By Josh FunkDecember 14, 2009
A retired Union Pacific conductor can seek compensation for a knee injury because walking into work from the parking lot was part of the conductor's job, the Nebraska Supreme Court said in a ruling released Dec. 11.
The ruling reinstates the lawsuit Glenn Holsapple filed after he stepped in a pothole in April 2006 in Marysville, Kan. A Douglas County, Neb., judge had previously issued a summary judgment in Omaha-based Union Pacific's favor.
Union Pacific's attorneys had argued the railroad shouldn't be held liable because Holsapple was commuting and hadn't yet reported for work when he hurt his knee.
But the Supreme Court determined Holsapple's injury happened during the course of his employment because it was just before his shift began and on a driveway employees regularly used to get from the parking lot to the railroad's depot. It doesn't matter that the driveway is owned by the city of Marysville, not Union Pacific, the court said.
“It was a necessary incident of the workday for Holsapple to walk from his car to the yard office to report for duty,'' the court said in its ruling.
One of Holsapple's attorneys, Robert T. Dolan of Minneapolis, said the only reason Holsapple was in the driveway “is he was going to work.''
“We believe the railroad had a duty to make sure that the parking lot was safe,'' Dolan said.
A message was left Dec. 11 for Union Pacific attorney David Schmitt.
Holsapple tore some knee cartilage in the incident and had to have surgery. He missed work for some time but was able to return to the job before retiring earlier this year.
The Federal Employees Liability Act, which covers railroad workers in much the same way as state-administered worker's compensation laws, mandates that employers provide a safe place for workers. It also outlines the procedure for collecting damages after an injury.
The law says even if Holsapple's employer played only a slight part in the injury, it could be held liable, his lawyers argued.
Union Pacific operates 32,400 miles of track in 23 states from the Midwest to the West and Gulf coasts.
On the Net: Nebraska judicial branch: http://www.supremecourt.ne.gov
2009년 12월 23일 수요일
Shooting Case Tests Mississippi Tort Reform, Premises Liability
Shooting Case Tests Mississippi Tort Reform, Premises Liability
December 22, 2009
Before Mississippi lawmakers passed tort reform that limited damages in civil litigation, Ronnie Lee Lymas' lawsuit against the store where he was shot wouldn't have gotten much attention.
That's anything but true now: The case is being characterized as a test of Mississippi's tort reform laws -- hailed by business leaders and despised by plaintiffs attorneys -- and a showdown over so-called premises liability issues.
Lymas' lawsuit is now before the Mississippi Supreme Court, and those filing briefs in the case include the Mississippi attorney general's office, Gov. Haley Barbour and dozens of trade and business associations.
Barbour, a Republican who has championed tort reform, said in a news release that Mississippi was a "judicial hellhole'' before limits were placed in civil litigation and a ruling that overrides those laws would be devastating for the state.
Barbour filed a brief in the case asking the state Supreme Court to uphold a lower court's ruling that he said affirmed "the constitutionality of Mississippi's non-economic damage caps.''
The non-economic caps put a limit on what juries can award someone for such things as pain and suffering.
Numerous business groups have also signed onto court briefs, weighing in on the issue of premises liability and whether businesses are liable for injuries to customers.
This is how the Lymas lawsuit rose from obscurity. Lymas sued Double Quick Inc. after he was shot in 2007 while leaving a store in Belzoni, claiming the company didn't do enough to ensure the safety of its customers.
A jury awarded Lymas actual damages to cover things like medical costs and additional non-economic damages with the total coming to about $4 million. The judge in the case, however, lowered the non-economic damages to $1 million, which is the cap put into law by the Mississippi Legislature in 2004.
Lymas' attorneys are challenging the constitutionality of the limit. His attorneys had no comment when contacted Friday by The Associated Press.
The Magnolia Bar Association, a lawyer's group, filed a brief in support of Lymas, saying the Legislature's limit violated the Constitution's separation of powers by stepping into judiciary matters.
"Capping damages ... eviscerates trial by jury as it was understood when the constitutions of Mississippi and the United States were first adopted,'' the group argues.
Barbour also filed what is known as an amicus brief in the case, a legal tool that allows outside parties to show support in a case.
"Judicial repeal of the non-economic damages cap would have horrendous consequences for the State,'' Barbour argued. "Insurance premiums for Mississippi businesses and health care providers would dramatically increase due to the added uncertainty of exposure to outrageous awards.''
The limits on damages was adopted after years of contentious wrangling over tort reform in Mississippi. Doctors, businesses and medical groups had argued that the legal climate in Mississippi was untenable due to excessive awards. Plaintiffs attorneys and others claimed caps on damages further victimized people who had been wronged by negligence and denied them the compensation they deserved.
December 22, 2009
Before Mississippi lawmakers passed tort reform that limited damages in civil litigation, Ronnie Lee Lymas' lawsuit against the store where he was shot wouldn't have gotten much attention.
That's anything but true now: The case is being characterized as a test of Mississippi's tort reform laws -- hailed by business leaders and despised by plaintiffs attorneys -- and a showdown over so-called premises liability issues.
Lymas' lawsuit is now before the Mississippi Supreme Court, and those filing briefs in the case include the Mississippi attorney general's office, Gov. Haley Barbour and dozens of trade and business associations.
Barbour, a Republican who has championed tort reform, said in a news release that Mississippi was a "judicial hellhole'' before limits were placed in civil litigation and a ruling that overrides those laws would be devastating for the state.
Barbour filed a brief in the case asking the state Supreme Court to uphold a lower court's ruling that he said affirmed "the constitutionality of Mississippi's non-economic damage caps.''
The non-economic caps put a limit on what juries can award someone for such things as pain and suffering.
Numerous business groups have also signed onto court briefs, weighing in on the issue of premises liability and whether businesses are liable for injuries to customers.
This is how the Lymas lawsuit rose from obscurity. Lymas sued Double Quick Inc. after he was shot in 2007 while leaving a store in Belzoni, claiming the company didn't do enough to ensure the safety of its customers.
A jury awarded Lymas actual damages to cover things like medical costs and additional non-economic damages with the total coming to about $4 million. The judge in the case, however, lowered the non-economic damages to $1 million, which is the cap put into law by the Mississippi Legislature in 2004.
Lymas' attorneys are challenging the constitutionality of the limit. His attorneys had no comment when contacted Friday by The Associated Press.
