AI status and 30 day notice of cancel endorsment

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etimer
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AI status and 30 day notice of cancel endorsment

Post by etimer »

The request to have the 30 day notice of cancellation endorsement has been awakened again. Now the question is this:

1. There is no ISO 30 day notice form
2. The 30 day notice is manually written by each company
3. The word endeavor
4. Blanket AI is in force

The Contract -- "ADDITIONAL INSURED. CONTRACTOR AND OWNER, its officers, directors and employees, shall be named as additional insured's under the Commercial General Liability policy."

If under the 30 day notice endorsement an insurance company is to endeavor to send notice to an Additional Insured, how can they send notice to officers, directors and employees? I see this language a lot in General Contractor contracts that are signed by subcontractors. I've gone round and round with General Contractors showing case law that points that to name so many as Additional Insureds is not in the public interest and is not what the AI is meant to do.

What I am tempted to do is start requiring the GC that wants AI status granted to so many people, I may start asking for names and addresses of all officers, directors and employees. I mean after all, how can an insurance company endeavor to send out a notice if they don't know the names or addresses of people that should receive the notice?

Kind of like using a little hammer to tell the GC to knock off the egregious contract requirements.
Big Dog
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Re: AI status and 30 day notice of cancel endorsment

Post by Big Dog »

As the person that handles contracts/agreements for a major hospital system, and all of our Agreements have that wording, I'd probably wind up telling you you're being a twit with that sort of request and attitude. There's also a good chance that I'd make the recommendation we not do business with your client because of the response received from their insurance agent/broker.

Congratulations - you just cost your client business and lost revenue. 'splain that one to 'em.
etimer
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Joined: Fri Feb 11, 2005 5:53 am

Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

Well you have a different point of view and I question how much you've studied the situation. Most brokerages will try to not add the 30 day notice because there was good reason for Accord dropping the wording. The word endeavor was never meant to meant to guaranteed and stats have shown that more often than people care to consider those notices were not sent. There are instances that an insurance company can not even satisfy the 30 day notice.

"So, what happens if the insured cancels immediately by written notice or surrendering the policy? How can the agent give 30 days notice unless either s/he or the certificate holder is willing to pay for an extra 30 days of coverage (which the insurer is unlikely to accept since they are not a party to the insurance contract)? What if the policy is cancelled by the insurer for nonpayment, fraud, misrepresentation, or criminal conviction? How can the agent possibly give 30 days notice to the certificate holder? The answer is simple: It can't be done. And, again, if the agent is aware of this, there is the very real risk of a claim that s/he issued a fraudulent or misleading document."

Asking for those manuscript forms adds cost to the bids and for something that could be done by contract, not requesting an additional endorsment? Why do you want to confer AI rights to a third party such as officers. An AI is granted certain rights to the policy of the contracting party and with those rights comes a legal response from the insurance company. Since contract language is supposed to be Which AI get sent the information?

Try this one....below is a link by the Atlanta legal department. See page 29 where the legal department came up with a simple, workable plan and it doesn't add to project cost. I would wager that the City of Atlanta is a bigger entity than the hospital where you work.

"City no longer requires direct notice of cancellation; accordingly, no conforming certificate or endorsement required

City requires contractor to fax copy of insurer's cancellation notice within 2 business days of receipt"

http://www.aci-na.org/static/entransit/Caput--Legal Aspects of Airport Insurance.pdf

Using "twit" in a discussion about reading contracts is interesting. I ask you:

If an AI who is a shareholder of the company files a direct claim, how is the insurance company supposed to know if the shareholder is valid. Yes I have seen contracts requesting all shareholders and a big company, just think large chocolate company and then think how many shareholders would be granted AI. The underwriters I know agree with me that granting all shareholders AI status will not happen.

I see contractors that request AI on the BAP. Maybe they should read the "who is" clause. There is the the Designated Insured” endorsement that only makes people feel good to see it but it really doesn't give them much.

"We have seen that a named insured contractor or subcontractor under the business auto policy is automatically in compliance with an indemnitee’s demand for additional insured status, provided the indemnitee is an entity liable for the named insured’s conduct. Confusion on this point, and the unwillingness of some indemnitees to “trust” the “Who Is an Insured” provision of the indemnitor’s BAP as to their insured status, eventually led to the development of independently filed additional insured endorsements by some insurers. These endorsements, while not providing any coverage that the “Who Is an Insured” clause did not already provide, served to give both the named insured and its indemnitee some specific documentation that additional insured status was in effect. "

Have you ever considered the problems created by requesting waiver of subrogation on WC policies?

http://www.irmi.com/expert/articles/201 ... ement.aspx

"It is advisable for subcontractors to resist workers compensation waiver of subrogation requirements whenever possible. The problem is they lack the leverage necessary to force the general contractor to drop this requirement. Unless their bargaining position changes for the better, subcontractors will likely need help from state legislatures or will need to mount court challenges to rid themselves of the waiver of subrogation requirements that they now face.
State Response

New Hampshire has taken a lead in this area by amending its workers compensation law in 2004 to make waivers of subrogation against public policy. Section 281–A:13 (VI) now prohibits any provision in any agreement that requires an employer or an employer's insurer to waive any rights of subrogation. Similarly, Kentucky, New Jersey, and Missouri have declared waivers of subrogation contrary to public policy and therefore null and void.

