Liability insurance

December 17, 2013

AIA contracts help effectively allocate risks and result in predictable interpretations

Source:, December 6, 2013
By: Cade J. Laverty and C. Michael Shull III, Frost Brown Todd LLC

It is sometimes difficult to tell whose insurer will be liable for certain occurrences on a construction project. The whole purpose of contracting is to allocate risk—hopefully to the party that is better situated to deal with that risk. In allocating that risk, all parties need to know which party is ultimately responsible for insuring against certain risks. While some court opinions can leave a reader unsure of the ultimate holding and its application, the Indiana Court of Appeals recently issued a clear and concise opinion regarding issues of insurer liability in the context of interpreting an American Institute of Architects (AIA) standard form agreement.

In Allen Cnty. Pub. Library v. Shambaugh & Son, L.P., the court considered issues of liability related to environmental remediation costs incurred as a result of a diesel spill under a standard AIA contract form. The spill was allegedly caused when a line connecting a back-up generator tank to its generator was struck by a certain contractor involved in the renovation of a library. The resultant leak allowed approximately 3,000 gallons of fuel to leak into the ground under the library. This ground was not a part of the scope of Work as defined in the contract. This was a key fact in the Court’s decision.

Both the library and the contractors on the job obtained multiple insurance policies. The library obtained a builders risk policy which contained a specific “coverage extension” for environmental remediation. When the library sued to recover the costs it incurred in cleaning up the diesel spill, the defendant contractors asserted that the library had waived its ability to seek compensation due to one of the provisions contained in the AIA agreement which provides for a waiver of subrogation, as well as the library having obtained its own pollution cleanup insurance.…

December 17, 2013

Marsh: Coverage rates continue to rise for U.S. construction firms

Source:, December 13, 2013

U.S. construction firms on average paid more for their insurance in the first half of 2013 as underwriters continue to seek price increases across the breadth of their contractor portfolios, according to a report published by Marsh.

Pricing for contractors general liability, project-specific general liability, umbrella and excess liability, workers’ compensation, and residential construction insurance was up between 3% and 7% on average during the first half of the year, according to Marsh’s Construction Market Update—First Half 2013. Construction firms with poor loss histories were more likely in general to have seen double-digit rate increases.

Pricing for non-residential construction, and contractors and architects and engineers professional liability insurance also was up on average during the first half of the year, but to a lesser degree.

“U.S. construction firms are grappling with a firming insurance market, especially when it comes to liability insurance where underwriters continue to tighten coverage terms and seek rate increases to make up for reduced investment income,” said Michael Anderson, leader of Marsh’s U.S. construction practice. “With a zero interest rate environment, there is no cushion against a poor underwriting decision.”

According to Marsh’s report, not all construction lines are experiencing rate increases. Premium rates for builders’ risk insurance generally remained flat during the first half of the year despite more demand for coverage. Similarly, contractors’ pollution liability rates remained generally flat to down 5%.

“While underwriters are attempting to gain rate increases, the market is awash in capital and new entrants are helping to maintain competition. The good news for well-managed construction firms is they can still generally find competitive pricing and terms,” Anderson said.


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.…

August 9, 2013

Seven things about professional liability coverage—part 2

Source:, August 3, 2013
By: Andrew B. Downs, Bullivant Houser Bailey PC

This is the second in a series of posts on issues arising under professional liability policies. The aim of this series is to provide sufficient background information to allow the defense attorney to identify relevant issues frequently raised by professional liability policies and to formulate a plan for addressing them. This is not a treatise on how different jurisdictions view professional liability issues. For that, the reader should review the DRI’s 2012 publication Professional Liability Insurance: A Compendium of State Law. There are, of course, other issues of importance not discussed here.

Professional Liability Insurance is Commonly Written on a Claims Made and Reported Basis

Many, although not all, professional liability policies are issued on a claims made and reported basis, as opposed to being issued on an occurrence basis. This means that in order for there to be coverage, the claim against the insured must first be made during the policy period and it must also be reported to the insurer during or immediately after the policy period. This differs from commonly available occurrence-based general liability and automobile policies, which cover any injury or damage occurring during the policy period without regard to when the insured was negligent or when the claimant files suit. Some policies are written only on a claims made basis, with no requirement that the claim must also be reported during the policy period. While those policies permit reporting outside the policy period, they often require that notice be given within a specified period of time after policy expiration.…

July 30, 2013

Ace: With M&A Uptick Comes Need to Review Environmental Liabilities

Source:, July 26, 2013
By: Anya Khalamayzer

The rate of global mergers and acquisitions (M&A) has seen a recent uptick, prompting a need for growing companies to review their global environmental liability strategies, says a report by ACE’s retail operations group.