The Magnolia Bar Association, a lawyer's group, filed a brief in support of Lymas, saying the Legislature's limit violated the Constitution's separation of powers by stepping into judiciary matters.
"Capping damages ... eviscerates trial by jury as it was understood when the constitutions of Mississippi and the United States were first adopted,'' the group argues.
Barbour also filed what is known as an amicus brief in the case, a legal tool that allows outside parties to show support in a case.
"Judicial repeal of the non-economic damages cap would have horrendous consequences for the State,'' Barbour argued. "Insurance premiums for Mississippi businesses and health care providers would dramatically increase due to the added uncertainty of exposure to outrageous awards.''
The limits on damages was adopted after years of contentious wrangling over tort reform in Mississippi. Doctors, businesses and medical groups had argued that the legal climate in Mississippi was untenable due to excessive awards. Plaintiffs attorneys and others claimed caps on damages further victimized people who had been wronged by negligence and denied them the compensation they deserved.
Insurance Not Triggered Because Pennsylvania Shooter was Drunk, Court Rules
Insurance Not Triggered Because Pennsylvania Shooter was Drunk, Court Rules
December 22, 2009
The U.S. Third Circuit Court of Appeals has ruled that a man’s drunkenness did not render his attempted shootings of a woman accidental and therefore did not trigger coverage under either his homeowners policy or his personal umbrella liability policy under Pennsylvania law.
The court sided with State Farm Fire & Casualty in denying coverage to Dr. Thomas Mehlman for his March 2005 attempted shootings of Maria Iacono. Iacono survived as the multiple shots fired at her by Mehlman all missed but Mehlman killed himself after the attempts. Iacono then sued Mehlman’s estate, which sought to have his insurance policies pay.
The appeals court concluded that despite Mehlman's intoxication, Iacono’s alleged injuries were not caused by an accident so there was not an “occurrence” under the homeowners policy or a “loss” under the umbrella policy. State Farm did not owe a duty to defend or indemnify Mehlman under either policy.
“Mehlman’s alleged actions demonstrate that he had an unmistakable intent to cause harm to Iacono. Damages resulting from a violent assault with a deadly weapon are exactly the type of injury against which insurance companies are not and should not be expected to insure,” the appeals court stated.
“Pennsylvania courts will not lightly allow an insured to avoid the financial repercussions of an act of violence by drinking himself into insurance coverage,” the court also wrote.
The case ended up on appeal because a district court had decided that while State Farm did not have a duty to defend or indemnify Mehlman’s estate under his homeowners policy, the insurer did have a duty to defend but not necessarily indemnify him under the personal umbrella policy. Both parties appealed.
Case History
On the afternoon of March 5, 2005, Mehlman left a restaurant in Edgemont, Pennsylvania, visibly intoxicated and cognitively impaired. He walked one and one-half miles to the residence of his girlfriend. Mehlman let himself in, and upon encountering the owner of the residence, Iacono, told her that he wanted to see his girlfriend but Iacono told him his girlfriend was in Colorado.
Mehlman became agitated and aggressive, threatening Iacono, and demanded to see his girlfriend. After Mehlman refused Iacono’s requests to leave, Iacono left the house and walked toward her car. Mehlman approached Iacono’s vehicle in a rage, raised his gun, aimed the weapon at Iacono’s head, and pulled the trigger, but the gun did not discharge.
Iacono attempted to flee, but her car stalled and then crashed it into a tree as she tried to drive away. Mehlman then jumped up on the front of Iacono’s car, aimed his gun at Iacono’s head through the front windshield, and pulled the trigger. The gun, however, again misfired.
Mehlman then approached the passenger side of Iacono’s car, attempted to break the window, and for a third time tried to shoot Iacono but the gun again misfired. When Iacono finally escaped and drove away, Mehlman fired at least one shot in the direction of her vehicle but he missed.
Mehlman returned to the residence. Later a SWAT team entered the residence and found Mehlman dead. A police report indicated that he died from a self-inflicted gunshot wound to his head. Mehlman’s blood-alcohol level at the time the police found his body was 0.21 percent.
Policy Language
Mehlman’s homeowners policy provided $500,000 in liability coverage “[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury . . . caused by an occurrence.” But the policy stated that “bodily injury does not include . . . emotional distress, mental anguish, humiliation, mental distress, mental injury, or any similar injury unless it arises out of actual physical injury to some person.”
The homeowners policy further limited coverage with an exclusion that stated that it does not provide coverage for bodily injury that is either expected or intended by the insured or is the result of “willful and malicious acts of the insured.”
Mehlman’s umbrella policy provided $1,000,000 in liability coverage if an insured is legally obligated to pay damages for a loss.” In a provision that parallels the homeowners policy, it excluded from its coverage personal injury “which is either expected or intended” by the insured, or which was a result of the insured’s “willful and malicious act, no matter at whom the act was directed.”
Iacono sued the Mehlman estate for intentional infliction of emotional distress; negligent infliction of emotional distress; assault with a firearm; and negligence. Mehlman’s estate demanded a defense and indemnification from State Farm under both policies.
State Farm sought a declaration that it did not owe a duty to defend or indemnify under either policy, while the lawyers for Mehlman’s estate and Iacono sought a declaration that State Farm owed those duties under both policies.
A district court concluded that State Farm did not have a duty to defend or indemnify under the homeowners policy because Iacono’s alleged injuries did not constitute “bodily injury” as defined in that policy, but that State Farm did have a duty to defend under the umbrella policy “at least until such time as the factual record can show that Mehlman’s purported state of intoxication did not negate any intent on his part.”
The appeals court noted that the plain language of both policies limited coverage to damage caused by an accident and examined Mehlman’s intent in deciding whether there was an accident so that there was a “loss” or “occurrence” for which there was coverage.
Whether something is an accident can depend on the degree of foreseeability and the state of mind of the actor in intending or not intending the result, according to the court. The Mehlman case centered on the question of whether Mehlman’s intoxication might have rendered conduct accidental even though it otherwise would be regarded as intentional.
While there may be situations in which an insured’s intoxication, particularly when combined with other factors, may call the insured’s intent into question, the court said Mehlman’s situation was not one of them. His actions demonstrated an “unmistakable intent to cause harm to Iacono,” the court found. The court noted that Mehlman intoxication did not keep him from walking one and one-half miles to Iacono’s residence. Also, his repeated attempts to shoot Iacono showed that he knew what he was doing.
