Financial Services

October 4, 2013

Act professional

Source:, September 30, 2013
By: Jay Sturhahn, Sherman & Howard LLC

A recurring risk for licensed professionals remains the threat of liability claims arising from their work. Given the nature of the professional’s practice, the claims are complex and costly, regardless of their merit. Therefore, professional liability insurance is a critical component of any professional’s practice.

Professional liability insurance continues to be a significant expense. Consequently, it has been our experience that the premium is often the biggest driver in policy selection. But selecting professional liability insurance based on cost, to the exclusion of an analysis of coverage, has its own negative economic consequences. Securing the best coverage, at the best price, requires examination of certain critical factors.

Insure the Right Risk.

Don’t assume insurers will voluntarily cover every claim arising from the professional’s performance of a compensated act for a client. Many professionals provide a blend of professional services, whereas liability policies are designed to cover risk arising from the traditional practice of the profession. For example, lawyers often give operational advice to their business clients and architects are asked to provide construction advice. Whether claims arising from the performance of these “non-traditional” acts are covered will depend on the policy in question, so review the policy before binding. Also, if you are a professional that regularly engages in “non-traditional” acts – e.g., a lawyer that prepares clients’ tax returns – confirm that undertaking is covered.…

September 6, 2013

Transportation Hub Upgrade

Owner of a $50,000,000 light rail and transportation hub upgrade project sued the design-builder for $15,000,000 in additional project costs and delay relating to inadequate static frequency converter design.  Asserted claim amount exceeded the $1,000,000 in professional liability coverage held by design-builder.  Settlement achieved for $1,000,000 above the available design professional insurance.


July 3, 2013

Grasping professional liability insurance coverage

Source:, June 27, 2013
By: John Baker

An architect had occasion, for the first time, to call on his errors-and-omissions insurance policy for coverage.

No suit had been filed; the architect’s client had not even made a claim. But over a period of months, the architect had grown concerned that some problems he had seen in one of his recent projects could easily turn into a defects claim in which he would be a defendant.

The architect had maintained his insurance for many years – certainly he was covered. It would be a relief to have some help.

So the architect notified his insurer, told the adjuster all he knew about what might be wrong and how it might have come to be that way. To the architect’s surprise and dismay, the adjuster, misinterpreting some of the information he had just heard, concluded that the architect had known about the claim far earlier and, due to a delay in reporting, therefore fell outside the coverage of his professional liability policy.

If the adjuster were right, there would be neither coverage nor defense. Instead of getting a helping hand, the architect would face his worst nightmare.

This story is not unusual. Only the luckiest of professionals never faces the prospect of a claim that he or she has made an error for which he or she may be legally liable. This professional could have avoided some missteps and anxiety had he better understood his relationship with the professional liability insurer.

Insurance policies are contracts. An insurer protects an insured party because it is legally obligated to do so. An insurer will not protect an insured party from losses or expenses that are not included under the policy. Coverage is determined by broad provisions that are moderated by numerous exclusions.…

July 3, 2013

Substantial savings in moldy mobile home case

Source: Beazley Pro, Summer 2013

A customer alleged that her HVAC contractor failed to reconnect the ventilation system in her doublewide trailer during servicing. As a result, she said, mold and mildew developed in the attic and wall cavities of the trailer.

The plaintiff’s initial demand exceeded $150,000 and included the contractor tearing out and replacing all of the trailer’s interior walls, ceilings, floors and fixtures. Beazley, which provided Contractor’s Pollution Liability Insurance for the defendant, engaged two experts who uncovered that the water intrusion and moisture that led to the mold and mildew was due in part to vulnerabilities in the exterior envelope of the trailer. The contractor’s general liability carrier initially attempted to deny any payment on the claim; later it offered a nominal contribution of $3,000. Beazley pursued the general liability insurer for contribution and eventually obtained payment of $25,000 from the general liability carrier and settled the matter for $65,000, a fraction of the initial demand.

Lessons learned:
Bringing best-in-class resources to bear early in the claims process can make a pivotal difference in claim outcome. In this case, Beazley hired an international engineering company to do a building envelope analysis that revealed early on that areas of water intrusion unrelated to any actions by the contractor could have led to mold. This information quickly diffused the plaintiff’s demands… and led to the general liability insurer agreeing to pick up substantially more of the settlement (benefiting the insured, as it fell outside the contractor’s deductible).


