- There may be claims made against the insured but not yet reported to the current carrier
- There may be pending claims the Insured is not aware of yet
- There may be “potential claims” which Insureds report to the current carrier; however, the form may not allow reporting of potential claims or there may not be enough details in the report. Often there is not enough time to confirm whether the report was accepted. If recognized, only the exact potential claim identified might be covered, if the claim is.made slightly differently or is related it won’t be covered.
- There may be “potential claims” which Insureds don’t report to the current If the new carrier feels the Insured should have reported the situation to the previous carrier as a “potential claim” they will decline coverage. This happens often as there are 3 different opinions as to what constitutes a “potential claim” or a “situation likely to give rise to a claim”: 1) the Insured’s opinion, 2) the old carrier’s and 3) the new carrier’s.
- There were actual Claims reported to the current carrier. The new carrier will look to exclude any new claims that arise from or relate in any way to claims made against the prior carrier. Examples include an old claimant bringing new allegations, or a new claimant makes similar allegations arising from the same
- Mainform applications contain claim warranty questions. ”Yes” responses may result in specific exclusions or may trigger exclusions in the form, applicable to the reported claim and also to related claims. “No” responses may trigger a voided policy or denial of coverage if the carrier tracks the history of a claim and determines that IN THEIR OPINION the Insured should have answered “yes”.
- Differences between the policy forms – different definitions of “claim” or “wrongful act” – different reporting guidelines, etc.- may impact whether the carriers deem an incident should have been reported, and when. The new carrier may say something should have been reported to the old carrier as a Claim even though the old carrier might not have accepted it as a
- What constitutes a “situation that may give rise to a claim”, or “circumstances which any Insured should reasonably expect to give rise to a claim” may be described differently between carriers or be silent in either
- Definitions of “interrelated claims”. The old carrier may not state that future claims related to claims already reported will be covered. The new carrier may deny new claims deemed “related” to past
- The new carrier may contain a retroactive date or prior acts exclusion, either be displayed on the Declarations page, written into the policy form or mentioned on an endorsement. A specific date may be used or there may be a reference to the “inception date of coverage” or “the first date of continuous coverage”.
- Prior/pending litigation exclusions or continuity dates may be displayed on the Declarations page, written into the policy form or mentioned in endorsements. A specific date may be used or there may be a reference to the “inception date of coverage” or “the first date of continuous coverage”. Prior/Pending Litigation exclusions exclude claims arising or related to the pending or prior litigation not just the pending or prior litigation itself
- Prior knowledge exclusions in most forms apply to claims, acts or even situations which the Insured knew about as of the inception date. Prior notice exclusions for claims, acts or situations which the Insured did or should have reported to the previous carrier, including related claims or situations, whether covered or not by previous carriers
- Not least importantly, the adjusting of Management & Professional Liability claims is often highly subjective, with weight given to loyalty of the insured and relationship with the broker. We’ve seen claims covered due to relationship that could have been declined due to a reporting
When we study the loss experience of cooperative or apartment buildings, we note that the most serious losses that occur are directly related to the work performed by contractors and their subcontractors. New York statutes and common law make the building owner responsible for not only his or her own negligence but also responsible for providing a “safe place to work” for the contractors, subcontractors and vendors employees.
Workers Compensation was created to help an injured employee of a contractor. It pays for all medical costs the injured employee incurs from the worksite accident, and it pays the employee for lost compensation while unable to work, due to the injury. There are additional significant lump sum payments to seriously injured workers. Workers Compensation was created to avoid the need for injured employees to have to sue their employers to collect these benefits. It eliminated the inefficiency of having to hire an attorney to prove employer negligence. By cutting-out lawsuits, Workers Compensation efficiently takes care of the injured employee.
The current abuses of the system were created over the last 10-15 years as more and more attorneys in New York realized there was a “loop-hole” that allowed an employee to sue for injuries on a jobsite when the accident was height-related. When subcontractor employees are injured, instead of suing their employer, which is prohibited due to the existence of Workers Compensation, they utilize the “Scaffold Law” to sue the building owner, or the General Contractor that hired the Subcontractor. New York attorneys have pushed the envelope of the definition of “heights” to include: a hammer falling off a ladder, a worker falling into a hole, even an injury from stepping off a stool. And, many judges and juries have supported the broader interpretation. What makes the abuse of this law even worse is that there is no defense. Labor Law 240/241 creates Absolute Liability on the building owner or General Contractor. Even if the employee is at fault, there is absolutely no defense.
Summary of NY (Scaffolding Law) Labor Law
New York State’s Labor Law (NYLL) represents an onerous burden for property owners and managing agents in New York, making them financially liable for virtually any work-related accident on their premises. So as building owners, unit owners, tenants and managing agents routinely hire contractors to do work on their properties, they routinely face huge liability exposures.
