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What is a Primary and Non-Contributory Endorsement?

What is a Primary and Non-Contributory Endorsement?

Contingent on the business, a primary and noncontributory endorsement can be an important part of an insurance policy. Credible businesses who understand the value of proper insurance coverage may want to require the parties they do business with to have insurance that includes them as an additional insured on a primary and non-contributory basis.

In order to truly recognize the importance of the primary and noncontributory endorsement, we must break down and analyze the terms "primary" and "noncontributory" separately.


Primary:

When an insurance policy is considered “primary” it will pay out first in the event of a loss. If there are two policies covering the same risk, the policy deemed “primary” will pay out its limit before the secondary policy and is responsible for the defense costs until liability is determined. This is important because if there is a claim, you want to the other party’s insurance to pay out first if there is a loss as well as pick up the defense costs.

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Noncontributory:

When and insurance policy is considered “noncontributory” the insurance carrier issuing the policy will not seek contribution from an additional insured if it pays out a loss.

For example, ABC general contractor needs some help constructing a building and hires XYZ subcontractor.  XYZ names ABC as an additional insured on a primary and non-contributory basis. If a claim arises and XYZ’s insurance company pays out, the noncontributory endorsement prevents them from seeking contribution for the loss from ABC. 

This is important because if the other party’s insurance pays out a claim, you don’t want their insurance carrier coming after you after claiming you were partially at fault and should responsible for contributing to the loss.


Primary & Noncontributory Endorsement (CG 20 01):

If you are named as an additional insured on a policy containing a "primary and noncontributory" endorsement, that policy will generally pay out first, cover the defense costs associated with the claim and be estopped from seeking contribution from you.  This endorsement is ideal for general contractors because it helps transfer the risk associated from the negligence of one of its subcontractors.

To learn more about primary & contributory coverage or proper risk transfer in general, contact us to set up a review of your insurance.


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

7 Tips for Managing Certificates of Insurance

7 Tips for Managing Certificates of Insurance

For those who do not know, a certificate of insurance ("COIs") is a document, which summarizes an insured’s coverage as it pertains to a particular risk. More often than not, COIs are issued to third parties who require evidence that proper coverage is in place. If handled irresponsibly, Certificates of Insurance COIs can be a cumbersome issue for your business. Here are 7 tips for managing certificates of insurance:


1. Get it from the broker:

Did you know an insured is prohibited by law to issue its own COI? In order for a COI to legally be issued it needs to come from a licensed insurance broker. To avoid any issues, ask an insured’s broker for a COI directly.

2. Set specific and concise requirements for EVERY risk:

There is no such thing as a universal insurance policy for every risk you encounter, determine the specific coverages necessary to ask for in the COI. Developing insurance guidelines specific to each risk you manage is the best way to ensure proper coverage. 

3. Don’t be afraid to voice your concerns:

At the end of the day, you are responsible for protecting the well-being of your business. If you sense or recognize an insured’s COI is not compliant with your requirements say something. Even if you are wrong, developing the habit of questioning and understanding the coverages listed in a COI will pay dividends for you in the future.

4. Create a system for managing COIs:

This may not be the most exciting part of your day but it will save you from misery in the future. Creating an internal system for managing and overseeing COI is a great way to reduce the risk of improper coverage.

5. Don’t Jump The Gun:

No matter how urgent it is to begin working a job, it is not worth risking the livelihood of your business. All too often businesses permit vendors to begin working on a job without reviewing and approving their COIs. You may get away with this once or twice, however, this bad habit can and will lead to issues moving forward. 

6. Record and Respect the Expiration Date:

One of the first pieces of data to extract from a COI is the expiration date of the policies listed. Ask yourself, what if the insured’s coverage expires in the middle of the project? Record and monitor the expiration dates for all policies listed on the COIs and make sure to follow-up for renewals. 

7. Outsourcing:

Depending on the size of your business, you may not be able to handle a comprehensive system for managing COIs internally. A common alternative is to outsource the responsibility of managing your COIs to your insurance broker. Skyline Risk Management, Inc. can oversee and manage your COIs for you. 

If you have specific questions about how you can manage your COIs, contact Skyline Risk Management, Inc. at (718) 267-6600 for more information. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Commercial General Liability and the Prior Work Exclusion

Commercial General Liability and the Prior Work Exclusion

What is a policy exclusion?