2012 showed M&A growth, according to Mergermarket statistics, with the year’s first quarter topping three successive quarters of the highest M&A values experienced in the last five years.

“Certainly, for those companies with strong balance sheets, access to inexpensive debt and superior working capital management practices, M&A will remain a core part of their strategic growth priorities, both domestically and abroad,” says Seth Gillston, senior vice president of Ace Global Mergers & Acquisitions Industry Practice and co-author of the study. “Companies seeking a stronger foothold in emerging markets–particularly within those countries that have liberalized foreign ownership rules–will continue to pursue M&A as a means of entry. In doing so, they will confront compliance with a patchwork quilt of constantly shifting environmental laws and regulations.”

Risk management is crucial to transferring exposures from a target company’s previous activities, which may include pollution, contamination, mold, hazardous waste, and toxic chemicals in water, air, and on land- especially when it comes to acquiring industrial manufacturers.…

July 17, 2013

Taking a Closer Look at Environmental Insurance

Source:, July 16, 2013
By: S. Ira Grossman

In a recent blog post I discussed how a comprehensive Phase I Environmental Site Assessment (ESA) and the Bona Fide Prospective Purchaser (BFPP) liability protection can help to protect you from acquisition environmental risk. Today I’ll look at Environmental Insurance, and how it can help cover the cost of remediation if an environmental hazard is found at your site.

Prior to the mid-1980s General Liability Insurance, the most common type of commercial risk insurance, made no mention of environmental damages. Then in the wake of the environmental movement and numerous regulations, insurers began to write environmental exclusions into the General Liability Policies, which led to the emergence of a new tool to manage environmental risk: environmental insurance.

Regulations Creating Liability

In 1972 the Clean Water Act was established. This law established the goals of eliminating releases of high amounts of toxic substances into water by 1985.

Two years earlier, Congress passed amendments that strengthened the scope of the 1967 Air Quality Act with new regulations such as national air quality standards and statutory deadlines for compliance.

In 1976, the Resource Conservation and Recovery Act (RCRA) was enacted. It is now most widely known for the regulations promulgated under RCRA that set standards for the treatment, storage and disposal of hazardous waste in the United States.…

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 18, 2013

Great American Insurance Group’s Environmental Division Launches Enhanced Premises Environmental Liability Product

Great American Insurance Group`s Environmental Division is pleased to announce the launch of its enhanced Premises Environmental Liability Insurance Policy. The policy speaks to many newer exposures now faced by site owners, operators, property managers and tenants, including:

– Contingent Business Interruption
– Emergency Response Costs
– Green Building Materials
– Methamphetamine Labs
– Biological Hazards

Limits of liability of up to $35 million per occurrence, $70 million in aggregate, are available with policy terms of up to 10 years.

John Reynolds, President of Great American’s Environmental Division, stated, “This innovative coverage further solidifies Great American Insurance Company as one of the leading insurers in the environmental liability arena.” Great American’s robust suite of environmental liability products and capacity are available to retail and wholesale brokers throughout the US and Canada. Environmental Division offices are located in Plymouth Meeting, PA, San Francisco, CA, and its newest location in New York, NY.

Please contact your Great American Environmental Underwriter to see how the new enhancements may help your clients manage their pollution exposures.


May 7, 2013

West, Texas blast reveals lack of insurance rule

Source: El Paso Times, May 5, 2013
Posted on:

The insurance on the fertilizer plant that blew up in West, Texas, on April 17 was a “drop in the bucket” next to the damage it caused, the spokesman for an industry group said Friday.

Meanwhile, the state agency that regulates insurers said there is no state requirement that companies that handle hazardous materials such as fertilizer carry insurance the way Texas drivers do.

The city of El Paso also doesn’t require insurance, and it doesn’t appear the city has the power to do so.

The lack of an insurance requirement was one of several regulatory gaps that were identified this week when state Rep. Joe Pickett, chairman of the House Homeland Security and Public Safety Committee, convened a hearing into the

blast. The El Paso Democrat has been the first state official to hold a public session to ask what other areas might be at risk for disasters like the one that occurred in West.

The state and federal investigation into the blast, which killed 14 and injured more than 250, continues. The explosion destroyed 142 buildings and caused major damage to 51 others, according to Texas Department of Emergency Management statistics.

Even so, the plant’s owner carried only $1 million in liability insurance — commonly the minimum policy for a business, said Mark Hannah, spokesman for the Insurance Council of Texas, an industry group.

The council estimates total insured losses from the explosion to be $100 million, Hannah said.…