Section 240 is known as the Scaffolding Law. This is the law that involves accidents from heights, such as falls from ladders or objects falling onto workers. Height has been defined by the courts as the last rung in a ladder, or about ten inches. Labor Law 240 states that the responsibility of keeping workers safe when working from significant heights should be placed on construction companies, property owners, and contractors and not the workers. Owners and contractors should provide appropriate safety measures and guards to all workers (examples include: safety harnesses, lanyards, barricades, fencing, netting, and safety railings). The law also states that scaffolding must be able to hold four times the amount of weight it is expected to bear.
To meet the eligibility requirements of Labor Law 240, the injured construction worker must have been engaged in one of the following activities:
- Building Erection
- Erection of blocks, braces, handers, hoists, irons, ladders, pulleys, ropes, slings, stays, or similar types of equipment
- Pointing a building
Court rulings of fall related accidents are broadly defined and effect applicability of the law. The result is litigation against those hiring, supervising or subcontracting the injured workers for work performed on such things as ladders, scaffolds, roofs, stairs, open platforms and even stools. Individuals that are injured from falling objects such as tools, materials, debris being raised, lowered, or secured, are subject to the law. The courts have now expanded the interpretation to include injuries resulting from falling objects whose base is on the same level as the injured worker (for example, injuries resulting from a box, crate, equipment tipping over and striking a worker).
The interpretation of Labor Law 240 has been extremely liberal to the benefit of the worker. This has put all Labor Law 240 claims in the category of strict liability. Insurance companies can only mitigate the claim payment, not deny the claim, because of contributory negligence of the worker.
Protection From New York Scaffold Law
The building owner cannot transfer his/her responsibility for losses for which he or she is negligent but can limit the exposure for acts of the contractor and subcontractors as well as the exposure of “Scaffold Law” losses.
To insulate themselves from high-value lawsuits brought by injured workers, building owners and managing agents should enter into hold harmless and indemnification agreements, backed up by the contractors’ own insurance, which transfers liability for such injuries from themselves to the contractors and subcontractors whose negligence caused the injuries. Failure to do so can cost building owners millions of dollars.
USE RISK TRANSFER TACTICS
Using written contracts to transfer the risk of liability and damages from you to your contractors can protect you from claims of serious injury and potentially large damage awards.
Listed below are various items that must be addressed prior to allowing a contractor or vendor on your premises:
- Hold Harmless and Indemnification Agreements
Every contract between you and your general contractors, as well every contract between your general contractors and their subcontractors, must contain a clause requiring the general contractors and their subcontractors to “defend,” “indemnify,” and “hold harmless” the unit owner, building owner and the managing agent from liability, loss or other damages that arise because of any of the contractors’ work. It is important that this agreement be properly worded, dated and executed before the work begins.
- Insurance Procurement Requirement
Contractors and their subcontractors must agree to add unit owner, building owners and their managing agents as additional insureds to their insurance policies for any liability arising out of their work. The limits of these policies should be at least $1 million for a primary commercial general liability (CGL) policy and S3 million for an umbrella policy. Also, the additional insured coverage should be written on a “primary and non-contributory basis.”
- Insurance Requirements and Certificates of Insurance
While it is common practice to request a Certificate of Insurance (COI) from contractors and subcontractors, the certificate alone does not confer or prove the existence of additional-insured coverage on your behalf.
A proven “best practice” is to require your contractors to submit a copy of their primary liability and umbrella policies or an Acord 855 NY for review by an insurance professional. All COI’s and insurance policies must be provided to the building owner or managing agent before the work begins. The COI and insurance policies should also show that the building owner and managing agent are named on the primary and umbrella policies as additional insureds.
Before allowing work to commence on your premises, require the contractor and vendor to have the Indemnity Agreement and Insurance Requirements listed in his contract with you. Also, require the contractor to provide a copy of his or her policy with the Contractor Insurance Endorsement attached naming you as an additional insured.
The end result of following these procedures will be a reduction in losses caused by the contractor/vendor, his employees or any subcontractor, which would otherwise end up being a loss on your insurance. By protecting yourself, you will be reducing your losses, which will ultimately save you dollars on your insurance.
Guaranteed Replacement Cost = Full Coverage For Your Home!
Most Homeowners policies are on an actual cost basis or replacement cost form. (Those will be discussed in another blog post) So is there something better than replacement cost? YES!
Guaranteed Full Dwelling Replacement Coverage (GRC) provides 100% protection from catastrophic events. Such as fire, gas leak and explosion, lightning strike, fallen trees that cause significant damage and more. Should an event occur, GRC guarantees to pay 100% to restore your home with like kind materials and craftsmanship, 100% coverage for your family’s temporary living expenses and will even waive the policy’s deductible should the total value of the claim exceed $50,000. Unexpected, extra expenses that may arise from circumstances such as inflation, supply-demand issues, weather delays and updated building code requirements are also fully covered with no pre-set limitations or caps. Guaranteed Full Dwelling Replacement Cost is absolutely the best form of protection you can buy for your home. However it’s hard to find and can only be obtained through professionals such as ourselves. GRC coverage cannot be purchased through buy direct, advertised insurance companies. This level of commitment and sophistication is simply too rich for their blood.