“Unlike his gun, which was not functioning as it was intended to do when it misfired, Mehlman certainly was functioning precisely as he intended,” the court said.
By providing coverage only for damages caused by accidents, State Farm expressed its desire to exclude coverage for damages caused by a drunken insured’s violent assault, the court added.
In closing remarks, the court also addressed what is said is tension that arises in intoxication insurance coverage situations:
“On the one hand it is unfortunate that the denial of coverage is likely to deprive an innocent victim from obtaining compensation for her injuries but on the other hand the Pennsylvania cases make plain that it is against the policy of that state to provide insurance coverage for insureds intentionally committing wrongful acts intended to cause injury.
“Moreover, insurance companies are not eleemosynary institutions and thus courts cannot require them to provide coverage beyond the scope of the coverage in their contracts unless duly adopted legal requirements compel the companies to provide such coverage. There is no such legal requirement implicated here.”
December 22, 2009
The U.S. Third Circuit Court of Appeals has ruled that a man’s drunkenness did not render his attempted shootings of a woman accidental and therefore did not trigger coverage under either his homeowners policy or his personal umbrella liability policy under Pennsylvania law.
The court sided with State Farm Fire & Casualty in denying coverage to Dr. Thomas Mehlman for his March 2005 attempted shootings of Maria Iacono. Iacono survived as the multiple shots fired at her by Mehlman all missed but Mehlman killed himself after the attempts. Iacono then sued Mehlman’s estate, which sought to have his insurance policies pay.
The appeals court concluded that despite Mehlman's intoxication, Iacono’s alleged injuries were not caused by an accident so there was not an “occurrence” under the homeowners policy or a “loss” under the umbrella policy. State Farm did not owe a duty to defend or indemnify Mehlman under either policy.
“Mehlman’s alleged actions demonstrate that he had an unmistakable intent to cause harm to Iacono. Damages resulting from a violent assault with a deadly weapon are exactly the type of injury against which insurance companies are not and should not be expected to insure,” the appeals court stated.
“Pennsylvania courts will not lightly allow an insured to avoid the financial repercussions of an act of violence by drinking himself into insurance coverage,” the court also wrote.
The case ended up on appeal because a district court had decided that while State Farm did not have a duty to defend or indemnify Mehlman’s estate under his homeowners policy, the insurer did have a duty to defend but not necessarily indemnify him under the personal umbrella policy. Both parties appealed.
Case History
On the afternoon of March 5, 2005, Mehlman left a restaurant in Edgemont, Pennsylvania, visibly intoxicated and cognitively impaired. He walked one and one-half miles to the residence of his girlfriend. Mehlman let himself in, and upon encountering the owner of the residence, Iacono, told her that he wanted to see his girlfriend but Iacono told him his girlfriend was in Colorado.
Mehlman became agitated and aggressive, threatening Iacono, and demanded to see his girlfriend. After Mehlman refused Iacono’s requests to leave, Iacono left the house and walked toward her car. Mehlman approached Iacono’s vehicle in a rage, raised his gun, aimed the weapon at Iacono’s head, and pulled the trigger, but the gun did not discharge.
Iacono attempted to flee, but her car stalled and then crashed it into a tree as she tried to drive away. Mehlman then jumped up on the front of Iacono’s car, aimed his gun at Iacono’s head through the front windshield, and pulled the trigger. The gun, however, again misfired.
Mehlman then approached the passenger side of Iacono’s car, attempted to break the window, and for a third time tried to shoot Iacono but the gun again misfired. When Iacono finally escaped and drove away, Mehlman fired at least one shot in the direction of her vehicle but he missed.
Mehlman returned to the residence. Later a SWAT team entered the residence and found Mehlman dead. A police report indicated that he died from a self-inflicted gunshot wound to his head. Mehlman’s blood-alcohol level at the time the police found his body was 0.21 percent.
Policy Language
Mehlman’s homeowners policy provided $500,000 in liability coverage “[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury . . . caused by an occurrence.” But the policy stated that “bodily injury does not include . . . emotional distress, mental anguish, humiliation, mental distress, mental injury, or any similar injury unless it arises out of actual physical injury to some person.”
The homeowners policy further limited coverage with an exclusion that stated that it does not provide coverage for bodily injury that is either expected or intended by the insured or is the result of “willful and malicious acts of the insured.”
Mehlman’s umbrella policy provided $1,000,000 in liability coverage if an insured is legally obligated to pay damages for a loss.” In a provision that parallels the homeowners policy, it excluded from its coverage personal injury “which is either expected or intended” by the insured, or which was a result of the insured’s “willful and malicious act, no matter at whom the act was directed.”
Iacono sued the Mehlman estate for intentional infliction of emotional distress; negligent infliction of emotional distress; assault with a firearm; and negligence. Mehlman’s estate demanded a defense and indemnification from State Farm under both policies.
State Farm sought a declaration that it did not owe a duty to defend or indemnify under either policy, while the lawyers for Mehlman’s estate and Iacono sought a declaration that State Farm owed those duties under both policies.
A district court concluded that State Farm did not have a duty to defend or indemnify under the homeowners policy because Iacono’s alleged injuries did not constitute “bodily injury” as defined in that policy, but that State Farm did have a duty to defend under the umbrella policy “at least until such time as the factual record can show that Mehlman’s purported state of intoxication did not negate any intent on his part.”
The appeals court noted that the plain language of both policies limited coverage to damage caused by an accident and examined Mehlman’s intent in deciding whether there was an accident so that there was a “loss” or “occurrence” for which there was coverage.
Whether something is an accident can depend on the degree of foreseeability and the state of mind of the actor in intending or not intending the result, according to the court. The Mehlman case centered on the question of whether Mehlman’s intoxication might have rendered conduct accidental even though it otherwise would be regarded as intentional.
While there may be situations in which an insured’s intoxication, particularly when combined with other factors, may call the insured’s intent into question, the court said Mehlman’s situation was not one of them. His actions demonstrated an “unmistakable intent to cause harm to Iacono,” the court found. The court noted that Mehlman intoxication did not keep him from walking one and one-half miles to Iacono’s residence. Also, his repeated attempts to shoot Iacono showed that he knew what he was doing.