June 4, 2013

United States: Counsel’s Role In Insurance Risk Management

Source:, May 29, 2013
By: Finley T. Harckham, Anderson Kill & Olick,P.C.

Originally published by The Metropolitan Corporate Counsel, Volume 21, No. 5, 2013

Insurance policies are complex contracts and pursuit of an insurance claim is often a high-stakes, conflict-ridden endeavor. Yet all too many companies entrust their assets and their very survival to insurance policies that are never seen by their attorneys, and pursue claims without the benefit of counsel’s evaluation of the company’s contractual rights. In-house counsel have an important role to play both when insurance is obtained and when claims are pursued.

Counsel Should Analyze Insurance Policies Before Coverage Is Bound

Before coverage is bound, counsel should analyze the contracts being offered with the company’s major liability and loss exposures in mind. Insurance policies for businesses are typically complex, lengthy contracts written in arcane language, with many exclusions that take away much of the coverage that is otherwise afforded. Many of the key provisions found in standard form policies have been interpreted by the courts and are best understood in light of that case law.

An attorney’s review of the company’s insurance policies is not as daunting a task as it might first appear, at least after going through the exercise once. Most policies consist largely of standard forms, many of which remain largely unchanged from year to year. The insurance broker can be asked to identify all changes in coverage. Moreover, excess policies often “follow form” to primary policies. So, reviewing higher-layer policies in a tower of insurance is typically far less involved than gaining an understanding of primary policies. However, care must be taken to ensure, if possible, that excess policies do not have less advantageous terms, and that if they do, any policies at higher levels do not follow form to them.…

May 14, 2013

Top 10 Environmental Trends

Source:, February 4, 2013
By: Bryant Rousseau

1. Contingent Business Interruption cover is driving a lot of interest in the line, especially among hospitality clients. Companies with substantial international supply chains also are increasingly considering acquiring Contingent Business Interruption cover in case an environmental incident shuts down a supplier.

2. Mold is a source of increased concern for real estate and health-care clients.

3. The jury is still out on just how much risk is posed by nanotechnology—and whether it’s an Environmental risk or a Product one. If nano particles get into a landfill and are able to migrate out through “impermeable” barriers because of their size, then an incident is likely to be seen as an Environmental exposure.

4. Carbon sequestration presents special underwriting challenges because of the potential legacy issues. While it’s not as hot a topic today as it was three or four years ago, Marsh expects it’s going to come back.

5. One impact of the recent financial crisis is a greater awareness of counterparty credit risk, with people saying: “OK, I’ve got this Environmental indemnity—but how good is it?” So Marsh is structuring insurance programs in such a way that they will drop down in the event of an indemnity failing (due to an Environmental loss).

6. The post-Great Recession world also has created an environment in which banks are much more aware of the risks of the organizations to which they are lending. Marsh is seeing a trend where lenders are saying, “In order to refinance, I expect you to have an Environmental insurance solution in place.”

7. Buyers of Pollution policies for their operational risks could typically get three, five or even 10 years of coverage. But over the last couple of years—and especially in 2012— carriers have desired to reduce the amount of longer-term programs they write in favor of three-, two- or even one-year deals.

8. Outside the U.S., there is certainly environmental regulation—but not as much enforcement. So the driver for buying is more about managing cash flow and first-party loss—and less about fear of being sued.

9. Among the trends in the private-equity space: Five years ago, private-equity players were more inclined to keep Environmental risks on their books. Now, with pricing so competitive, it’s a no-brainer for them to transfer the risk to an insurance program.

10. Telecommunication companies with fiber-optic networks and solar-panel manufacturers are two growing sources of Environmental placements, according to Janet Carl, a senior member of the Marsh Environmental team.


April 25, 2013

Do Bacteria and Other Living Things Qualify as "Pollution" Under Insurance Policies?

Source: Becker’s Hospital Review, April 24, 2013

Hospitals and other medical facilities often deal with the outbreak of viral or bacterial infections in the course of their business. Many may not have considered these outbreaks as a form of “pollution,” but depending on the jurisdiction in which they are located, their insurance companies may very well do so. And doing so may limit severely a facility’s ability to obtain coverage for such incidents. Read more.