The Maine courts have also weighed in favorably for subcontractors on this issue. In Fowler v. Boise Cascade Corp., 948 F.2d 49 (1st Cir. 1991), the court held that a waiver of subrogation did not prevent the employer from enforcing its lien against the employee who made the third-party recovery. In a bit of an end-around, the employer could not enforce its lien against the contractor that required the waiver, but it could enforce its lien directly against the employee who received the third-party settlement. While not completely declaring waivers of subrogation contrary to public policy, Wisconsin—like Maine—allows employers to recover on their liens even when there is a waiver of subrogation endorsement.

It is a cruel irony for subcontractors that they are forced to accept waivers of subrogation to secure work from general contractors, and, yet, the waiver may not benefit the general contractor but could cause great harm to the subcontractor's loss experience. Until universal change comes to the industry, subcontractors can only push back on waivers where they can and, of course, work as safely as possible to avoid the multiple claim hits that can come from injuries to their employees."

Heck there are still contractors out there that are requesting the CG 20 10-1185 Form. There are contracts that read as broad as the CG 20 10-1185 or equivalent. Wearing an attorney hat I would ask - equivalent to what? Since CG 20 10-1185 is not available, which part of the CG 20 10-1185 do they want equivalent? If a contract is to be valid it can't be vague. It is accepted that courts will predominately favor the other party that signed the vague contract.

I hate to tell you this but many (if not most) contractor PM's or risk managers will pencil out a clause that creates a problem to a good subcontractor. It is all about thinking and not just doing just for the sake of doing. Personally I like negotiating with attorneys because more than most, they understand that words mean something and are open to negotiating.

I only push back when needed and have yet to cost any client lost business. It isn't as simple as calling me a twit.

There are two brokerages that I have friends working at and both brokerages have over 140 employees and I've known one woman for 30 years, she works in the commercial department (she's been in the business for 35 years) and the other for 18 years. At both brokerages they say that they push back hard to not add the 30 day notice of endorsement. With the issue with the AI requests for everyone and their brother named, they agree with me. You have to do it but if the crap happens it is going to be a big problem but sometimes you just need to do it and go a hope and a prayer. Well since I am not as well heeled as a 100 $million a year brokerage, I take a harder stance on this stuff. My E&O premiums are high enough and I don't want to spend time in a court room defending myself. I take more of a text book stance than a do it to just get along attitude.

Big Dog wrote:As the person that handles contracts/agreements for a major hospital system, and all of our Agreements have that wording, I'd probably wind up telling you you're being a twit with that sort of request and attitude. There's also a good chance that I'd make the recommendation we not do business with your client because of the response received from their insurance agent/broker.

Congratulations - you just cost your client business and lost revenue. 'splain that one to 'em.
Big Dog
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Re: AI status and 30 day notice of cancel endorsment

Post by Big Dog »

I’ll try and address a few of your points, since your response was all over the map, and your train of thought had no caboose..

Having worked in the insurance industry for some 20+ years before working on the “client side”, most insurance carriers have the technology to track who is named as an Additional Insured, or requires a Waiver of Subrogation on a policy. If a vendor/contractor/service provider were to cancel their coverage immediately upon renewal, and we did not receive not any notice of that, they would be in Breach of Agreement – which has severe legal implications.

With respects to being named as an Additional Insured on a BAP, in my situation, we have numerous vendors/contractors/service providers on site every day. If one of them runs into someone or damages someone’s vehicle on our owned/leased property, the injured party’s attorney is going to name everyone and their mother in a legal action. Since we were not the ones that caused the accident, we’ll look to those vendors etc. to cover our defense costs with the AI.

The same holds true for a Waiver of Subrogation on Workers’ Comp. Considering we have some 100+ vendors/contractors/service providers on site at each of our facilities on any given day, I don’t want to be responsible if they are injured (we pay enough in claims as is).

I’ve had several insurance brokerages tell their clients not to agree to Additional Insured or Waiver of Subrogation requirements in an Agreement, and to tell us that the carrier won’t allow it. Nine times out of ten their coverage is with an insurance carrier that’s part of our overall insurance program, and we’re aware of what they can and can’t do.