“Unlike his gun, which was not functioning as it was intended to do when it misfired, Mehlman certainly was functioning precisely as he intended,” the court said.
By providing coverage only for damages caused by accidents, State Farm expressed its desire to exclude coverage for damages caused by a drunken insured’s violent assault, the court added.
In closing remarks, the court also addressed what is said is tension that arises in intoxication insurance coverage situations:
“On the one hand it is unfortunate that the denial of coverage is likely to deprive an innocent victim from obtaining compensation for her injuries but on the other hand the Pennsylvania cases make plain that it is against the policy of that state to provide insurance coverage for insureds intentionally committing wrongful acts intended to cause injury.
“Moreover, insurance companies are not eleemosynary institutions and thus courts cannot require them to provide coverage beyond the scope of the coverage in their contracts unless duly adopted legal requirements compel the companies to provide such coverage. There is no such legal requirement implicated here.”
Wrap-Ups and Agent E&O Exposures
Essentials: Wrap-Ups and Agent E&O Exposures
By Steven PlittDecember 22, 2009
Insurance agents who write insurance coverage for subcontractors in the construction field need to be familiar with consolidated insurance programs (CIP). These type of programs are often labeled as "wrap-up" programs.
There are two types of CIPs that the agent must be generally familiar with. The first is an owner-controlled consolidated insurance plan (OCCIP). The second is a contractor-controlled consolidated insurance plan (CCCIP). These types of "wrap-up" programs bring together within one policy diverse entities working on a single construction project. Typical OCCIPs provide workers' compensation/employer's liability, general liability and builder's risk coverage.
This article will focus on the general liability coverage which is provided by the OCCIP and whether it is as broad as is needed to replace the subcontractor's existing liability policies for that project.
The most significant potential disadvantage of a wrap-up program is the potential gap in insurance coverage for client subcontractors. This is especially true because an increasing number of insurers are routinely using a wrap-up exclusion.
Typically, a project owner or general contractor will adopt a wrap-up program. A wrap-up can be used to control elements of risk on the project site through coordination among the property owner or developer, the construction manager (if utilized), the general contractor, and subcontractors. In some design build projects a wrap-up program may include architects and engineers. This is often seen when the entire project from its design plans up through final construction are administered by one entity.
It has been my experience that wrap-ups do not save subcontractors on insurance costs. The only concrete way to ensure adequate insurance coverage for the client subcontractor is when the insurance agent disregards the presence of the wrap-up program coverage and writes the subcontractor's coverage as if no wrap up existed. This approach foregoes the theoretical cost savings of an OCCIP in favor of practical risk management through standard liability insurance already covering the client.
When a wrap-up insurance program is adopted, the owner/developer and/or general contractor will require the contract participants to factor into their bids a reduction in price under the theory that the contracting participants are covered by the wrap-up insurance policy. Therefore, the contract participants are told to eliminate from their bid allocated insurance costs. In theory, the owner/developer and/or general contractor acquires the wrap-up through discount purchasing and also avoids contractor markups on insurance costs in the bidding process. However, insurance agents need to be cautious in meeting the risk protection needs of their client subcontractors when those clients will be participating in a wrap-up program.
Although a client subcontractor may try to not enroll in an OCCIP and instead rely on its own liability insurance for the project, most OCCIPs have mandatory enrollment requirements. That means that the agent is likely to be faced with a coordination of benefits question.
The agent's goal to analyze the wrap-up plan to determine if the coverage afforded is sufficient to replace the client subcontractors' existing coverage for that project is key. In reviewing the wrap-up the agent must determine the scope of subcontractor participation. In some wrap-up programs coverage may only include subcontractors with contract values over a specified amount. The client subcontractor may not be aware of this. Subcontractors that furnish both materials and installation through their own subcontractors may not qualify for coverage under the wrap-up because these subcontractors may be designated as material suppliers, which typically are not covered.
OCCIPs do not provide coverage for claims for off-site work. Therefore, it is important to understand your client's business. Does your client have a fabrication shop or infrastructure work on an adjacent site? Wrap-up coverage typically does not attach to the subcontractor's offsite operations, including offsite work and transportation. Wrap-up coverage does not provide coverage for post-completion onsite work as well, which may include warranty work. The offsite work that is incidental to the project is typically covered by the subcontractor's existing policies but will not be covered by most OCCIP programs. Therefore, the client subcontractor's existing general liability coverage must remain to some extent for that project.
If the agent attempts to parse the exposure in order to maximize any cost savings that have already been factored into the client subcontractor's bid, there is a real risk that there could be a gap of coverage. This could result in an errors and omissions claim for the agent if an uncovered exposure results in a claim. It is difficult for the agent to draw these fine lines in trying to secure the right scope of coverage for the client subcontractor in order to maximize insurance cost savings from participation in the OCCIP while simultaneously attempting to cover exposures without permitting gaps in necessary coverages.
The agent needs to know that the client subcontractor's participation in a typical OCCIP arrangement will not eliminate contractual indemnity owed by the client to the property owner/developer and general contractor. This indemnity obligation is a covered "insured contract" under a CGL policy. If an OCCIP exclusion is used, this indemnity obligation becomes an uncovered exposure. In many instances the construction contracts on smaller projects still contain requirements for individualized liability coverage and the subcontractor is required to name the owner/developer and general contractors. In this situation, the agent must make sure there is no OCCIP exclusion on the subcontractors policy.
In typical OCCIP situations the scope of insurance coverage is summarized in a "OCCIP Manual." This manual should be acquired by the insurance agent in those situations where the agent is going to permit OCCIP exclusions in the otherwise existing client subcontractor's separate insurance program. In those situations where the client subcontractor does not qualify for OCCIP participation, notify the client subcontractor's current insurer so that any OCCIP exclusion is rendered inoperable for that particular OCCIP controlled project.
The insurance agent should review the OCCIP coverage to determine whether it is as broad as the contractor's existing policies. As an example, not all OCCIP programs have umbrella liability coverage for enrolled contractors.In the typical contractor setting, individual contractors and tiers and subcontractors provide the general contractor with certificates of insurance in accordance with the contract insurance coverage requirements. However, actual coverage may be inadequate because the limits of the existing policies may have been depleted by claims that have been paid out regarding the subject project.