A policy exclusion is anything specifically not covered by your insurance policy. Every insurance policy has a designated section called “Exclusions”. The purpose of an exclusion is to limit coverages appropriately. Some policies offer coverage for certain risks for which the insured may not need coverage. Exclusions serve to limit excess coverages and often help reduce the cost of insurance.

What is a Commercial General Liability (CGL) policy?

Commercial General Liability (CGL) policies are commonly referred to as General Liability (GL) policies and cover a business for liability against bodily injury (BI) and property damage (PD). CGL policies cover claims, which occur on the premises, or from operations, product and completed operations, and/or advertising personal injury (PI) liability.

Commercial General Liability Exclusions:

Excluding certain coverages from your CGL policy is not a bad thing. Of course the more coverage you have the better protected you are, however, excess coverage for risks that are outside the regular scope of operations may be deemed unnecessary. A big reason why policyholders elect to include calculated exclusions is to remove unnecessary coverages for a reduced premium. On the flip side, carriers commonly issue exclusions for certain risks they are not willing to insure against.

The Prior Work Exclusion:

A popular CGL exclusion carriers request is the Prior Work Exclusion. For example, Paul is a contractor and carries a CGL policy with ABC company effective from January 1st, 2016 to December 31st, 2017. All throughout 2016, Paul is working and completing various jobs.

At the end of 2016, Paul is approached by XYZ insurance carrier offering the same coverages as ABC carrier but at a much more affordable premium. However, XYZ carrier’s policy includes something call a prior work exclusion. Not knowing the significance of the prior work exclusion Paul cancels his policy with ABC carrier and binds with XYZ carrier. Paul believes he made a wise decision because he has the same coverage limits he had with ABC carrier but at a more affordable rate. 

Four months later Paul gets a phone call from one of the clients he performed work for during 2016. The client informs Paul that one of the walls Paul built in the client's office unexpectedly cracked and fell down during the middle of the work day. The felled wall caused significant property damage and bodily injury to one of the client’s employees. The client is not happy and plans to sue Paul for damages. 

Paul calls XYZ carrier to submit the claim. XYZ carrier denies Paul’s coverage because of the prior work exclusion, which clearly states no work that was performed before the effective date of the new policy is covered. Paul now realizes that the prior work exclusion leaves him vulnerable to any and all work he completed prior to the effective date of his policy.

The Lesson Learned:

If you take away anything from this article, understand that exclusions can have a major impact on the quality of a policy. Do not take exclusions lightly and do not underestimate their importance. On the other hand, do not be afraid of exclusions either as some exclusions are okay when coverage is deemed excess and/or unnecessary. The best person to help you make these decisions is your insurance broker. A good broker will be able to identify these potential issues and will recommend alternative coverages to fit the unique needs of your business. 


THE SKYLINE DIFFERENCE

Other brokerages take a cookie cutter approach to insurance and outfit their customers with generic coverage.  Skyline is different.  We believe insurance should be built on innovation and experience. We appreciate the fact that every engagement is unique and understand proper coverage requires a deep understanding of the underlying business and individual.

"The opportunity to safeguard your concerns is a privilege we never take for granted."

Actual Cash Value (ACV) Vs. Replacement Cost Value (RCV)

Actual Cash Value (ACV) Vs. Replacement Cost Value (RCV)

Buying items is simple. Selling things is a little more difficult, but still fairly straightforward. As long as humans have been around, we’ve been giving value to certain items, whether it be monetarily or otherwise. “How much does it cost?” isn’t that complex of a question – until it is.

So when it pricing complex? Pricing becomes a problem when claims adjusters get involved. Finding a definitive price for an item not on the market, after depreciation, and so forth is an art form. Well, more like a science. So how do claims adjusters find the true or definitive price of an item?


The Basics

Enter actual cash value (ACV) and replacement cost value (RCV). Actual cash value is the cost to replace an item minus depreciation. Replacement cost value is the cost to replace the asset at the full present value.

While these concepts may seem straightforward, things can get complex quickly. Adjusters not only need to decide on the value of an item, but there are also numerous local and state laws that can impact how ACV and RCV are calculated.