Oh...one more thing - the only policy that I know of that an insured can "surrender" is a cash value life insurance policy (something we don't contractually require).
etimer
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Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

You may have been in the business 20+ years but so have I (1983). Actually I believe you have been in the business for 30+ years because back in 2009 you were giving 25+ years in the business....so you are seasoned.

The issue with AI can be argued on many different points, the court dockets are clogged with AI suits.

I will stand by what I said about the AI on the BAP, it gives you nothing that the BAP "who is" definition doesn't already do. You don't care to believe me fine....go to International Risk Managment, Inc. and fight with heir lawyers about it. Guess what ---- attorney's will always name you.

The WC WOS will not stop someone from suing you. Don't believe me --- fine go argue with the attorneys. There is a reason that the States are moving in and making it illegal to have the WC WOS. I'll help you --- The Albert Risk Management Consultants claims management team (Glenn Brown, Lisa Hartman, William Quinn, Jr., David Ackerman, and David A. Tweedy) contributes articles on claims topics. You can reach Glenn Brown at gbrown@albertrisk.com.

"In the scenario where the employee initiates the third-party claim, and there is a waiver of subrogation endorsement attached to the workers compensation policy, the contractor who required the waiver receives absolutely no benefit from the waiver. The claim is not barred because the injured employee who initiated the claim is not bound by the waiver. The third-party award does not get reduced even though the workers compensation insurer has waived their right to recover its payments from the award. In many jurisdictions, when there is a waiver, the injured employee gets to keep the full award which essentially gives the employee a double recovery for the indemnity and medical benefits already received through the workers compensation claim. Giving a double recovery to an injured employee while providing no benefit to the contractor that included the waiver of subrogation in its contract was certainly not the intent of requiring the waiver, but in many cases, it is the reality.

Conclusion

While the preceding paragraphs highlight some states where subcontractors aren't required to forego a third-party recovery even when there is a waiver of subrogation in place, these states are very much in the minority. It is a cruel irony for subcontractors that they are forced to accept waivers of subrogation to secure work from general contractors, and, yet, the waiver may not benefit the general contractor but could cause great harm to the subcontractor's loss experience. Until universal change comes to the industry, subcontractors can only push back on waivers where they can and, of course, work as safely as possible to avoid the multiple claim hits that can come from injuries to their employees."

Did you even read what the City of Atlanta decided to do with the 30 day notice of cancellation endorsement? It is a waste of your time and the insurance company time. Put it in the contract and then if the subcontractor fails to give you notice...it is a breech. As I preach to my clients --- "you ain't covered for breech, why did you sign that contract."

From Zurich Insurance
Senior Vice President of Operations
and Profit Management
Zurich Construction
Seth is an active member of the Associated General Contractors of America (AGC), a board member of the ACE Mentor Program as well as the construction issues committee of the American Insurance Association (AIA). He holds a Construction Risk and Insurance Specialist (CRIS) designation from the Insurance Institute of America.

A deeper look at the cancellation scenarios
As construction insurers looked at the specific contract terms, it became clear the solution would not be as simple as a short endorsement designed to meet the various contract terms. A key issue was the different scenarios under which policy
cancellation occurs.

Active cancellation by the insurance company.
This is perhaps the least common scenario, but the easiest to manage. Various reasons could include misrepresentation or significant change in operations. The insurance company is typically required to
provide advanced notice to the contractor and that notice could easily be provided to certificate holders as well.

Non-payment of premium.
This is often the most common scenario as well as the most challenging to manage. Premium payments are typically made monthly. If an insured misses a payment, the insurance company often provides advance notice
that coverage would be cancelled within 10 days. While it is reasonable to provide this notice to interested third parties, in many cases, the premium is paid prior to the actual cancellation date and therefore the cancellation is rescinded. This scenario presents two challenges. First, the insurance company is required to provide a second notice to third parties indicating coverage was not cancelled. This process creates more work and is inefficient and costly. Secondly, and perhaps more importantly, every time a payment was late or lost in the mail, the insurance company would have to provide notice to all third parties that cancellation would occur. This would cause unnecessary challenges for subcontractors since the premium payments are generally paid and coverage is typically not cancelled.

Contractor request.
A contractor can request immediate cancellation from their insurance company. This occurs if the contractor decides mid-term to change carriers or has other business circumstances that warrant cancellation. While these are exactly the scenarios that owners want to be made aware of, it is contractually impossible for an insurance company to provide advance notice of these changes. The only possible notification could occur subsequent to the cancellation."