An OCCIP policy provides a "composite" aggregate that combines both operations losses and completed operations losses under one aggregate limit. Under this type of approach an OCCIP's policy limit may be exhausted by a single bodily injury claim during the construction operations phase. If this were to occur there would be no policy limits left available for other claims. Typically, what occurs is that an employee, who could not bring suit against his own employer due to worker's compensation exclusivity, will bring a suit against the project owner or general contractor for injuries sustained while working on the project. These type of claims become transferred back to the subcontractor due to the indemnity requirements of the construction contract and the "insured contract" coverage in the commercial general liability policy. This will not have the same effect in an OCCIP because there is only one policy for all of the contractors and it is the only policy that is available for accident settlements.
Brain injuries, wrongful deaths, paralysis, all common general types of serious accidents on work sites jeopardize coverage availability. Thus, the question must be asked as to whether a residential OCCIP has "adequate limits." The characteristics of each project may call for different OCCIP limits based upon type of construction, size of project, length of construction phases, the extent of construction (from demolition, conversion, seismic retrofitting, only exterior work), the number of projects that may be folded into the OCCIP, and the number of contractors named under the policy. The the greater the number of named insureds, the greater the potential for claims to erode the aggregate.
The marketplace is increasingly becoming populated with insurance companys offering wrap-up policies that have low aggregate limits, with some as low as $1 million. Allowing the client subcontractor's individual policy to be excess to the available OCCIP coverage solves this problem.
Although OCCIPs typically include completed operations coverage for losses, there is typically a specified time period limitation, i.e., two- to five-year tail after project completion. Therefore the contractor's exposure is likely to continue for a longer period of time. Thus, whenever possible, a contractor should endorse its own general liability policy to include any exposures beyond the OCCIP period.
At a minimum, the agent should remove from the client subcontractor policy any wrap-up exclusion endorsement from their client's CGL policy. It is best to get confirmation from the insurance company's underwriting department that the client subcontractor's individual coverage will be excess whenever the client is involved with an OCCIP project. This is required so that the CGL policy will apply as excess insurance coverage over the OCCIP provided policy.
Plitt is a licensed insurance agent and an attorney with the Phoenix law firm of Kunz Plitt Hyland Demlong & Kleifield practicing in the field of insurance law. Phone: 602-331-4600. His column, Essentials, appears from time to time on www.ClaimsJournal.com and http://www.insurancejournal.com/.
By Steven PlittDecember 22, 2009
Insurance agents who write insurance coverage for subcontractors in the construction field need to be familiar with consolidated insurance programs (CIP). These type of programs are often labeled as "wrap-up" programs.
There are two types of CIPs that the agent must be generally familiar with. The first is an owner-controlled consolidated insurance plan (OCCIP). The second is a contractor-controlled consolidated insurance plan (CCCIP). These types of "wrap-up" programs bring together within one policy diverse entities working on a single construction project. Typical OCCIPs provide workers' compensation/employer's liability, general liability and builder's risk coverage.
This article will focus on the general liability coverage which is provided by the OCCIP and whether it is as broad as is needed to replace the subcontractor's existing liability policies for that project.
The most significant potential disadvantage of a wrap-up program is the potential gap in insurance coverage for client subcontractors. This is especially true because an increasing number of insurers are routinely using a wrap-up exclusion.
Typically, a project owner or general contractor will adopt a wrap-up program. A wrap-up can be used to control elements of risk on the project site through coordination among the property owner or developer, the construction manager (if utilized), the general contractor, and subcontractors. In some design build projects a wrap-up program may include architects and engineers. This is often seen when the entire project from its design plans up through final construction are administered by one entity.
It has been my experience that wrap-ups do not save subcontractors on insurance costs. The only concrete way to ensure adequate insurance coverage for the client subcontractor is when the insurance agent disregards the presence of the wrap-up program coverage and writes the subcontractor's coverage as if no wrap up existed. This approach foregoes the theoretical cost savings of an OCCIP in favor of practical risk management through standard liability insurance already covering the client.
When a wrap-up insurance program is adopted, the owner/developer and/or general contractor will require the contract participants to factor into their bids a reduction in price under the theory that the contracting participants are covered by the wrap-up insurance policy. Therefore, the contract participants are told to eliminate from their bid allocated insurance costs. In theory, the owner/developer and/or general contractor acquires the wrap-up through discount purchasing and also avoids contractor markups on insurance costs in the bidding process. However, insurance agents need to be cautious in meeting the risk protection needs of their client subcontractors when those clients will be participating in a wrap-up program.
Although a client subcontractor may try to not enroll in an OCCIP and instead rely on its own liability insurance for the project, most OCCIPs have mandatory enrollment requirements. That means that the agent is likely to be faced with a coordination of benefits question.
The agent's goal to analyze the wrap-up plan to determine if the coverage afforded is sufficient to replace the client subcontractors' existing coverage for that project is key. In reviewing the wrap-up the agent must determine the scope of subcontractor participation. In some wrap-up programs coverage may only include subcontractors with contract values over a specified amount. The client subcontractor may not be aware of this. Subcontractors that furnish both materials and installation through their own subcontractors may not qualify for coverage under the wrap-up because these subcontractors may be designated as material suppliers, which typically are not covered.
OCCIPs do not provide coverage for claims for off-site work. Therefore, it is important to understand your client's business. Does your client have a fabrication shop or infrastructure work on an adjacent site? Wrap-up coverage typically does not attach to the subcontractor's offsite operations, including offsite work and transportation. Wrap-up coverage does not provide coverage for post-completion onsite work as well, which may include warranty work. The offsite work that is incidental to the project is typically covered by the subcontractor's existing policies but will not be covered by most OCCIP programs. Therefore, the client subcontractor's existing general liability coverage must remain to some extent for that project.
If the agent attempts to parse the exposure in order to maximize any cost savings that have already been factored into the client subcontractor's bid, there is a real risk that there could be a gap of coverage. This could result in an errors and omissions claim for the agent if an uncovered exposure results in a claim. It is difficult for the agent to draw these fine lines in trying to secure the right scope of coverage for the client subcontractor in order to maximize insurance cost savings from participation in the OCCIP while simultaneously attempting to cover exposures without permitting gaps in necessary coverages.
