The Seven Deadly Endorsements – Part 4

 General Liability Endorsements That Are Bad For Contractors

                                                    Endorsement #4 – The CG 21 39

One of the most important considerations a contractor must make is the amount of liability he assumes in a contract and whether or not his insurance covers contractual liability.  In most construction contracts, liability is transferred through an indemnification agreement.  There are different types of indemnification agreements and laws regarding such agreements vary from state to state.  Here’s how it typically works though:

1. A general contractor is automatically liable for the work of his subcontractor.

2. The GC transfers that liability back to the subcontractor through an indemnification agreement. 

3. As a result, the subcontractor is now obligated to indemnify the GC in the event of a loss, including the GC’s defense costs. 

Now the question is: Will the subcontractor’s liability policy cover the subcontractor’s contractual obligation to indemnify the GC?  The answer is maybe. 

First, let’s look at the standard language regarding contractual liability in an ISO Occurrence Policy.  The coverage for contractual liability is actually found in the exclusions section.  See below:

As you can see, contractual liability is excluded unless the contract is an “insured contract”.  To find out what is an insured contract, we must go to the Definitions section of the policy.

Under the definitions Section 9.f. an indemnification agreement would be considered an insured contract. 

The CG 21 39 simply deletes sections 9.f. from the definitions of an “insured contract”.  The result is that a subcontractor can now be on the hook to pay for the legal expenses and liability of the general contractor in the event of a loss.  So, before you sign your life away on an indemnification agreement, check your insurance policy for a CG 21 39. 

The experts at Orr & Associates can review your current policy to uncover this and other endorsements that you should be aware of.  We will give you the tools to make the right decisions about your insurance and risk management.  For more information, contact Tarah Gruber at 619-487-0376 orTarah@redhotinsurance.net.  Or visit www.redhotinsurance.net.

Check back tomorrow to read about endorsement #4.

The Seven Deadly Endorsements – Part 3 General Liability Endorsements That Are Bad For Contractors

Endorsements #3 – The CG 22 94

The CG 22 94 is one of the most complicated endorsements in contractors liability insurance.  To understand this endorsement, you must first understand the standard “Your Work” exclusion in the ISO CG 00 01 policy.  A standard general liability policy states that damage resulting from your work is covered, but damage to your work is excluded.  For example, a general contractor builds a fence. The damage to the fountain is covered, but the cost to rebuild the fence is not. 

The exclusion reads as follows:

As you can see, the exception to the exclusion is work performed on your behalf by a subcontractor.   With this exception, work completed by a subcontractor is not considered “your work”.   Consequently, if the same fence was built by the insured’s subcontractor, there may be coverage under the general contractor’s policy for both the fountain and the fence. 

The CG 22 94 removes the exception to the exclusion. 

So, as a result, if the general contractor’s policy has a CG 22 94 endorsement, he would have no coverage for the damage to either the fountain or the fence. 

The experts at Orr & Associates know construction insurance.  We can review your current policies to help you find dangerous endorsements like the CG 22 94.  We provide you with the tools you need to make the right decisions about your insurance.  For more information, please contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net. 

Check in tomorrow to read about endorsement #4.

The Seven Deadly Endorsements – Part 2 General Liability Endorsements That Are Bad For Contractors

Endorsement #2 - The Prior Work Exclusion

At face value, prior work exclusions do not always concern contactors. The rationale is, why should they buy coverage for prior work when they already had policies during the time that work was completed? To understand why this endorsement is dangerous, you must first understand coverage triggers. Most general liability policies for contractors are written on an Occurrence form, meaning that coverage is based upon when the loss occurs. Most often a loss is considered to have “occurred” when a project is completed, but not always. It depends on the type of loss and the coverage trigger wording in your general liability insurance policy. 

Many occurrences happen years after a project is completed, especially construction defect losses. Because of this, a contractor with a Prior Work Exclusion may think he is covered, but most likely is not. According to one major carrier in California, this is the number one reason that claims are denied in their contractor’s general liability program. 

The experts at Orr & Associates can analyze your policy and identify prior work exclusions as well as many other exclusions and limitations that you should be aware of. Our goal is to give you the tools to make the right decisions about your insurance. For more information, please contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net. Or visit www.redhotinsurance.net. 