There are more to the above examples. Maybe you've been out of the retail side for a while it has become more normal for underwriters to not request a copy of the COI.

"Who is in the best position to send the notice? Most owners expect the notice to come from a third party which makes sense as the subcontractor who has a genuine cancellation issue is not as likely to volunteer that information. Most contracts require notice to come from the insurance company; however, the insurance companies do not have record of the third parties under contract and/or certificate holders. This information is retained by the insurance broker. While the broker could transmit that information to the insurance company, the potential for error increases. So perhaps the broker is in the best position to provide notice of cancellation; however, most contracts do not provide that flexibility. The same is true for independent vendors with the infrastructure to provide notice in a timely and accurate fashion. The insurance company will simply notify one party via policy terms and the contractor’s agreement allows for independent third party notification.
While this appears to be an efficient process, many of today’s contracts do not allow for that option."

This is from the Big I Virtual University about the days of the old Acord Form ----

"The ACORD certificates of insurance indicate that the issuing insurer will "endeavor to" provide notice of cancellation to the certificate holder. Typically, nothing in the policy requires this and many of your insurers say they do not even want copies of certificates, much less plan to provide notice. Is telling the certificate holder that the insurer with "endeavor to" provide notice of cancellation (when they clearly have no intention of doing so) ethical?

At least one state insurance department (New York, February 15, 2006) has moved this issue from the realm of ethical dilemmas to that of regulatory decree by opining that, if a policy (presumably including additional insured endorsements) does not grant a right to notice of cancellation, then the ACORD certificate should not include such a grant."

"As an agent/broker I have been dealing with this issue for 40 years. As a student of the business and instructor for the IEA, I have been teaching and discussing this issue with 1000's of insurance professionals over the last 30 years. I have many clients that are certificate holders and certificate givers. I tell all of them that they MUST not rely on a certificate for any grant of coverage or privilege under the policy.

The term "endeavor to" is so ambiguous and subjective that it can not be relied upon for any certainty of action. I could endeavor to give you a $1,000,000 but that does not mean you will get it. Endeavor can be no more than a wish or a prayer.
Barring any direct promise to do so, I do not believe that failing to notify a certificate holder of cancellation or change is a breach of of the standard of care. Unless you specifically obligate yourself to that certificate holder, there is no obligation to physically notify them.

I have been involved in several law suits regarding this issue as an expert and it has become very clear that the standard of the industry is generally not to provide specific notification. While something may be legal and not ethical, I believe that the standard applying to the millions of certificates that are issued are pretty clear."

On the 30 day notification you fail to take into account that there are times an insurance company CAN NOT supply the 30 day notice. Having once worked for the insurance company you surely know this fact.

So if you really, really, really want a notice stop relying on a third party and put it in your contractors contracts. They are the ones that will pay the price for not giving you notice, they are the one's that have a duty and that is all I have to say about it.

Now there is a reason I give you notations from places like International Risk Management, insurance companies and the Big I and that is this --- I can say anything but if I don't back them up, they are just words.

Just because people think they are getting something doesn't mean in reality they will benefit from their belief.

Every COI I send I also send this notice --

Property and Casualty Insurance Companies and Producers Issuing Certificates of Insurance in
Pennsylvania; Notice No. 2009-02 [39 Pa.B. 918]


[Saturday, February 14, 2009]


''Certificates of Insurance'' regarding Property and Casualty coverage are typically used to
provide proof of liability insurance to and summarize the terms of a policy for a third party in lieu of
providing the third party with a complete copy of the policy.


Certificates of insurance are not forms subject to filing with the Insurance Department (Department)
because these certificates do not in any context amend, extend or alter coverage of the insurance
policy. They simply summarize the coverages provided by that policy.

This is also added to the COI package --

http://www.docstoc.com/docs/165267786/T ... cers-doing

I added the above to make certificate holders aware that just because another broker says they have AI status on a Cert --- it may not be true. There are / were a lot of brokers that would send out a COI giving AI status before it was a manuscript on the policy. For a long time I've promoted using the Broad Form AI and that way nobody misses asking for the endorsement.

Even though it may only be $50 to add the 30 day notice endorsement it is still a cost. It is a cost to the project owner, the contractor, the subcontractor, the insurance company and to me, the person that needs to obtain the endorsement.

I still remember a time that big General Contractors would accept one COI that was written for "all jobs". As one underwriter said --- "the requests keep getting worse and worse."

The word surrender may have been used to mean, you are giving your policy back to the insurance company. When I've had insureds request cancellation the insurance company will want the policy back (surrendering it). Normally I have to complete an LPR and that settles that one. Parsing words are we? :)

"Oh...one more thing - the only policy that I know of that an insured can "surrender" is a cash value life insurance policy "

Late in the east and time for a glass of vino.



