Risk Tips

December 13, 2018

Risk Tip – Rectification Coverage – What’s in a Name?

By: Tim Farrell, RT New Day

While doing research documenting and comparing the carriers’ Rectification coverage, I was struck by the different names this coverage is given by the carriers. And while ‘Rectification’ is the most prominent name, I found ‘Mitigation Costs,’ ‘Recall Expense,’ ‘First Party Protection,’ ‘Redress Coverage,’ ‘First Party Indemnity’ – and in one policy, both ‘Rectification’ and ‘Mitigation’ are used.

Just a quick general description — under a contractor’s professional liability (CPrL) policy, rectification expense coverage pays first party costs incurred by the contractor (Named Insured) to remedy acts, errors or omissions in professional services performed by or on behalf of the named insured. The idea is to address a problem early and quickly with the intent to prevent a third-party claim (professional liability claim).

Naturally there is some confusion regarding the name of the coverage – and the coverage that it implies. Technically, ‘rectification’ means to fix a problem. And technically ‘mitigation’ refers to preventing the problem from getting worse. Ideally, the coverage should look to fix the problem or more specifically, pay for the costs to remedy the error created by the professional service performed. Part of the confusion is the result of carriers using the two terms interchangeably. The other names listed above are basically just the carriers’ way to distinguish themselves with unique nomenclature.

The tip is – look beyond the word or title and to the scope of the coverage provided. These phrases/words can have totally different meanings in the realm of CPrL.…

October 31, 2018

Risk Tip – Identifying Limitations of Liability

By: Bill Webb

When a general contractor or builder accepts a Limitation of Liability (LOL) be aware there may be insurance implications under the protective indemnity insuring agreement.  Contractor’s Protective Professional Indemnity (CPPI) forms often contain language that limits accepting a Limitation of Liability to available insurance proceeds.  While the Owner’s Protective Professional Indemnity (OPPI) policy requires notification of any LOLs agreed to by the Named Insured.  As protective indemnity is a first party excess coverage, both forms have a Minimum Insurance Requirement (MIR), the minimum amount of underlying insurance the carrier expects to be available.  If an LOL is agreed to below the MIR and is not identified, the insured may be responsible for paying the difference between the LOL and MIR before the protective coverage part will respond.  The protective insuring agreement is designed to indemnify the insured for damages they are legally entitled to recover.  Limiting recovery through an incorrectly worded LOL potentially restricts your insured’s coverage within their own policy.  Given the possible ramifications, it is important to advise insureds that accepting Limitations of Liability that limit liability to available insurance proceeds increases the chance of insurability and indemnity.

October 30, 2018

Risk Tip – Impacts of Mold Claims

By: Brittany Negron
Mold claims are having a serious impact throughout the environmental insurance industry.  An increase in mold claims is pushing insurance companies to be more cautious when underwriting certain types of real estate risks where mold has become more prevalent.  Most notably, over the past 12-18 months, there have been several seven-and-eight figure claims impacting the hospitality and habitational sectors of the real estate market.  These claims not only included remediation/clean-up of mold, but also included millions of dollars in restoration costs and reimbursement for business interruption. An increase in frequency and severity of losses paid has resulted in a narrowing of terms and conditions with certain environmental insurance markets. Due to the large amount of claims paid, some insurers have erased this risk from their appetite all together.

Other markets still willing to include mold coverage for these risks are placing restrictions around the coverage, such as capital improvements exclusions or higher mold deductibles, and in the hospitality industry, “per-door” deductibles.

Preventing or containing mold can be the first step in obtaining broader coverage, and most importantly protecting your financial investment in your property. Indoor air quality exposures from mold typically result from spas, pools, hot tubs, HVAC, hot/cold water pipes, improper ventilation, and improper use of facilities.   Developing and implementing a mold management plan is pertinent to obtaining coverage, particularly in certain risk types such as hospitality, habitational, and healthcare facilities.

Although, several environmental insurers have restricted mold coverage for certain classes, real estate clients can protect their balance sheets by purchasing premises pollution liability or Pollution Legal Liability (PLL) insurance.   PLL coverage includes clean-up of pollution conditions including mold as well as third party liability for bodily injury and property damage resulting from the exposure to pollution conditions and legal defense.   As discussed above, coverage for replacement costs and business interruption/extra expense is still readily available as well.…

July 20, 2018

Risk Tip – Silica Regulation

By: David Slaugenhoup

Since September 23, 2017, OSHA has been enforcing the revised exposure limits for respirable crystalline silica.  On an annual basis, it is estimated the new limits will impact 2 million construction workers across 600,000 workplaces and save more than 600 lives and $7.7 Billion in associated costs.

The regulation has some bite too: the new regulations allow for up to $12,471 per violation, up from $7,000.  And if the violation is deemed to be willful or repeated, the fine can be $124,709 per violation (up from $70,000).

But why all the fuss?  It’s just dust, right?

Since crystalline silica is a component of soil, sand, granite and other minerals, it is a common component of building materials such as concrete, bricks and tile.  The danger is when silica – a classified human lung carcinogen – becomes airborne and inhaled, which can ultimately cause tuberculosis and/or silicosis.  To help put the risk into perspective, one source estimated the dust from cutting a common 60 mm walkway paver with a standard dry-cut circular saw releases approximately 29 years worth of silica when compared to the new permissible exposure limit.

From an insurance perspective, a first or third party claim could arise from exposure to silica.  Worker’s compensation will respond to damages incurred by the construction worker. Based upon the jurisdiction, a third-party over action claim could arise and would thereby be addressed by the Contractors Pollution Liability (CPL) if the insured purchases such coverage.  But what about the 3rd party claim – says the person working adjacent to the construction site?

While multiple insurance lines may be triggered, the claim is likely going to be covered by the General Liability (GL), the CPL or a combination of both.  But be aware as the GL likely includes a total pollution exclusion. As such, we highly recommend contractors purchase a CPL program, which includes coverage for bodily injury resulting from a contractor’s jobsite operations.

And while the common CPL policy does not include a silica exclusion, it’s not a bad idea to review in light of the recent OSHA updates.…

June 21, 2018

Risk Tip – Contractor’s Pollution Liability: Mold vs. Bacteria

By: Jeff Slivka

Even though mold continues to be of concern for many carriers, especially with regard to resulting property damage, many insurers offer mold coverage as part of their overall Contractor’s Pollution Liability (CPL) program. Depending on the type of business or work/project types conducted by the firm, it could be provided on an occurrence or clams made basis. However, bacteria, specifically Legionella Pneumophila, is found to be less common and typically must be added via endorsement. When carriers provide coverage for “microbial matter” it’s prudent to ensure it not only provides coverage for mold, fungi, mildew and the like, but also bacterial matter.…