Check back tomorrow to read about deadly endorsement #3.

The 7 Deadly Endorsements – Part 1 General Liability Endorsements That Are Bad For Contractors

Deadly Endorsement #1 – The Sunset Clause

A general contractor completes a new home in 2008.  He carried a $1,000,000 general liability policy at the time the house was built and has continued to renew his coverage ever since.  In 2011, the contractor is sued for a construction defect on the 2008 home.  He files a claim with his insurance carrier.  The carrier denies coverage and refuses to provide any defense for the contractor.  Why?  The policy had a sunset clause. 

A sunset clause limits the amount of time after a policy expires that a claim can be filed, usually two to five years.  This endorsement is typically seen in policies written for construction related risks.  Considering the fact that most construction defect losses arise years after a project is completed, this endorsement is dangerous for contractors. 

If you are a contractor shopping for general liability insurance, take a second look at your proposal before buying coverage.  The experts at Orr & Associates can analyze your coverage to find this and many other key exclusions that are bad for contractors.  For more information please contact Tarah Gruber at 619-487-0376 or tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net.

Check back tomorrow to read about endorsement #2.

What Business Owners Should Know About Personal Auto Insurance

In April 2007, Laura Anderson was involved in a collision in San Diego, CA.  She was rear-ended by a pick-up truck owned by a licensed plumbing contractor.   The contractor, who was found to be at fault, was driving a truck with his business name and contractor’s license number painted on the side.  Although he sometimes used this vehicle for personal use, he mostly used it for business.  When contacted by the claims adjuster, he explained that he was on the way from one jobsite to the other.  The insurance carrier denied the claim because the contractor’s personal auto policy excluded use of vehicles for commercial purposes.  It took over three years for Ms. Anderson to recoup her losses from the “uninsured” contractor. 

Many contractors and business owners across the country carry personal auto policies on vehicles not realizing that they might be driving around without the right coverage.  So how can you know if your policy covers you?  The answer is not that simple.  Not all personal auto policies are the same.  The one way to be absolutely sure you’re covered properly is to get a commercial auto policy that allows for personal use. 

The experts at Orr & Associates can help you evaluate your auto insurance policy (personal or commercial).  We’ll show you what you need to know and where you need to go to fit your auto insurance needs.  For more information contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net.

The CG 2010 (11/85) - What You Should Know

It’s a common story.  A commercial contractor buys a general liability policy in order to fulfill a contract.  He spends weeks shopping for the best rate and buys a policy that includes additional insured endorsements.  He provides his certificate of insurance to the project manager, only to find out that his insurance is not sufficient.  His contract requires a CG 20 10 (11/85) additional insured endorsement, which his policy does not offer.  In the end, the contractor has to buy a new general liability policy and come up with another down payment. 

So what are differences between the 11/85 and other additional insured endorsements? The 11/85 is the original version of the CG 20 10 additional insured endorsements.  It’s actually a date, November 1985.  The CG 20 10 extends coverage to the contractor’s clients such as property owners, developers and general contractors.  The 11/85 differs from all later versions, because it does not exclude completed operations.  It covers liability arising out of “your work”. 

Here is an example of the CG 20 10 (11/85):

All later versions of the CG 20 10 replace the words “your work” with “your ongoing operations”.  The result is that once the project is completed, there is no longer coverage extended to the additional insured.  This is especially an issue in the construction industry because most construction defect claims arise years after the projects are completed.  

Here is an example of a later version of the CG 20 10:

There are many additional insured endorsements that are equivalent to the 11/85.  The important thing to look for is whether or not they exclude coverage for completed operations.  

Why is this important to me? Contracts for commercial and public works projects typically require the CG 20 10 (11/85).  Failure to supply the correct additional insured endorsement can hold up projects and more often, hold up payment for the work you've already completed.  The experts at Orr & Associates can analyze your commercial general liability policy and the insurance requirements in your contracts to make sure you are carrying the right coverage. 

For more information contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.  Also, check out our website, www.redhotinsurance.net.

Floor Waxing Increases Risk For Janitorial Firms

If you’re a janitorial firm working in retail stores or commercial buildings, chances are that floor waxing is a major part of your operations.  And chances are that you assume that your general liability policy covers you for those operations.  A precaution: take a second look.  Many general liability policies written for janitorial contractors exclude or limit coverage for floor waxing operations.