Big Dog wrote:I’ll try and address a few of your points, since your response was all over the map, and your train of thought had no caboose..

Having worked in the insurance industry for some 20+ years before working on the “client side”, most insurance carriers have the technology to track who is named as an Additional Insured, or requires a Waiver of Subrogation on a policy. If a vendor/contractor/service provider were to cancel their coverage immediately upon renewal, and we did not receive not any notice of that, they would be in Breach of Agreement – which has severe legal implications.

With respects to being named as an Additional Insured on a BAP, in my situation, we have numerous vendors/contractors/service providers on site every day. If one of them runs into someone or damages someone’s vehicle on our owned/leased property, the injured party’s attorney is going to name everyone and their mother in a legal action. Since we were not the ones that caused the accident, we’ll look to those vendors etc. to cover our defense costs with the AI.

The same holds true for a Waiver of Subrogation on Workers’ Comp. Considering we have some 100+ vendors/contractors/service providers on site at each of our facilities on any given day, I don’t want to be responsible if they are injured (we pay enough in claims as is).

I’ve had several insurance brokerages tell their clients not to agree to Additional Insured or Waiver of Subrogation requirements in an Agreement, and to tell us that the carrier won’t allow it. Nine times out of ten their coverage is with an insurance carrier that’s part of our overall insurance program, and we’re aware of what they can and can’t do.

Oh...one more thing - the only policy that I know of that an insured can "surrender" is a cash value life insurance policy (something we don't contractually require).
rcenters
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Re: AI status and 30 day notice of cancel endorsment

Post by rcenters »

Big Dog wrote:As the person that handles contracts/agreements for a major hospital system, and all of our Agreements have that wording, I'd probably wind up telling you you're being a twit with that sort of request and attitude. There's also a good chance that I'd make the recommendation we not do business with your client because of the response received from their insurance agent/broker.

Congratulations - you just cost your client business and lost revenue. 'splain that one to 'em.
Since you represent the contract "offerer", this is a good opportunity to ask about the intent of your contract.

1. Does your contract require just the hospital system ("ABC Hospital Corp") to be named additional insured, or broader wording like "ABC Hospital Corp., its officers, directors, et cetera"?

2. If you do require the broader wording, what, in your opinion, is the specific intent of your 30 day cancellation wording in the contract? Is the intent that notice to the First Additional Insured (which doesn't technically exist as a term but I believe you know what I mean by it) constitutes notice to all officers, directors, etc?

Also, a separate but related issue if anyone wants to tackle it, there are Lender Loss Payable endorsements for Property that can continue coverage for the Lender in the event of non-payment (for example), would such a thing be feasible for Liability? I imagine that every additional insured would want that endorsement, and that the standard of care to administer it would be a nightmare...
etimer
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Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

I question a lot of what is asked because often the people asking don't understand what or why they are asking.
Example is when I was negotiating for a client that was going to sign a contract with the company that makes chocolate kisses. The kisses company wanted all shareholders to be named AI. When I asked them what they were trying to achieve, neither the PM nor the Risk guy could answer it. They could only say that has always been in the contract. They penciled it out of the contract. I mean for goodness sakes how many people own shares in that company plus the amount is always changing.

Take the WC waiver of subrogation. Imagine that the employee of the GC is messing around on the second floor and drops a 2X4 that hits the head of subcontractor working on the first floor. It is a $200,000 WC claim for head injury and the fault lies with the employee of the GC. The WC insurer will pay the claim but can not recoup the money from the entity whose negligence caused the loss. The general contractor’s loss history stays clean while the subcontractor’s workers compensation experience modification gets hit with a big loss. Is that equitable risk transfer. Plus there are people out there that think a WC WOS will stop a third party suit. A waiver of subrogation does not prevent an injured subcontractor's employee from filing suit against the contractor.

They are slow to answer but the States are slowly considering the WC waiver of subrogation to be against public policy.

"New Hampshire has taken a lead in this area by amending its workers compensation law in 2004 to make waivers of subrogation against public policy. Section 281–A:13 (VI) now prohibits any provision in any agreement that requires an employer or an employer's insurer to waive any rights of subrogation. Similarly, Kentucky, New Jersey, and Missouri have declared waivers of subrogation contrary to public policy and therefore null and void.

The Maine courts have also weighed in favorably for subcontractors on this issue."

The never ending and growing want for various waivers of subrogation prompted a large Baltimore attorney's group to answer with this idea.......

