at the end. With that, we're going to start off with the area of indemnification. Again, I'm not an attorney. Justin is. But in our practice, every contract contains some form of an indemnity hold harmless clause indemnifying upstream parties for your acts that could cause bodily injury, property damage, consequential damages, the like. For all of those that review contracts, you've seen AIA. You've seen consensus docs. You've seen hybrid versions. I call it do-it-yourself wording, and they all vary. There is some protection under the anti-indemnification statutes in many states, but you still might be exposing yourself to situations not covered by your liability insurance. And I'm going to kind of turn to Justin for a moment and just kind of comment on some of the things that he sees that are pretty wild out there and things to be aware of. Thanks, Gary. The most common thing that I see is when you're reviewing the indemnity language, just ensure that it lines up, that you read it and you understand what you're reading and you understand what you're actually indemnifying for. I had an example come across my desk the other day where the language had the contractor picking up all damages, which seems kind of standard, but you also want to have language that limits you to not picking up consequential damages. As you can see, I mean, consequential damages could be anything and could definitely not be covered by your policy, and that would be an out-of-pocket cost. So, again, you just want to make sure that when you're reviewing these terms, you just want to make sure that you make sure what you're citing is definitely covered by your policy. Correct. And, you know, we recommend that you do a review of each contract because it varies so much, and, again, wording might be outside the scope of your liability coverage. You want to consult your attorney to see if you can amend or revise the language to work with your program. We've worked with the American Subcontractors Association in the past. Your attorney's counsel works diligently on this, but the key here is to provide contract equity. So we're going to pivot, and we're going to start talking about the major lines of insurance coverage that are in the insurance requirements of most construction contracts. The workers' comp obviously shows up. We're going to want to know that you've covered a response to the state in which you're working in. So the key here is if you're doing multi-state projects, working in other states, you want to make sure that your workers' comp policy is endorsed or amended to include the state in which the work is being performed because if an injury occurs on the job site, no matter if it's delivery, if it's an erection, you know, installation, what have you, it's where the injury, the state in which the injury occurs, is where the benefits are going to apply. But the second part of workers' comp is coverage B, referred to as employer's liability. This is negligence coverage in addition to the standard workers' comp benefits, you know, medical, lost time, et cetera. What we see most often today is employer liability limit requirements at a million, each accident, disease, each employee disease, policy limits. Sometimes, you know, depending on the jurisdiction, you might see lowered limits, $500,000, but that will be a function of, you know, what the project is and then how much umbrella liability coverage is required to drop down above that. And then workers' comp waiver of subrogation is a standard requirement. The waiver of subrogation is basically saying that you are preventing your insurance carrier from going back against an upstream party if in any way they contributed to the injury by your employee on the job site. This comes in the form of either a blanket type waiver of subrogation covering all projects or depending on, you know, where you're at, what the jurisdiction is, the waiver of subrogation could apply just on a specific project. The last item, I'm not going to spend much time on, launch foreman's harbor workers' coverage, but if you're doing any work on or above navigable water, you could come under the Federal Launch Foreman Harbor Workers Act, and you'll have to have your workers' comp policy amended to include that coverage. And if your carrier can't do that, you'll have to talk to your agent or broker about basically buying a standalone work comp on foreman harbor workers' policy. So we're just going to kind of advance the slides for a moment. You'll see a standard workers' comp waiver of subrogation endorsement, basically triggers, you know, by written contract. And again, if that requirement is not common in your jurisdiction, then you can get a one-off just to apply to that specific project. And let's move on. We'll talk about general liability. Next slide. General liability in our construction practice, typical limits, we'll see a million each occurrence, 2 million product completed operations, 2 million general aggregate, pretty standard as far as primary coverage. But we're going to spend a little time on the next item, additional insurance. And we'll talk about coverage endorsements for both ongoing and completed operations. We're going to stick with just the standard industry additional insured endorsements, referring to the CG2010, which is ongoing operations, CG2037, which is completed operations. And we'll talk about the different later addition dates that are more restricted in coverage. Just a moment on additional insurers. We have to name an architect, engineering firm. We'll talk about primary non-contributory waiver of subrogation, again, and general liability for project aggregate requirements in these contracts. A key item is completed operations coverage, what we're responsible for in terms of number of years, post-completion of our work, and then all the way up to the statute of repose, which is a statute of