The agent needs to know that the client subcontractor's participation in a typical OCCIP arrangement will not eliminate contractual indemnity owed by the client to the property owner/developer and general contractor. This indemnity obligation is a covered "insured contract" under a CGL policy. If an OCCIP exclusion is used, this indemnity obligation becomes an uncovered exposure. In many instances the construction contracts on smaller projects still contain requirements for individualized liability coverage and the subcontractor is required to name the owner/developer and general contractors. In this situation, the agent must make sure there is no OCCIP exclusion on the subcontractors policy.
In typical OCCIP situations the scope of insurance coverage is summarized in a "OCCIP Manual." This manual should be acquired by the insurance agent in those situations where the agent is going to permit OCCIP exclusions in the otherwise existing client subcontractor's separate insurance program. In those situations where the client subcontractor does not qualify for OCCIP participation, notify the client subcontractor's current insurer so that any OCCIP exclusion is rendered inoperable for that particular OCCIP controlled project.
The insurance agent should review the OCCIP coverage to determine whether it is as broad as the contractor's existing policies. As an example, not all OCCIP programs have umbrella liability coverage for enrolled contractors.In the typical contractor setting, individual contractors and tiers and subcontractors provide the general contractor with certificates of insurance in accordance with the contract insurance coverage requirements. However, actual coverage may be inadequate because the limits of the existing policies may have been depleted by claims that have been paid out regarding the subject project.
An OCCIP policy provides a "composite" aggregate that combines both operations losses and completed operations losses under one aggregate limit. Under this type of approach an OCCIP's policy limit may be exhausted by a single bodily injury claim during the construction operations phase. If this were to occur there would be no policy limits left available for other claims. Typically, what occurs is that an employee, who could not bring suit against his own employer due to worker's compensation exclusivity, will bring a suit against the project owner or general contractor for injuries sustained while working on the project. These type of claims become transferred back to the subcontractor due to the indemnity requirements of the construction contract and the "insured contract" coverage in the commercial general liability policy. This will not have the same effect in an OCCIP because there is only one policy for all of the contractors and it is the only policy that is available for accident settlements.
Brain injuries, wrongful deaths, paralysis, all common general types of serious accidents on work sites jeopardize coverage availability. Thus, the question must be asked as to whether a residential OCCIP has "adequate limits." The characteristics of each project may call for different OCCIP limits based upon type of construction, size of project, length of construction phases, the extent of construction (from demolition, conversion, seismic retrofitting, only exterior work), the number of projects that may be folded into the OCCIP, and the number of contractors named under the policy. The the greater the number of named insureds, the greater the potential for claims to erode the aggregate.
The marketplace is increasingly becoming populated with insurance companys offering wrap-up policies that have low aggregate limits, with some as low as $1 million. Allowing the client subcontractor's individual policy to be excess to the available OCCIP coverage solves this problem.
Although OCCIPs typically include completed operations coverage for losses, there is typically a specified time period limitation, i.e., two- to five-year tail after project completion. Therefore the contractor's exposure is likely to continue for a longer period of time. Thus, whenever possible, a contractor should endorse its own general liability policy to include any exposures beyond the OCCIP period.
At a minimum, the agent should remove from the client subcontractor policy any wrap-up exclusion endorsement from their client's CGL policy. It is best to get confirmation from the insurance company's underwriting department that the client subcontractor's individual coverage will be excess whenever the client is involved with an OCCIP project. This is required so that the CGL policy will apply as excess insurance coverage over the OCCIP provided policy.
Plitt is a licensed insurance agent and an attorney with the Phoenix law firm of Kunz Plitt Hyland Demlong & Kleifield practicing in the field of insurance law. Phone: 602-331-4600. His column, Essentials, appears from time to time on www.ClaimsJournal.com and http://www.insurancejournal.com/.
7 Wonders of Insurance History
By Christopher J. Boggs, CPCU, ARM, ALCM
December 22, 2009
What events have shaped the modern insurance landscape? Which ideas, innovations and accidents stand out as landmarks in the development and growth of this most important industry known as insurance? Following is one man’s opinion of the seven wonders of insurance history to this point.
1. Lloyd’s of London.
Although the first informal gatherings of shippers and investors in 1688 were not intended to produce an insurance mechanism; Edward Lloyd’s coffeehouse on London’s Tower Street witnessed the first days of what has become the world’s best known insurance underwriting society. The first official committee of subscribers did not meet until 1771. The first 100 years of Lloyd’s were somewhat “unofficial,” operating on trust among the insureds and the underwriters. Lloyd’s of London is a pilgrimage site for all insurance geeks.
2. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.
Founded by Benjamin Franklin and several prominent business associates in 1752, The Contributorship, as it is now commonly called, was a proactive insurance carrier refusing to provide coverage to houses and other structures that were not constructed according to strict building standards. During the British occupation of Philadelphia in 1777, The Contributorship hired a chimney sweep to maintain the chimneys of insured houses that were still occupied. This was one of the first insurance carriers to enact loss control standards.
3. Workers’ Compensation.
Prior to workers’ compensation laws, workers injured on the job had to seek recovery through the court system. To gain recovery, they had to prove their employer was negligent in causing the injury. Many did not have the funds to wage this fight leaving injured workers without income and somewhat destitute. America did not attempt to enjoin the workers' compensation social revolution in the early 1900s. Maryland (1902), Massachusetts (1908), Montana (1909) and New York (1910) each introduced workers’ compensation statutes. All four laws were struck down under constitutional challenge as violating "due process."
Wisconsin in May 1911 became the first state to effectuate an ongoing workers' compensation program that survived legal challenges. Nine more states adopted workers' compensation laws before the close of 1911. By the end of 1920, 42 states plus Alaska and Hawaii (even though statehood didn't come for either until 1959) enacted workers' compensation statutes. Mississippi was the last state to implement a workers' compensation statute, waiting until 1948.
(Taken from, “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit”)
4. The New York Standard Fire Policy.
This 165-line document became the basis for nearly all modern property insurance contracts and in many (approximately 26) states it is still attached or referenced in all property policies or statute. Although first adopted in 1918, any current mention of this policy is a reference to the 1943 edition.
5. National Flood Insurance Program.
Federal flood insurance was proposed as early as the mid-to-late 1930’s, when private insurers ceased offering flood coverage; but it wasn’t until the National Flood Insurance Act of 1968 was signed into law that federal flood insurance became a reality in the form of the National Flood Insurance Program (NFIP). Although signed into law in 1968, necessary funding was not provided to carry out the mandates of the program until the early 1970’s. Although troubled by charges of inadequate or incorrect rating information and heavily subsidized rates, creation of the flood policy was an important milestone in insurance history.