"At this time, it appears as though the best way for insurers to protect themselves from Waiver of Subrogation provisions is to insert clear, thorough and unambiguous exclusions into all of their policies providing that if an insured enters into a contract containing a Waiver of Subrogation provision, the insurer may deny coverage for any loss based on which it would have been entitled to subrogation rights if not for the provision"

I was reading a contract today that the GC wanted waivers of subrogation to extend out 5 years in the future after the job completion. The courts disagree.........

"Because the court found the waiver of subrogation clause to be ambiguous in relation to the meaning of the “Work” under the AIA language, the court looked at these terms under the contract as a whole. Under the court’s reading, the “Work” did not encompass the completed Arby’s and therefore the Hartford policy was not “other property insurance applicable to the Work.” This reading of the AIA language has the effect of invalidating the waiver of subrogation language argued by Phoebus. The court justified its stance by noting that public policy supports the notion that waiver of subrogation clauses in “construction contracts pertain to the period of time in which construction is taking place, and not to the (unlimited) period of time after construction and final payment, when the structure is built and being used and the parties no longer are working together to accomplish that.”"

Still even in the face of court cases the contracts don't change. Why?

rcenters wrote:
Big Dog wrote:As the person that handles contracts/agreements for a major hospital system, and all of our Agreements have that wording, I'd probably wind up telling you you're being a twit with that sort of request and attitude. There's also a good chance that I'd make the recommendation we not do business with your client because of the response received from their insurance agent/broker.

Congratulations - you just cost your client business and lost revenue. 'splain that one to 'em.
Since you represent the contract "offerer", this is a good opportunity to ask about the intent of your contract.

1. Does your contract require just the hospital system ("ABC Hospital Corp") to be named additional insured, or broader wording like "ABC Hospital Corp., its officers, directors, et cetera"?

2. If you do require the broader wording, what, in your opinion, is the specific intent of your 30 day cancellation wording in the contract? Is the intent that notice to the First Additional Insured (which doesn't technically exist as a term but I believe you know what I mean by it) constitutes notice to all officers, directors, etc?

Also, a separate but related issue if anyone wants to tackle it, there are Lender Loss Payable endorsements for Property that can continue coverage for the Lender in the event of non-payment (for example), would such a thing be feasible for Liability? I imagine that every additional insured would want that endorsement, and that the standard of care to administer it would be a nightmare...
rcenters
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Re: AI status and 30 day notice of cancel endorsment

Post by rcenters »

etimer wrote:The never ending and growing want for various waivers of subrogation prompted a large Baltimore attorney's group to answer with this idea.......

1 "At this time, it appears as though the best way for insurers to protect themselves from Waiver of Subrogation provisions is to insert clear, thorough and unambiguous exclusions into all of their policies providing that if an insured enters into a contract containing a Waiver of Subrogation provision, the insurer may deny coverage for any loss based on which it would have been entitled to subrogation rights if not for the provision"

I was reading a contract today that the GC wanted waivers of subrogation to extend out 5 years in the future after the job completion. The courts disagree.........

2 Still even in the face of court cases the contracts don't change. Why?
On the first part, that's a pretty radical suggestion considering that subcontractors are kind of forced into signing agreements with these requirements, because if they don't, the next sub will. Would probably be better for insurers to refuse to provide insurance to contractors/businesses who have a high exposure to waivers, than to write their insurance but cause them to be at a huge risk of being in breach of contract for placing insurance with an insurer/policy that didn't meet a contract requirement, because such an exclusion would never be disclosed through a Certificate, so only the sub would know (and perhaps not even them if the agent doesn't warn them).

On the second, why take it out when it might still prevail in some jurisdictions? I've never been a risk manager, but I've often seen the idea be advanced that it's better to put a requirement in the contract than not, that way you at least have some ground to fight on later, and in some jurisdictions it may still hold.
etimer
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Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

The idea was not mine, it was from something read from the legal firm Niles, Barton & Wilmer and was mentioning a PA Superior Court case.

Yep it is heading more and more into the throw the crap against the wall and see if it sticks mentality of risk transfer. The problem is that the court cases grow because of adhesion contracts and IMHO is not good equitable risk transfer. In a way it is pushing an individuals legal liability onto another individual that was not responsible for the loss. The take it or leave it contract is never smiled upon by the courts and often those people with their inequitable contracts loose the court case. I've always thought that it probably ticks off judges to see people trying to hoodwink by using a contract.

"that it's better to put a requirement in the contract than not, that way you at least have some ground to fight on later, and in some jurisdictions it may still hold"

I would say that very few subcontractors wouldn't fall in this category "high exposure to waivers".

rcenters wrote:
etimer wrote:The never ending and growing want for various waivers of subrogation prompted a large Baltimore attorney's group to answer with this idea.......