limitations in each state. And we'll talk a little bit about damage to work performed by subcontractors on your behalf. So we're going to advance the slides a little bit, and we're going to just show some reference material. The first slide here is the standard industry additional insured endorsement, the CG2010, and it's the 1001 edition. It provides the broadest form of additional insured coverage to whom you're contracted with, whom you're meeting to include additional insured status. This is the ongoing operations for liability claims that would occur on job sites and the like. Now, the CG2010, the 1001 edition, it basically picks up your negligence, your liability, and it can pick up the negligence of whom you're contracted with if they contributed in any way to the liability claim. So the large general contractors today, and again, we're based in Chicago, are pretty much requiring this 1001 edition because they want some form of additional insured status if somehow they were negligent or they contributed to the liability claim. The next slide is the same CG2010, but it goes to July 04, and it works pretty much the same way as the 1001, the original endorsement, but it's a little bit more restrictive because if you look down under A, and I know it's a little bit hard to read, but items 1 and 2, it restricts additional insured status to whom you're contracted with or whom you've named for simply your acts or omissions or the acts or omissions of those acting on your behalf. This could be subcontractors of yours. So what this does, the July 04 edition is more restrictive because it doesn't pick up any negligence on the part of who you're contracted with. We're going to kind of move to the next slide. April of 13 was the next time that the ISO industry made a change in the additional insured endorsements, and in this instance, they started to restrict coverage even further. If you look down about halfway under A, it says, however, it says the insurance reported to the additional insureds applies only to the extent permitted by the law. So some of the anti-indemnity type statutes could protect us because of that, and then it goes on to say the coverage that's provided is required in the contract and not to be broader than what you've provided, et cetera. So it restricts it a little bit more. This is good for us, but it may not comply with what the requirements in the contract are. And then the last CG 2010 endorsement came out, 12 of 19. It's very similar to the April 13 edition, and they just kind of cleaned up some words. But again, if these are the endorsements that are on your general liability policy, beware, because if they're requiring a broader version like the 1001 editions or even the 704 edition, you could be in breach of contract if a liability claim occurs. And we've got a more restrictive additional insured endorsement than what is required by contract. And then conversely, we talked about completed operations, and you'll see the completed operations additional insured endorsement up there referred to as the CG 2037. Again, this is the 1001 version, the broadest additional insured coverage. So this works in tandem with the CG 2010 N01 for ongoing operations. So, again, this is the broadest form of completed operations coverage. And then, as you would expect, they filed a CG 2037 completed operations additional insured endorsement for July 04. It works kind of the same way as the ongoing 2010 endorsement. And the same thing for the CG 2037 April 13 edition, wording very similar. And then last but not least, you'll see the 2037 December 19 edition. So, again, these are standard industry endorsements. Depending on who your insurance carrier provider is, they may have their own additional insured endorsements, and they may read similar or possibly different. So the key is to know how your wording and your policies are for additional insured purposes. Make sure that they comply with the wording on the contract. So we're going to go on, and we spoke just briefly about how we deal with architects, engineers, surveyors. This is the standard industry. They call it the CG 2032. This is a July 04 edition. This would give any architects, engineers, surveyors additional insured status on your policy, and this would be the appropriate additional insured form to use. And then we talked about in these contracts where there's primary non-contributory wording. Primary non-contributory basically means this. We've added somebody as an additional insured on our policies for ongoing and completed operations purposes, but they see this wording, which is very common today. What they're saying is our coverage has to go first before whoever you're contracted with, their primary coverage would go second or third, depending on, you know, who was involved in the claim. And the reason I bring this up is to, well, actually, most importantly, depending on the state in which, you know, you're going to work in, it could be a vertical exhaustion of liability state, where it means that your general liability would go, and then your whatever umbrella liability you carry would go next on a primary basis. And then there are certain states in the country, Illinois, where we reside, New York, and a few others have got common law on horizontal exhaustion. Horizontal exhaustion basically means even with a primary non-contributory provision in our initial insured, our coverage goes first. The general contractor or whoever we're contracting would go next. Then it would come back to us from an umbrella standpoint. Our umbrella would go next. Then in this hypothetical example, the general contractor's umbrella would go next. So that's why we see this primary non-contributory wording. Just like workers' comp, in most contracts we review, we see a general liability waiver of subrogation, and this is the standard industry endorsement that will provide the waiver of