6. Creation of Insurance Services Office (ISO) and American Association of Insurance Services (AAIS).
Insurance Services Office (ISO) was founded and created in 1971 by a merger between the Mutual Insurance Rating Bureau and the Insurance Rating Bureau (known as the National Bureau of Casualty Underwriters until 1968). ISO provides statistical and actuarial services, rating information, claims data, standardized policy language and other relevant industry data. It has one of the largest databases in the world and by far the largest insurance-related databases.
American Association of Insurance Services (AAIS) was organized in 1975 as a multiline property/ casualty advisory organization and as a licensed statistical agent. AAIS is the successor organization of the former Transportation Insurance Rating Bureau, a Chicago-based inland marine rating bureau formed from the merger of two smaller bureaus founded in the 1930s. AAIS promulgates, files and maintains on behalf of its more than 600 member companies forms, rules and rating information for more than 20 lines of personal and commercial insurance.
These two organizations are largely responsible for the standardization enjoyed in the industry today. Although their forms and rates (loss costs) may be considered advisory, they are considered the standards on which proprietary forms and rates are based.
7. The Businessowners’ Policy (BOP).
First introduced in 1976, this was the first time commercial risks were offered property and liability coverage in the same form without the need to piecemeal the parts together in a package.
Not much innovation has occurred within the standard insurance market since the mid-1970’s. Most of the changes since the introduction of the BOP have simply been updates to the coverages and forms currently available. There has been some innovation in captives, delivery systems and other minor areas, but nothing that has altered the way most agents do business or the business itself.
As mentioned in the first paragraph, this is one person’s opinion; if there are other modern insurance history milestones you feel should be considered as one of the top seven, please submit them. The list may be altered once all opinions are heard.
December 22, 2009
What events have shaped the modern insurance landscape? Which ideas, innovations and accidents stand out as landmarks in the development and growth of this most important industry known as insurance? Following is one man’s opinion of the seven wonders of insurance history to this point.
1. Lloyd’s of London.
Although the first informal gatherings of shippers and investors in 1688 were not intended to produce an insurance mechanism; Edward Lloyd’s coffeehouse on London’s Tower Street witnessed the first days of what has become the world’s best known insurance underwriting society. The first official committee of subscribers did not meet until 1771. The first 100 years of Lloyd’s were somewhat “unofficial,” operating on trust among the insureds and the underwriters. Lloyd’s of London is a pilgrimage site for all insurance geeks.
2. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.
Founded by Benjamin Franklin and several prominent business associates in 1752, The Contributorship, as it is now commonly called, was a proactive insurance carrier refusing to provide coverage to houses and other structures that were not constructed according to strict building standards. During the British occupation of Philadelphia in 1777, The Contributorship hired a chimney sweep to maintain the chimneys of insured houses that were still occupied. This was one of the first insurance carriers to enact loss control standards.
3. Workers’ Compensation.
Prior to workers’ compensation laws, workers injured on the job had to seek recovery through the court system. To gain recovery, they had to prove their employer was negligent in causing the injury. Many did not have the funds to wage this fight leaving injured workers without income and somewhat destitute. America did not attempt to enjoin the workers' compensation social revolution in the early 1900s. Maryland (1902), Massachusetts (1908), Montana (1909) and New York (1910) each introduced workers’ compensation statutes. All four laws were struck down under constitutional challenge as violating "due process."
Wisconsin in May 1911 became the first state to effectuate an ongoing workers' compensation program that survived legal challenges. Nine more states adopted workers' compensation laws before the close of 1911. By the end of 1920, 42 states plus Alaska and Hawaii (even though statehood didn't come for either until 1959) enacted workers' compensation statutes. Mississippi was the last state to implement a workers' compensation statute, waiting until 1948.
(Taken from, “The Insurance Professional’s Practical Guide to Workers’ Compensation: From History through Audit”)
4. The New York Standard Fire Policy.
This 165-line document became the basis for nearly all modern property insurance contracts and in many (approximately 26) states it is still attached or referenced in all property policies or statute. Although first adopted in 1918, any current mention of this policy is a reference to the 1943 edition.
5. National Flood Insurance Program.
Federal flood insurance was proposed as early as the mid-to-late 1930’s, when private insurers ceased offering flood coverage; but it wasn’t until the National Flood Insurance Act of 1968 was signed into law that federal flood insurance became a reality in the form of the National Flood Insurance Program (NFIP). Although signed into law in 1968, necessary funding was not provided to carry out the mandates of the program until the early 1970’s. Although troubled by charges of inadequate or incorrect rating information and heavily subsidized rates, creation of the flood policy was an important milestone in insurance history.
6. Creation of Insurance Services Office (ISO) and American Association of Insurance Services (AAIS).
Insurance Services Office (ISO) was founded and created in 1971 by a merger between the Mutual Insurance Rating Bureau and the Insurance Rating Bureau (known as the National Bureau of Casualty Underwriters until 1968). ISO provides statistical and actuarial services, rating information, claims data, standardized policy language and other relevant industry data. It has one of the largest databases in the world and by far the largest insurance-related databases.
American Association of Insurance Services (AAIS) was organized in 1975 as a multiline property/ casualty advisory organization and as a licensed statistical agent. AAIS is the successor organization of the former Transportation Insurance Rating Bureau, a Chicago-based inland marine rating bureau formed from the merger of two smaller bureaus founded in the 1930s. AAIS promulgates, files and maintains on behalf of its more than 600 member companies forms, rules and rating information for more than 20 lines of personal and commercial insurance.
These two organizations are largely responsible for the standardization enjoyed in the industry today. Although their forms and rates (loss costs) may be considered advisory, they are considered the standards on which proprietary forms and rates are based.
7. The Businessowners’ Policy (BOP).
First introduced in 1976, this was the first time commercial risks were offered property and liability coverage in the same form without the need to piecemeal the parts together in a package.
Not much innovation has occurred within the standard insurance market since the mid-1970’s. Most of the changes since the introduction of the BOP have simply been updates to the coverages and forms currently available. There has been some innovation in captives, delivery systems and other minor areas, but nothing that has altered the way most agents do business or the business itself.