1 "At this time, it appears as though the best way for insurers to protect themselves from Waiver of Subrogation provisions is to insert clear, thorough and unambiguous exclusions into all of their policies providing that if an insured enters into a contract containing a Waiver of Subrogation provision, the insurer may deny coverage for any loss based on which it would have been entitled to subrogation rights if not for the provision"

I was reading a contract today that the GC wanted waivers of subrogation to extend out 5 years in the future after the job completion. The courts disagree.........

2 Still even in the face of court cases the contracts don't change. Why?
On the first part, that's a pretty radical suggestion considering that subcontractors are kind of forced into signing agreements with these requirements, because if they don't, the next sub will. Would probably be better for insurers to refuse to provide insurance to contractors/businesses who have a high exposure to waivers, than to write their insurance but cause them to be at a huge risk of being in breach of contract for placing insurance with an insurer/policy that didn't meet a contract requirement, because such an exclusion would never be disclosed through a Certificate, so only the sub would know (and perhaps not even them if the agent doesn't warn them).

On the second, why take it out when it might still prevail in some jurisdictions? I've never been a risk manager, but I've often seen the idea be advanced that it's better to put a requirement in the contract than not, that way you at least have some ground to fight on later, and in some jurisdictions it may still hold.
RM& Insurance
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Re: AI status and 30 day notice of cancel endorsment

Post by RM& Insurance »

This issue is near and dear to my heart as a 20+ year broker insuring contractors and now a risk manager for a mid size property manager/developer.

Here are my thoughts. On WOS, you can be sued for anything. Having a piece of paper that says "you can't" sometimes helps. I'm not concerned with anyone's loss history by my employer's...it's what they pay me for. A contractor's job site is his "workplace". They are responsible for safety, if it is unsafe they should not work. They should notify me. They should train their employees to do the same. I don't want to be drawn in on a trip and fall for uneven concrete. Examine your work area, stop work and notify me. Enough said (though I KNOW it is much more complicated than that).

Now...for 30 day notice. Indemnity for anything, including breech, from a sub-contractor without insurance behind it is most times meaningless and I can't count on the times it isn't. Further, without notice from someone other than the contractor, the cert is good for the day it's issued, that's it...maybe not even that, and NO ONE is responsible

The answer: (though I admit I haven't fully utilized it because of the unfairness issue below and because I just started making the brokers include endorsements...too much at one time would cause blanket revolt) Brokers providing a letter that they WILL mail notice of cancellation. Put their E&O on it if they don't. They make too much money for this not to be the answer. This is an automated society and as operations manager for many years, it's not as difficult as it is made to appear. Now, I certainly agree that asking for a full 30 days isn't fair, and I LOVE your wording of "within 2 days of receipt"! I will begin using this this year. Brokers who will do it will get referrals from me for subs who have brokers who won't. Simple as that.

The truth is the Brokers do need to be on the line for this AND what they put on a cert. I receive 100's every week. They provide additional insured, waiver, primary without ever issuing an endorsement. When asked to provide the endorsement, many don't even know what it is. The absolute garbage that comes out of most brokerage's today is astounding. Don't even get me started on direct writers. Brokers put their entry level people on certs and it's ok because they aren't responsible. They should be.

Further, the cert holders are the biggest problem of all. They accept whatever is given them because they don't read it, and then the insurance industry gets a bad name when there is no coverage. It truly makes my job harder as I'm accused of being difficult just because I DO read and understand the endorsements...

Finally, I once heard a judge in a contract review seminar say, "at the end of the day that contract says whatever I say it says", and it's substantially if not purely true. In the end, the courts will decide. The paper is only here to discourage that end and of course provide us with a defense.
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Re: AI status and 30 day notice of cancel endorsment

Post by mccluney »

What i find disturbing is that I would venture that most subcontractors are small and cannot get the coverages in the policies that are required by the contracts they assume. I always cringe at the wording in the contracts that require the subcontractors to be responsible for ANY claim. As we all know, their are numerous policy exclusions especially for contractors. I know that
the subs frequently take on jobs that are excluded in their policies. When I get tired of writing two page memos to the client indicating the relevent exclusions, I will need to let the client go rather than expose my E & O insurance. The certs never show all the exclusions and the clients who ask for the certs have no clue as to what the subs' policies actually cover. So the subs take on the jobs knowing that they may not have the coverage needed when a claim occurs. They hope that the claim that does occur will be covered and they will seek bankruptcy if not covered.

Agent's should NEVER alter the wording on a certificate or provide AI or WOS or 30 days notice unless they have specific permission from the underwriter to do so.
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Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

Well I don't know but the State I live in a State that has anti-indemnity statutes but I read contracts that pretend otherwise. SO reading that you only care about "your" employer makes me wonder, do people in your position care about State statute, about good public policy or just to have the most adhesion contract that is possible?