subrogation against or in favor of whomever we're contracting with, which will prevent our insurance carrier from going back against the general contractor, owner, or whoever we're contracting with. And this will vary, too. A lot of insurance carriers have come up with their own versions, but, again, just making sure that it works with your contracts. There's a requirement that we're seeing today where they want to see a general aggregate per project aggregate, and this is the standard industry general liability point to make that work. And it basically is saying that if you see this in a contract, what they're asking you to do is making sure that your general aggregate applies to each and every project. So, theoretically, you'd have a separate set of limits. Let's use the 1 million occurrence and the 2 million general aggregate example a moment ago. You'll have 1 million, 2 million limits for each and every project you do, and then your umbrella would drop down. So it opens up your liability insurance program. And, again, this will vary by insurance carrier, but that's the standard industry form. I'm not going to spend any time on this, but this is amendment of insured contract. You'll want to look at your policy to see if you have any restrictions like this in your general liability policy. If you do, you'll want to see if you can carve them out or make it work with the contract. And then the next slide is something that you as a contractor or subcontractor should be aware of, that you want to make sure that there's no exclusion in your subcontractor's general liability for damage work performed by them on behalf. This is a big got you, and, again, you should examine your subcontract requirements and have this type of verbiage in there to prevent your subs from having any type of restriction or exclusion that would give us coverage in the event they caused or contributed to the claim. We're going to move on. We'll talk about business auto for a moment. Pretty straightforward. In our practice, we see typical limits. We have a million dollars combined single limit for bodily injury property damage. But what has happened over the last number of years is we've seen additional insured requirements being added to the auto, just like general liability, we want additional insured status on a primary non-contributory basis, and again, like general liability workers' comp, we want to see waiver of subrogation, endorsements, and the like. So again, review the contracts, if any of this wording is in there, make sure that your business auto policy has been properly written or endorsed, include these coverages, again, in the event of an auto liability claim, particularly on a job site, you know, you're going to start pointing fingers, and they're going to want to make sure whoever you're contracted with can be looking for you to provide additional insured coverage to them. Then as we page over, we'll just give you some reference material here, this is the standard industry to add additional insureds under the business auto policy, again, it's going to vary, you know, by insurance carrier, but, you know, what you're going to be looking for is either some kind of a blanket or a designated additional insured endorsement to name the parties you're contracted with. And again, for reference purposes, we put the primary non-contributory business auto liability endorsement on there, you'll see some oftentimes this could be built into your auto liability coverage, but just, or it could be a one-off situation as well. And then last on the auto, back to the waiver of subrogation, here's the standard industry endorsement, and you could maybe have a blanket type limit, blanket waiver of subrogation in your auto policy as well. Let's move on, and we'll talk about umbrella for a moment, okay? So, umbrella, excess liability, in our, what we're revealing, we're seeing typical limits, 5 million occurrence, 5 million aggregate, we'll see higher limits depending on, you know, where the size of the project, the scope of the project, depending on where it's at, and again, just, you know, the cognitive of this, and if you're carrying a 5 million umbrella and you need to provide a 10 million today, the excess umbrella liability market's pretty restrictive, coverage can be obtained, and it could be obtained either on a one-off basis in the form of an excess liability, or trying to buy excess liability on a blanket basis over all projects. The cost of excess umbrella coverage has gone up pretty dramatic over the last couple years, a lot of it has been because of, you know, sizable claim settlements in the general liability and the auto liability area. Now, B, C, and D are things just like general liability that we've seen come into play in the umbrella requirements. The general contractors, savvy owner, developers saying, hey, we're not just satisfied that we have additional insured status in your general liability or auto, we want to make sure that it goes all the way up, and you'll see requirements for additional insureds, and starting to see more of the primary non-contributory additional insured requirements in the umbrella, including these waiver of subrogations, and this is something that shows up in a contract that you don't have, you know, the standard coverage. This is going to be a conversation with your agent or broker to make sure that, you know, you endorse your policies to make this work. And just like the other reference material, this is a standard additional insured endorsement for the commercial umbrella policy. Same thing, we talked about primary non-contributory status on the umbrella, and this is going to be a sample of that. And like the others, waiver of subrogation on the umbrella, and your standard endorsements, that'll vary, again, by insurance carrier. Let's move on, and let's talk about some specialty coverages, and this is becoming very