March 29, 2013

XL Group introduces pollution insurance protection in North America

Source: Insurance Business Review, March 21, 2013

XL Group has introduced a new pollution insurance policy to help the North American food and beverage industry address their environmental liability, clean up and disaster response concerns.

The new Environmental Food and Beverage policy will assist companies during recovery from accidental ammonia discharges, pathogen contamination among others.

XL Group North America Environmental business president Matthew O’Malley said less number of food and beverage businesses can afford a disruption to operations during costly and time consuming pathogen outbreak or other accidental pollution incidents.

”Fortunately, new tailored environmental insurance coverage can help food and beverage businesses quickly address and clean up if contamination or pollution conditions arise at their facilities,” O’Malley added.

Available through Greenwich Insurance and Indian Harbor Insurance, the policy offers the company’s standard Pollution and Remediation Legal Liability coverage, which provides protection for on and off-site bodily injury and property damage claims and cleanup and legal expenses.

The policy provides financial protection for cleaning and disinfection of storage areas and processing equipment, disaster response advisory expenses, medical and temporary living expenses.

Loss prevention services, including assistance from an in-house consulting staff and dedicated environmental claims specialist are also included in the coverage.


February 25, 2013

Hiscox: Contractors Could Face Mold Claims From Sandy

Source: BestWire Services, February 22, 2013
Posted on:

As contractors continue to rebuild properties damaged by Hurricane Sandy, insurers could see a spike in environmental claims stemming from mold, said Dan Gmelin, the head of the asbestos and environmental product line for Hiscox USA.

“It’s still early to see mold claims surfacing, but the mold claims will eventually roll in,” Gmelin said. “Contractors who don’t have any mold coverage in their policies are going to be left out.”

Still, worries of mold are helping to drive the demand for contractors to buy professional liability insurance.

In the aftermath of any major event, underwriters see an influx of new business, Gmelin said. “We’ve seen a lot of submissions from contractors and plumbers in the Northeast,” since Sandy, he said.

Contractors rebuilding properties damaged by mold may find their schedule pushed back due to the unexpected presence of mold. This could trigger claims from unhappy customers, Gmelin said.

Contractors have traditionally purchased general liability coverage, but in the past three to four years, have also been buying professional liability insurance to cover any gaps, including for mold, he said.

“You can see a lack of coverage if only general liability is in place,” Gmelin said. “Often, construction delay and cost overruns are excluded from GL, so you can see a denial of coverage issued by a GL carrier if the work is delayed due to mold,” he said.

Typical limits for contractors’ professional liability run from a low of $500,000 to a high of $5 million, with $1 million being the most common, Gmelin said. Policies can include both a per occurrence limit and an annual aggregate limit.

A typical premium for a $1 million limit is about $5,000.

Despite the increased demand, prices have remained steady to up slightly in some areas, Gmelin said.

In November, John Beauchamp of Beazley Group said Sandy’s devastation not only leveled homes and businesses, it also paved the way for environmental risks. He said the storm highlights the need for commercial environmental risk coverage (Best’s News Service, Nov. 21, 2012).

Hiscox Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent).


February 22, 2013

Consider This: Insuring New Construction and Renovation Projects

Source: MHN Online, February 8, 2013
By: Kevin Smith, Vice President & Real Estate Practice Group Leader, The Graham Company

While most property owners are familiar with coverage for their portfolio of properties, there are some unique provisions and exposures inherent in property under construction, whether new or renovation of existing buildings. A properly structured Builder’s Risk policy will ensure against the risk of loss or damage to these properties. However, it is not solely about the Builder’s Risk policy; the construction documents should clearly outline the requirements and responsibilities for Property as well as Liability insurance coverage. It is important to engage in conversations with your insurance broker and insurance companies regarding a specific project prior to the construction documents being signed to avoid any issues that may arise with obtaining adequate coverage for the project.

Property Coverage

There are several considerations that are important when structuring a Builder’s Risk policy for a project, such as:

  • Specifying the property covered
  • The parties insured
  • The coverage to be included

A Builder’s Risk policy is designed to cover the materials that are to be part of the permanent site once constructed; however, confusion may arise in a renovation project when there is an existing structure that needs to be insured as well. Other consideration needs to be given to covering materials off-site that are to become part of the finished project (even while in transit), as well as other tools, equipment and temporary structures erected during construction.…