Diving Into Differences

Each state tends to handle ACV and RCV a bit differently. For instance, California includes an interesting tidbit in their legislation regarding these issues. In California:

“Actual cash value is the amount it would cost the insured to repair, rebuild, or replace the item lost or injured less a fair and reasonable deduction for physical depreciation based on its condition at the time of the loss.”

While seemingly fair, this leaves pre-loss condition in a tough situation. Many adjusters have found themselves between a rock and a hard place due to this law. Often, it can be difficult to determine what an item actually is – much less its exact condition at the time of the loss.


Unique or Obsolete

Furthering confusing things, an adjuster has to work with obsolete and unique items. Not even item loss will be easily purchased on Amazon.com. No, there will be a variety of items that hold a unique value for the owner. Many of these items will be tough to find pricing for.

 This Honus Wagner baseball card sold for 2.1 Million in 2013

This Honus Wagner baseball card sold for 2.1 Million in 2013

As an adjuster, understanding that one man’s trash could equate to another’s treasure is paramount when dealing with these unique cases. When dealing with these cases, communication is key. The adjuster must work to understand the insured and what he or she places value on. You need to understand the insured and the item before placing a value on it.

When dealing with these items, begin by understanding what exactly the item is, how it was used, and if the insured still values it. Many times, an adjuster will need to dig deep and do some research before giving value to a unique or obsolete item.

If an adjuster is struggling to price an item properly, try:

  • Consulting experts in the field. Look for a certified consultant who can help you give value to a unique, obsolete, or high-priced item. Always verify these individuals’ credentials.
  • Use the Internet. While Internet pricing isn’t the most accurate, you’ll often be able to gather a working knowledge of the item and its value by going online.

Overall, the best way to determine value for an obsolete or unique item is to find a similar item already on the market. Finding a similar kind and like item can ensure fair pricing and valuation for both parties.


Understanding Antiques

Antique items open a whole other bag of worms for adjusters. Not every item that is older is considered a valuable antique. Most items are required to be a certain age and origin to qualify. A minimum of 100 years old is required for an item to be “antique” from an insurance perspective. Adjusters should handle antique items in a similar manner to obsolete and unique items.


Actual Cash Value Vs. Replacement Cost Value

Overall, understanding the actual cash value versus the replacement cost value isn’t that complex. Most homeowners will benefit from RCV more than ACV when an adjuster is looking into their claim. How a state handles these cases and individual policies will go a long way in determining how the claim is calculated.

For more information about Actual Cash Value (ACV) vs. Replacement Cast Value (RCV) contact Skyline Risk Management, Inc. at (718) 267-6600

Additional Insured Coverage Confirmed Limited to Contractual Privity in New York

Additional Insured Coverage Confirmed Limited to Contractual Privity in New York

The New York Supreme Court, Appellate Division, First Department decided that additional insured endorsement only provided additional insured coverage to an entity in direct contractual privity with the named insured. The decision reinforces the New York law, which controls policy language entitlement to added insured coverage.


Why the Confirmation?

The New York Supreme Court was forced to confirm this law due to a recent case. Brought to heed on Sept. 15, 2016, the case involved the Dormitory Authority of New York (DASNY), Gilbane Building Co. /TDX Construction Corp (a joint venture, or JV)., and Sampson Construction Company.

The contract between DASNY and the JV stated that all prime contractors retained by DASNY were to name the construction manager as an additional insured under the liability policies. This was a requirement.

Next, DASNY contracted with Sampson to retain its services as a prime contractor in all foundation and excavation labor. In this contract, Sampson agreed to name the construction manager as an additional insured on its commercial general liability policy. The company then purchases a commercial general liability insurance plan from Liberty Insurance.

The policy Sampson procured from Liberty contained the following information about additional insured endorsements:

WHO IS AN INSURED: (Section II) is amended to include as an insured any person or organization with whom you have agreed to add as an additional insured by written contract, but only with respect to liability arising out of your operations or premises owned by or rented to you.

Moving forward – the work Sampson did on the job site allegedly created property damage to the building adjacent. Thus, DASNY filed suit against Sampson and the architect. Then the architect bought a suit against the JV, too. The JV then sought coverage under the Liberty policy that Sampson procured for the DASNY contract as additional insured.