prevalent today. Professional liability, often known as contractors areas and emissions, for design engineering services that you would provide or you would contract out, and owner-developers, general contractors, pushing these requirements in your contract. We've seen limits, $2 to $5 million each claim, depending on the size scope of the project, the aggregate limits being the same. They'll oftentimes put requirements where you can have, you know, minimum, maximum, deductions, and so on, and so forth. And deductibles, and the like. Professional liability contractors E&O coverage is claims and age coverage, and as opposed to occurrence, the professional liability contractors E&O coverage, a policy has to be in place at the time the claim is made, and if you discontinue coverage for any reason, you would probably be faced, you'll be faced with buying what they call an extended reporting endorsement, often known as tail coverage, and in the contracts we see professional liability, three to five years following the completion of the construction project or the statute of revoces. I'm going to have Justin just kind of jump in on this from a contract review standpoint, talk about the completed operation side. Thanks, Gary. It is important for you guys, for contractors to have the policy in place for years past, for years past post-completion of the project. Again, if you have, if it's in your contract that requires it and you don't have it, you know, you could be, you know, left unhooked, you're paying those expenses out of pocket, and obviously no one wants that. Right, and oftentimes where you see the, Justin, when you see language asking that through the statute of revokes, which could be eight, ten, fifteen years, your recommendation is to knock it back to a couple, three years? Yeah, two or three is more, two or three is more standard for sure. I have very little pushback on that. Yeah, so you got to be mindful of this in these contracts. If you've got claims made coverage and it's under the professional contractor C&O and the like, item C is something kind of newer that's kind of come into play in the contractors C&O coverage that's referred to as rectification, halting work, sometimes mitigation coverage. And just a word on that, these C&O policies can be endorsed or you can get coverage for work, you're relying on the design of the work, and then the installation starts, and then something has gone wrong on design, and let's say the concrete panels aren't fitting, aren't working, and you find it out early on, instead of continuing on this path of installation, you could make a first-party claim under these contractors errors and omissions policies for the redo or the retrification of the work that has been put in. And what it does require is early notification to your agent or broker and insurance carrier that something's gone wrong in the design, you partially installed it, now you get a rip and tear and take it out. And so if you've got professional liability contractors C&O, look, review your policy, this is a valuable coverage. In particular, we saw a situation three to four years ago with one of our precast clients, they were doing a parking garage and the design was wrong, they started to put in the concrete panels and all of that, found out early on that this stuff isn't going to work, they put the general contractor and owner on notice, and then they had a rip and tear. And the faulty work endorsement is a third-party liability situation where we, let's say we just continued on, we didn't know that the design was bad, we still did the installation, and a liability claim comes back based on faulty work. So something to be cognizant of in that area. And then we're going to shift over to pollution, environmental or remediation services. But depending on the scope of your work, we've got potential pollution liability situations for silica and other bad environmental stuff. And in the contracts we're seeing today, two million to five million limits each claim, two to five in the aggregate. Again, they'll probably put mandates on, you know, maximum deductible, you could have oftentimes up to 50,000. In the pollution liability area, you can either get claims made coverage, works just kind of like the professional, contractor's professional E&L coverage. It could have a requirement for a reporting endorsement or tail, three to five years or two to three years. But the preferable way to buy pollution liability today, if you can get it, is on an occurrence basis. So you don't have to be concerned about reporting endorsement coverage or tail coverage if you cease coverage or go to another insurance carrier. But like general liability and unlike professional liability, we're seeing additional insured requirements in the pollution liability section, also making your additional insurance primary non-contributory status, and then the waiver of subrogation requirements, just like general liability. So be aware of, you know, any type of pollution environmental coverage. And then we just included a couple slides, you know, with standard primary non-contributory language, and there's a provision for a waiver of subrogation. We're going to move on and we're going to talk just briefly, we're going to kind of, you know, just shift a little bit out of the liability side, talk about property coverage. Item A, property of others, stored material is becoming a big factor because of supply chain, you know, issues. And we're getting requests from our clients that, gee, you know, we've had, you know, amount of panels or whatever fabricated or whatever the material is. There's a staging issue, you know, as far as the job site and the material might be, maybe it's been paid for by the general contractor and it's your material now, but it's being stored at your production facility, or it's being stored off job site. And we may have the responsibility