I can tell you that a lot of subcontractors and General Contractors are tired of all the BS. There are many old dogs that still remember the days before the risk transfer war started One guy that is 83 years old, a GC who owns a nice business (not paper GC) thinks the industry has gone crazy. I tend to agree.

RM& Insurance wrote: I'm accused of being difficult just because I DO read and understand the endorsements...
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Re: AI status and 30 day notice of cancel endorsment

Post by etimer »

Ha ha! I'm laughing because I get COI samples from the GC showing how I am to write the COI. I kindly send them a note about Accord's rules / copyright and that COI that they are showing as a sample, the one with a date of 2009....well Accord would have a problem with it. Finally after years and years of telling them, there has been on GC that is using an updated Accord as a sample. Now I am not sure if they have a contract with Accord and what Accord would think about that big Sample that they wrote in marker. But again....who is looking? :)

Maybe one thing that would help in construction contracts would be standardized contracts maybe a group like AIA or something? Then everyone would know what to expect, what endorsements they would be expected to supply, etc.

mccluney wrote:Agent's should NEVER alter the wording on a certificate or provide AI or WOS or 30 days notice unless they have specific permission from the underwriter to do so.
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Re: AI status and 30 day notice of cancel endorsment

Post by FerdTurguson »

Big Dog wrote:As the person that handles contracts/agreements for a major hospital system, and all of our Agreements have that wording, I'd probably wind up telling you you're being a twit with that sort of request and attitude. There's also a good chance that I'd make the recommendation we not do business with your client because of the response received from their insurance agent/broker.

Congratulations - you just cost your client business and lost revenue. 'splain that one to 'em.
...Right. And the only problem with that approach is - the day the policy is cancelled for whatever reason (insured-request, carrier-driven) it is not possible to provide notice (because no names or addresses were provided by YOU), the insured has their work contract voided because they are in violation of the requirement, and then YOU post your resume on LinkedIn because you are the sole reason that notices could not be sent. Nicely done!

And a hearty congratulations go to you, also - you single-handedly cost your employer more money because they now have to find a new contractor, caused an honest contractor to lose a big account, and caused an agency to scramble to save a big account. And all because you think YOU know better than experienced insurance professionals who, for decades, have handled hundreds of accounts similar to yours.

So while you're interviewing for your new job and they ask you why your company dismissed you, as you so eloquently put it, 'splain that one to 'em.
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Re: AI status and 30 day notice of cancel endorsment

Post by FerdTurguson »

etimer wrote:Well you have a different point of view and I question...I take more of a textbook stance than a do it to just get along attitude.
Bottom line "etimer", you are correct. "Big Dog" is just an internet troll who trying to get a rise out of you so you'll post another reply. And in my opinion, he/she knows NOTHING of the insurance industry from the carrier side. He/she "worked in the 'industry' for some 20+ years".

Yeah, "Big Dog" me too. I have a career spanning three decades, Senior Commercial Lines Underwriter, Corporate Insurance Trainer, Insurance Pre-Licensing Adjunct, Certified Insurance Counselor currently completing my Associate in Risk Management. Over my career, I've worked for seven insurance companies, worked on accounts from 10K in premium up to and including accounts worth 11 million in premium. You know who else worked "with" me in the "industry" for 20+ years? The guy in the mailroom. And "Big Dog" is about as qualified as he was.

Quote: "most insurance carriers have the technology to track who is named as an Additional Insured". Right. Harry Potter sits in the corner and with a wave of his wand, gets us the names and addresses of everyone who wants to be an AI.

I'm on the agency side now and I just spoke with an underwriter who told me "you are welcome to issue a certificate and you do not need to forward a copy to us (the carrier). The certificate would not be reviewed or filed." Many companies don't even SEE certificates of insurance any more. And since agencies are not a party to the contract, they do not have a legal right to issue a cancellation notice, and so they cannot. (Without being in violation of the law and their contract with the carrier.)

So to recap: "Big Dog" an internet troll who doesn't know insurance. "etimer", not only do you KNOW insurance, you can provide links to case law PROVING that what you say is correct. And me? Well, I'm "Mr. Wonderful". Insurance Carriers wish they had me back as an underwriter due to my intensive corporate expertise and knowledge, Insurance Agents want me to jump ship and work for them, because they ask for 100% and I give them 125%, Insurance Headhunters call me weekly because they know the value I bring to employers which would put commission $$$ in their pockets (but where are the Insurance TRAINING jobs, guys?) and Insurance Practitioners wish they had my brain so they could pass their exams on the first try and my charm so they could have the same admiration by friends and co-workers as I enjoy!
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