Contractor GL Specialists - Please weigh in on this

[Rob]

Question mainly for people in California or any state who may have been affected by the Montrose decision:

Given the option between the following two types of policies below for a small residential trade contractor, which would you choose?

A. A "modified" occurrence form with manifestation wording with an admitted A rated carrier and a per occurrence deductible


OR


B. A standard occurrence form with a non-admitted, A rated carrier, with a per claim deductible

Keep in mind the modified occurrence form with manifestation wording will only cover damage or injury which manifests itself during the policy period. If the completed operation takes place during the policy period, and damage "occurs" and then progressively deteriorates and then shows up outside of the policy period, it will not be covered.

[pita3333]

Robb: That is a no brainer! Everyone (well I hope) will say the true occurrence form. Now if you add in ... premium, deductible terms etc...that answer will likely "float".

[Rob]

Yes I agree. I guess I'm seeking assurances that it is the best way to go. Consider the premium being comparable and the deductible is $1000 instead of $500 and it is a per claim deductible.

[brokerdave]

Rob

You aptly discuss the pitfalls of the manifestation restrictions in "A".
What do you see as the issues with "B" that could lead you to select the pitfalls associated with "A"?

[pita3333]

Actually let me add one thing...I would try to change the deductible from "Claim" to "Occurence"...at very least let my client see premium impact to make the switch (assuming the carrier would do this).
Would also analyze the past history and how the deductible would apply if activity stayed at same level.

[Rob]

Actually let me add one thing...I would try to change the deductible from "Claim" to "Occurence"...at very least let my client see premium impact to make the switch (assuming the carrier would do this).
Would also analyze the past history and how the deductible would apply if activity stayed at same level.

Well that is sort of the concern. It is a $1000 per claim deductible (pd only) on policy "B" rather than a $500 occurrence deductible (pd only) on policy "A"

The reason I'm addressing all these now is back when the market was extremely hard, alot of these small guys (1 man or 1 man with very little payroll) who do drywall or concrete or whatever couldn't get anything else or anything remotely affordable. So alot of them are with that company now and I'm trying to switch them.

By the way, Lincoln General is company "A" and Burlington is company "B"

[Rob]

Let me also add that the Burlington policy, company "B" has an amendment to the insuring agreement which basically adds:

"This insurance applies to 'bodily injury' and 'property damage' only if: The 'bodily injury' and 'property damage', whether known or unknown to any person: a) Did not first occur prior to the inception date of the policy b) Was not in the process of occurring and is not alleged to have been in the process of occurring, as of the inception date of the policy and c) Was not in the process of settlement, adjustment, 'suit' or other proceeding of any kind (including, but not limited to, any repair attempts or any statutorily mandated loss resolution or pre-suit process) as of the inception date of the policy"

This however, seem reasonable to me in order to address montrose type claims.

Burlington also has a contractual liability amendment.

This stuff is pretty challenging to explain to a contractor. I get it but then try to explain it to the guy hanging drywall and he says "huh?, well what do you recommend?" Of course I'm recommending the one that is less restrictive but then I have to explain why we're going non-admitted, the deductible difference, and the premium is a bit higher.

[CATHIEA]

I do a lot of small contractors (arizona) and seem to do quite a lot of them with Burlington rather than Lincoln General. I would rather sleep at night knowing that my client's claim will be paid. Maybe it's different here but contractors here seem to be more aware of construction defect claims and are more driven by coverage. After all we have Autoowners writing contractors excluding products/completed ops. You have to sell them on the coverages and forget about the price. If you let the client know your main concern is their best interest - price plays a far second. And for all those who will read this and snicker - my agency has a 87% retention rate. And those we do lose to other agencies we get back within 2 years.

[darnovak]

Gosh you folks are good! I was waiting for a definition of "modified" and "manifestation wording" as well as waiting to see what other (unimportant items like PD deductible) he would remember to add during a later post. The original query is so lacking in detail I wouldn't consider even guessing. After 34 years in this business I wouldn't dare to offer a competent comparison of the policies unless I could examine the specimen forms, the underwriting guidelines, and the rating of each carrier. An insurance associate had some "personal property" damaged during Katrina. The PP was in a condo in Cancun. I heard 5 people comment on "covered" vs "not covered" before I asked "did you read your policy ?" That was my first suggestion when considering coverage.- "Read your policy." If you write a lot of these accounts, learn the contracts and underwriting limitations backwards and forwards so you don't have to solicit "opinions" from a place like this. I read these posts for entertainment value only. If something said here piques my interest, I'll research it using reliable resources. Regards, Dar Novak[/u][/b]

[Rob]