Here’s another possibly shocking revelation. GRC policies do not always cost more. Innovative underwriting concepts enable GRC coverage providers to offer extremely competitive rates to applicants with excellent credit and acceptable prior loss histories, who own homes that are well maintained and properly secured. As a result, all consumers who believe they will meet these requirements should apply for GRC coverage. This is the best way to feel safer, smarter and more secure without being forced to overpay.
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If you’re at all familiar with the process of shopping for insurance for your business, it’s likely you’ve seen the terms “non-admitted” and “admitted” relative to how insurance carriers are classified. For the purposes of this article, the terms admitted and non-admitted refer to how a particular insurance company is regulated by individual state insurance departments. Let’s take a deeper look into the differences, and why they are necessary.
The difference between admitted and non-admitted (also known as “surplus lines” and “excess lines”) insurance carriers lies mainly in the state-specific regulations they have to adhere to. These varying, and often confusing, regulations result in business models that focus on serving different areas of the insurance market. As a consequence, you may not be able to purchase a specific kind of business insurance for your company from a non-admitted carrier that an admitted carrier provides, and vice versa.
At first blush, the admitted designation of an insurance carrier by a state’s insurance commissioner may appear to give the insurance company some seal of authority or preferential treatment based on superiority. However, the name is primarily an administrative one rather than a mark of stability or quality. As we’ll see, other aspects are more important when choosing an insurance carrier.
Understanding the key differences between non-admitted and admitted insurance carriers is just one way to help you make better insurance decisions for your business. After all, you’ve worked hard to build your business to where it is today, and properly insuring that business can help protect the balance sheet from loss so you can continue to build into the future.
Here’s a summary of what these terms mean in the insurance world and how they may affect you as a business owner.
Admitted Insurance Carriers
Admitted insurance coverage is that which has been purchased from an insurance carrier formally licensed (or “admitted”) to operate by the state insurance department where that company transacts insurance business. These admitted carriers are subject to state insurance regulations governing things like capitalization, organization, rate approval, claims handling and policy forms, among other things. Non-admitted insurance carriers, on the other hand, are not subject to these same rules.
Admitted insurance carriers must adhere to strict requirements for transacting business. Following are some general examples of these requirements:
- Admitted insurance companies are required to have every rate and each insurance product approved by the state insurance department before they can be sold.
- Because admitted carriers are required to file their rates with the state, these companies don’t have the pricing flexibility that non-admitted carriers have.
- Claims decisions by admitted carriers can be appealed to the department of insurance if an insured feels a claim was not handled properly.
- Insureds have the protection of a state guaranty fund, in the event that an admitted carrier becomes insolvent or otherwise is unable to pay claims. Think of a guaranty fund as insurance for insurance companies. State guaranty funds are funded by insurance carriers admitted in that particular state.
- Additionally, purchasing insurance from an admitted carrier usually means that customers can avoid paying certain surplus lines insurance fees and taxes as part of the policy.
Non-Admitted Insurance Carriers
The “non-admitted” or “surplus lines” and “excess lines” insurance company is regulated much differently than their admitted counterparts. The laws regulating non-admitted carriers are far less stringent than those of admitted companies and are usually overseen by non-profit surplus lines associations within each state.
The significant features of the non-admitted carrier can include the following:
- Upon approval by the state surplus lines association or office, non-admitted insurance carriers are not required to have rates or insurance products approved.
- As noted earlier, non-admitted insurance companies have far greater pricing and product flexibility. This allows surplus lines insurance companies to provide coverage for specific and unique and risks that admitted carriers might not want to insure, such as asbestos remediation for example.
- Because they do not have the backing of state guaranty funds, non-admitted insurance carriers are required to have larger capital reserves in order to do business.
- Non-admitted insurance companies are also subject to more numerous fees and taxes, which can make the surplus option a more expensive one in some circumstances.
As a business owner, you may be asking yourself the obvious question at this point: Why even bother with non-admitted carriers at all, if that option appears to have more risk? In practice, the answer is that for many risks, the non-admitted carriers are the only insurance option. The fact is, states permit non-admitted insurance companies to transact business because there are insuring risks that will not or cannot be met by admitted companies.
As an example, take business insurance for contractors operating in New York City: Many admitted insurance carriers steer clear of this market because of the underwriting risks inherent to these classes of business in this area. For some contractors, doing business in New York requires the use of non-admitted carriers, or some combination of admitted and non-admitted insurance, in order to adequately protect the business and satisfy building owner insurance requirements.