As mentioned in the first paragraph, this is one person’s opinion; if there are other modern insurance history milestones you feel should be considered as one of the top seven, please submit them. The list may be altered once all opinions are heard.
Homeowner Insurance Claimants Less Satisfied Than Auto Claimants
December 23, 2009
Homeowners insurance customers who file a property claim are much less satisfied with their claims experience than auto claimants, according to a new study.
The satisfaction level of homeowners claimants is significantly lower than that of auto claimants, says J.D. Power and Associates 2009 Home Claims Satisfaction Study. The study finds that customer satisfaction with the home claims experience averages 828 on a 1,000-point scale. In comparison, satisfaction with the auto claims experience averages 842, according to the J.D. Power and Associates 2009 Auto Claims Satisfaction Study released in November.
“Home claims are typically far more complex than auto claims, and homeowners insurance claimants tend to have less knowledge of the specifics of their policy coverage than do auto claimants,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Although satisfying home claimants is particularly challenging, it’s still crucial for insurance providers to meet the needs of these customers, given the significant impact the experience has on long-term policy retention.”
The study also finds that higher levels of satisfaction with the home claims experience have a positive impact on customer loyalty and advocacy. Among customers of insurers that achieve high satisfaction scores (averaging 837 or higher), two-thirds say they “definitely will” renew their policy, while 64 percent say they “definitely will” recommend the insurer. In contrast, among customers of insurers with lower levels of satisfaction (scores averaging 816 or below), only 49 percent say they “definitely will” renew and 42 percent say they “definitely will” recommend the insurer.
“While only about 6 percent of homeowners insurance customers per year file a home claim, for those who do, no other aspect of the experience with their insurer is more meaningful,” said Bowler. “An experience that meets or exceeds customer expectations may foster long-term loyalty, just as a negative experience may drive a customer to shop other insurance companies.”
In particular, insurers have the opportunity to improve customer satisfaction during the first notice of loss and settlement portions of the claims process. During the first notice of loss process, fewer than three-fourths of home claimants indicate that the insurer provided an explanation of their policy coverage, compared with 81 percent of auto claimants.
During the settlement process, claimants’ lack of understanding regarding their policy coverage often leads to negotiated settlements. Twenty-two percent of home claimants report negotiating the settlement amount, while just 11 percent of auto claimants say the same.
“The negotiation process tends to be difficult and stressful and often leads most customers to become dissatisfied with their claims experience,” said Bowler. “On average, satisfaction among home claimants who negotiate their settlement is 117 points lower than among those who didn’t negotiate. By thoroughly explaining the limitations of the policy coverage and fully managing customer expectations, insurance companies may be able to lower the number of negotiations and improve claimant satisfaction considerably.”
The 2009 Home Claims Satisfaction Study measures insurance customer satisfaction with the property claims experience by examining five factors: settlement; first notice of loss; appraisal; service interaction; and repair process. The study is based on surveys from 2,500 insurance customers nationally who filed a property claim between January 2008 and July 2009 and evaluates 11 insurance companies across the industry, including: Allstate; American Family; Amica Mutual; Farmers; Liberty Mutual; Nationwide; Safeco; State Farm; The Hartford; Travelers; and USAA. The study was fielded in July and August 2009.
Source: J.D. Power and Associates
Homeowners insurance customers who file a property claim are much less satisfied with their claims experience than auto claimants, according to a new study.
The satisfaction level of homeowners claimants is significantly lower than that of auto claimants, says J.D. Power and Associates 2009 Home Claims Satisfaction Study. The study finds that customer satisfaction with the home claims experience averages 828 on a 1,000-point scale. In comparison, satisfaction with the auto claims experience averages 842, according to the J.D. Power and Associates 2009 Auto Claims Satisfaction Study released in November.
“Home claims are typically far more complex than auto claims, and homeowners insurance claimants tend to have less knowledge of the specifics of their policy coverage than do auto claimants,” said Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates. “Although satisfying home claimants is particularly challenging, it’s still crucial for insurance providers to meet the needs of these customers, given the significant impact the experience has on long-term policy retention.”
The study also finds that higher levels of satisfaction with the home claims experience have a positive impact on customer loyalty and advocacy. Among customers of insurers that achieve high satisfaction scores (averaging 837 or higher), two-thirds say they “definitely will” renew their policy, while 64 percent say they “definitely will” recommend the insurer. In contrast, among customers of insurers with lower levels of satisfaction (scores averaging 816 or below), only 49 percent say they “definitely will” renew and 42 percent say they “definitely will” recommend the insurer.
“While only about 6 percent of homeowners insurance customers per year file a home claim, for those who do, no other aspect of the experience with their insurer is more meaningful,” said Bowler. “An experience that meets or exceeds customer expectations may foster long-term loyalty, just as a negative experience may drive a customer to shop other insurance companies.”
In particular, insurers have the opportunity to improve customer satisfaction during the first notice of loss and settlement portions of the claims process. During the first notice of loss process, fewer than three-fourths of home claimants indicate that the insurer provided an explanation of their policy coverage, compared with 81 percent of auto claimants.
During the settlement process, claimants’ lack of understanding regarding their policy coverage often leads to negotiated settlements. Twenty-two percent of home claimants report negotiating the settlement amount, while just 11 percent of auto claimants say the same.
“The negotiation process tends to be difficult and stressful and often leads most customers to become dissatisfied with their claims experience,” said Bowler. “On average, satisfaction among home claimants who negotiate their settlement is 117 points lower than among those who didn’t negotiate. By thoroughly explaining the limitations of the policy coverage and fully managing customer expectations, insurance companies may be able to lower the number of negotiations and improve claimant satisfaction considerably.”
The 2009 Home Claims Satisfaction Study measures insurance customer satisfaction with the property claims experience by examining five factors: settlement; first notice of loss; appraisal; service interaction; and repair process. The study is based on surveys from 2,500 insurance customers nationally who filed a property claim between January 2008 and July 2009 and evaluates 11 insurance companies across the industry, including: Allstate; American Family; Amica Mutual; Farmers; Liberty Mutual; Nationwide; Safeco; State Farm; The Hartford; Travelers; and USAA. The study was fielded in July and August 2009.
Source: J.D. Power and Associates
피드 구독하기:
글 (Atom)