Gosh you folks are good! I was waiting for a definition of "modified" and "manifestation wording" as well as waiting to see what other (unimportant items like PD deductible) he would remember to add during a later post. The original query is so lacking in detail I wouldn't consider even guessing. After 34 years in this business I wouldn't dare to offer a competent comparison of the policies unless I could examine the specimen forms, the underwriting guidelines, and the rating of each carrier. An insurance associate had some "personal property" damaged during Katrina. The PP was in a condo in Cancun. I heard 5 people comment on "covered" vs "not covered" before I asked "did you read your policy ?" That was my first suggestion when considering coverage.- "Read your policy." If you write a lot of these accounts, learn the contracts and underwriting limitations backwards and forwards so you don't have to solicit "opinions" from a place like this. I read these posts for entertainment value only. If something said here piques my interest, I'll research it using reliable resources. Regards, Dar Novak[/u][/b]

Anyone who knows about contractor's GL has plenty of info in the original query to offer an opinion. The reason I did not offer a definition of manifestation or modified occurrence was because I only wanted to solicit replies from individuals who would know what I'm talking about without having to explain (obviously this didn't work in your case). If you read the first post and can't get what we're talking about then I don't need your opinion. Second, anyone who knows anything knows that it is very important (not unimportant as you state) to discuss and distinguish between a per occurrence and per claim deductible. One word can change the entire meaning and I don't think its at all "unimportant" to bring it into the discussion since it could potentially mean thousands of dollars in exposure to the client. Third, one can read the policy (like I do) and still have a desire to solicit "opinions" since policy wording can be subject to interpretation and will potentially be subject to interpretation by attorneys in the event of a claim. And what is wrong with a "place like this"? This is a place where professional insurance agents can get opinions or interpretations on various items, including the interpretation of policy wording.

[Rob]

I do a lot of small contractors (arizona) and seem to do quite a lot of them with Burlington rather than Lincoln General. I would rather sleep at night knowing that my client's claim will be paid. Maybe it's different here but contractors here seem to be more aware of construction defect claims and are more driven by coverage. After all we have Autoowners writing contractors excluding products/completed ops. You have to sell them on the coverages and forget about the price. If you let the client know your main concern is their best interest - price plays a far second. And for all those who will read this and snicker - my agency has a 87% retention rate. And those we do lose to other agencies we get back within 2 years.

CATHIEA,

Do you write any at all with Lincoln General? I'd be interested to know because it does seem that there are some cases that almost no one will do for one reason or another, including Burlington (class of business, residential work, apartment work even if service only etc). I too sell mainly on coverage and have been writing contractors with NIC (if there is no prior work exclusion and no sunset clause, if possible) and Burlington. The problem is that when the market was hard several years ago and since many carriers have been avoiding any contractor involved in new residential (even custom homes), sometimes there weren't very many options. Now that the market has softened I'm attempting to move them but when moving them I have to be careful. For example, going from manifestation wording to a policy with a prior work exclusion would not be an option. I have a concrete contractor that nobody wanted to write including Burlington (except Lincoln General). Of course there are carriers with min premiums at $10K and $15K but when you have a concrete guy who has total receipts of $65K he isn't going to go that route, regardless of coverage differences. Let me know I'd be interested in your opinion.

[darnovak]

Rob: Sorry, I forgot to join the "everybody already knows this" club years ago. Here in NY we have absolutely no knowledge of anything important in the GL world so I apologize for asking for clarifications and definitions - too much to expect "at this place". Thanks for the reply. Message received.

[PCorathers]

There are LOTSA admitted markets for trade contractors with minimum premiums starting at a 1000 + fees. Try Statewide, Colonial General, Superior Access, or CBIC. I write a couple or so every month - easy money!

There is no need for a small trade contractor to pay alot of money or have restricted coverage. You may have trouble if they do tracts or condo's. If not then you are good to go.

Generals are a WHOLE other story, of course. I would NEVER write a modified occurance ie claims made, unless you have your E&O paid up!!

[sylvia]

Tough choices for contractors, but I thought you couldn't place coverage through a non-admitted carrier if you had a quote by an admitted insurer? [/img]

[Rob]

There are LOTSA admitted markets for trade contractors with minimum premiums starting at a 1000 + fees. Try Statewide, Colonial General, Superior Access, or CBIC. I write a couple or so every month - easy money!

There is no need for a small trade contractor to pay alot of money or have restricted coverage. You may have trouble if they do tracts or condo's. If not then you are good to go.

Generals are a WHOLE other story, of course. I would NEVER write a modified occurance ie claims made, unless you have your E&O paid up!!

Those are GA's not insurance companies (except for CBIC and CBIC checks credit so not everyone qualifies). The question is what carriers are they quoting you with? If you are placing your coverage through a General Agent, especially Superior Access, chances are you ARE writing a limited form of some sort. For example, Superior Access's main carriers are Lincoln General, Century Surety, Probuilders, and Safeco. There is a problem with each. Lincoln General IS a modified occurrence form. Century Surety IS a claims made form. Pro-builders is an RRG (my E&O excludes a nonrated company) and Safeco does not allow ANY new residential contruction, PAST or present. Also modified occurrence isn't quite the same as claims made.

So to say there are LOTSA admitted markets for trade contractors without a restricted form just isn't correct. Sorry but I would check your policies that came back from Superior Access.