for ensuring this stored material. So this is something to be aware of. And, you know, it's coming up more times than often. Item B is a standard or typical property coverage, covering your materials in transit to the job site, temporary storage off site, and obviously on site, the job site, and all the way to the point where it's been installed and it's been paid for. And we find that many of our precast producers and erectors are buying an installation floater to be a backstop in terms of property coverage, if the material is damaged, stolen, et cetera. So the key here is to review your limits of coverage on your policy, make sure that they're appropriate, especially, you know, with this increased cost of materials and the like, and provide the coverage just in the event it comes back to you. The last thing is builder's risk coverage, and that's provided either by the owner or general contractor. And that's in the contract between the GC and the owner. Oftentimes the owner takes the responsibility of this, but the key here is to, if this is going to be a large project, don't hesitate to ask for a certificate of property insurance or evidence of property insurance from the owner or the general contractor that's providing the builder's risk insurance to look at what the limits, the amounts of coverage are, the deductibles, and the like. And the key in this instance is in your contract with either the GC or the owner, who's responsible for payment of the deductible if there's damage, you know, to your material or to the structure as it's going up. And don't hesitate to ask the owner GC for a certificate for evidence of property coverage. We're going to end with some common other requirements that show up in the contracts. AM Best Rating is the industry rating organization that rates insurance carriers from A++ all the way down to L. Clearly, you know, most GC owner developers want to see that your insurance program has got an A, A or higher, very standard in the industry. They just want to know that your insurance carriers are stable, you know, be there, you know, down the road if a claim occurs. The other thing that we're seeing in the contracts are, in addition to the certificate of insurance, the Accord 25, the standard endorsement being required today, they're asking for copies of additional insured endorsements and waiver of subrogation endorsements before the work begins. We've seen in rare instances where they've asked for an entire copy of your general liability policy with the appropriate endorsements. You know, just again, that's a little bit of overkill. But I think with a certificate and your additional insured waiver of subrogation endorsements, that's the price most often. Item C, just to comment on that, looking for coverage being maintained for maybe three years following the completion of the work from a completed operation standpoint, or avoiding, you know, being on the hook that the state's statute proposed, which could take you out 10, 12, 15 years. D is something that is embedded in a lot of contracts today, where there may be more stringent insurance requirements between, you know, the developer and the general contractor. But that may be drilled down to you as a subcontractor, supplier. So watch for that language, you know, in the construction contract. And the same thing under Item E. If you've got subcontractors, your subsubs might be responsible for the same amount of coverage that you have to provide in your subcontract agreement with the general contractor or the other developer. And then last but not least, the 30 days notice of cancellation or material changes being put in these contracts, watch for that. Just because you've issued a certificate of insurance, doesn't mean that the insurance carrier is going to notify the additional insurance in the event of a cancellation or material change. And oftentimes, the policies, general liability, workers' comp, umbrella, have to be endorsed to notify the certificate holder in the event of a cancellation, non-renewal, or material change. And so you don't want to get into that situation as well. If it is a requirement, you've got to have a conversation with your agent or broker. Make sure that the policies have been properly endorsed to handle that. And with that, we're going to just open it up for any questions and the like. Thank you, Gary and Justin, for a great and informative presentation. We will now start the Q&A portion of our presentation. The first question is, on professional liability insurance, after I retire, I will need to carry my E&O for the statute of repose, which in my state is seven years. Any idea how much the premiums will reduce each year on a percentage basis? Let me see if I understand the question correct. Under professional liability, the requirement is to carry the coverage for the statute of repose, and that being seven years. Essentially, if you renew your contractor's professional E&O liability year-to-year from a practice policy standpoint, then as long as you've got it in play for that seventh year, you've complied with the construction requirements, insurance requirements. Now, for any reason, if you don't renew your contractor's professional E&O coverage, then you would have to buy a reporting endorsement tail coverage to comply with the time for seven years or wherever you're at in the cycle. Thank you, Gary. That was the question that was submitted. I'll give it 10 more seconds to see if any more additional questions come through. Sounds good. So, on behalf of PCI, I'd like to thank Gary and Justin again for a great presentation. If you have any further questions about today's webinar, please email marketing at pci.org. Thank you again and stay safe.

insurance requirements

construction contracts

insurance risk management

general liability

workers' compensation

business auto

umbrella

professional liability