 

Insurance companies do a good job of hiding exclusions in their policies.  Often the contractor finds out the hard way when a claim is not going to be covered.  Floor waxing exclusions can be written into a policy in a couple of ways.  The first of which is a Designated Work Exclusion.  Very simply, this excludes specific operations from coverage.  The second way, a Class Specific Limitation, is a little sneakier.  Class Specific Limitations restrict coverage to operations defined in the Class Code under which the policy was written.  Often these class code definitions are written by the insurance companies and can limit where you work and what kind of work you can do. 

So why is floor waxing so bad?  Wax is slippery.  Slip and fall accidents are one of the most common type of bodily injury claims in the United States.  Losses can range from $500 to $500,000.  If you are a janitorial contractor doing floor waxing, you need to know that your business is protected.  The experts at Orr & Associates can evaluate your general liability policy and check for endorsements that you should know about, including Class Specific Limitations and Designated Work Exclusions.  We offer policies that cover floor waxing, house cleaning, window washing and many other operations that are often excluded in general liability policies.  For more information contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net. 

Special Considerations For Plumbers Insurance

Plumbing contractors have a special set of concerns when it comes to safety and protecting themselves with the right insurance.  Plumbers face increased liability due to fire and water damage hazards and increased risk of loss or theft of copper pipe, tools and equipment.  If you’re a plumber take a few minutes and read about some things you should be aware when reviewing your insurance policies.

General Liability
Water damage claims are one of the most common claims filed on contractors general liability policies.  Naturally, this makes plumbers a prime target for general liability losses. Whether the loss arises from a slow leak or a burst pipe, water damage losses can be costly.  Because of this, plumbers should beware of water damage exclusions in their general liability policies.  These endorsements can limit or exclude coverage for any loss related to water damage. 

Plumbers also face increased fire hazards due to the use of torches.  Plumbers should review their policies for any endorsements that exclude coverage for losses arising out of the use of heating devices.  Many policies carry these endorsements and they can often be removed for little or no additional premium. 

Finally, plumbers should be aware of Class Limitations and Designated Work Exclusions.  Class limitations restrict coverage to the class code description defined by the insurance company.  These class codes often preclude coverage for residential operations.  A Designated Work Exclusion might limit a certain aspect of a plumbers work i.e. Fire Sprinkler Installation. 

Equipment / Inland Marine
Plumbers typically carry around a lot of valuable equipment and inventory.  Because of this, plumbing contractors are often the victims of theft.  With copper pipes, bathroom fixtures and tools a robbery can be financially devastating to a plumbing business.  Many Equipment and Inland Marine policies have a higher deductible for losses resulting from theft.  Plumbers should check before buying their policy if there are any additional theft deductibles. 

The experts at Orr & Associates can evaluate your Equipment and General Liability policies to make sure you are covered properly.  We offer instant online quoting for Plumbers General Liability and policies can be issued within an hour.  In addition, we can help you with your Payroll Services, Workers Compensation, Commercial Auto and Bonds. 

For more information contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net.

Construction Defect Litigation On The Rise

Most often contractors buy general liability insurance in order to satisfy a contract, get paid or get on a jobsite.  Many contractors would never spend the extra money, especially those contractors who stand behind the quality of their work.  But, the fact is that construct defect litigation is on the rise in the United States and more contractors are finding themselves in the middle of lawsuits they never saw coming.  In the construction industry having the right coverage can make or break you. 

A general liability policy protects you from liabilities arising from bodily injury and property damage.  The right policy will cover your premises as well as ongoing and completed operations.  

Orr & Associates knows what certificates and endorsements you will need to satisfy your contracts.  We know what exclusions you should be aware of and we can explain the differences between the various additional insured endorsements.  We’ll also explain the difference between admitted carriers, non-admitted carriers and risk retention groups.  We give you the tools to make the right decisions about your insurance.

In most cases, quotes take just a couple minutes and policy numbers can be issued in less than an hour.  The first step to activating your policy is to answer a few basic questions about your company and we’ll send you an instant quote.  If you have any questions, please contact Tarah Gruber at Tarah@redhotinsurance.net.  Or visit www.redhotinsurance.net.