Liberty denied coverage. So the defendants opened a declaratory judgment action against Liberty. Then Liberty made a play for a summary judgment, claiming that additional summary judgment would require some direct contractual privity with the named insured, Sampson.

The court then denied Liberty’s motion on the basis that the policy only required a written contract in which Sampson is a party. This requirement was satisfied when DASNY and Sampson entered a contract. However, this was overturned on appeal based on the additional insured endorsement.

While the Sampson and DASNY contract was evidence that Sampson agreed to provide coverage, the court ruled that this has no impact on the coverage Liberty agreed to provide them. This opened the door for the JV to pursue Sampson on a breach of contract clause, as a third-party beneficiary.


Nothing Has Changed

The concept that New York courts read closely regarding additional insured endorsements determined whether privity was required is nothing new. The Gilbane Court relied on numerous prior decisions with similar language, including:

AB Green Gansevoort, LLC v. Peter Scalamandre & Sons, Inc., 102 A.D.3d 425, 961 N.Y.S.2d 3 (1st Dep’t 2013) (requiring contractual privity where additional insured endorsement stated that “an organization is added as an additional insured ‘when you and such organization have agreed in writing in a contract or agreement that such organization be added as an additional insured on your policy.’”); Linarello v. City Univ. of New York, 6 A.D.3d 192, 774 N.Y.S.2d 517 (1st Dep’t 2004) (same). See also Zoological Soc. of Buffalo, Inc. v. Carvedrock, LLC, No. 10-CV-35-A, 2014 WL 3748545 (W.D.N.Y. July 29, 2014) (requiring contractual privity where additional insured endorsement afforded coverage to “[a]ny person or organization with whom you have agreed, in a written contract, that such person or organization should be added as an insured on your policy, provided such written contract is fully executed prior to the ‘occurrence’ in which coverage is sought under this policy.”)

The JV and courts attempted to distinguish the language in each policy, but the Gilbane Court clearly stated that privity between named insured and additional insured is required. 

For more information about Additional Insured Coverage, contact Skyline Risk Management, Inc. at (718) 267-6600

Top 5 Reasons for Contractors to Consider Environmental Insurance

Top 5 Reasons for Contractors to Consider Environmental Insurance

Most construction contractors are acutely aware of their need for General Liability, Workers' Compensation, and Inland Marine insurance. Rarely will a construction contractor even consider that their company may be tied up in court for performing work that damaged the environment, but it happens, and it happens more frequently than you would imagine.


The U.S. Environmental Protection Agency has determined that contractors working in the construction industry have a significantly high potential for contributing to environmental damages. The EPA considers general contractors, subcontractors, engineers, and architects as the group of usual suspects when it comes to environmental pollution and the resulting damages pollution causes. 

Unfortunately, only a small percentage of active contractors recognize the significant risk of environmental claims that can result from their activities because claim activity is something they pay little attention to until if affects their livelihood.


Environmental Example:

XYZ Grading Services was hired to excavate some trenches on the perimeter of a residential construction project. The soil that was excavated was temporarily piled up on a nearby vacant industrial property. When the excavated trenches were backfilled by the contractor, the excess soil was spread across the construction site and used for grading purposes.

Not long following the completion of the construction project, dioxin was found in other soil at the industrial site where the excavated soil was temporarily stored. After further testing, dioxin was also found in the soil that was spread around the residential construction project. After EPA testing had been completed, it was determined that the contamination had also seeped from the surface into a water supply.

A number of parties to the project were found liable for the pollution which included the XYZ Grading Services and became responsible for a multimillion-dollar cleanup. XYZ Grading Services, a family owned business that had survived for three generations, no longer exists.


Important Reasons for Consideration

Certainly, a typical environmental pollution case should motivate contractors to consider environmental insurance, but if not, consider the following reasons below:

1.      Most General Liability and Professional Liability policies exclude coverage for pollution claims.

2.      Spills of toxic chemicals that are stored and used at job sites such as solvents, finishers, and fuel can lead to a pollution claim.

3.      Exposure resulting from hazardous materials such as fiberglass, asbestos, lead paint, and mercury that is not properly disposed of.

4.      Storm water run-off from project sites due to lack of a safe drainage strategy.

5.      Inadvertently puncturing an underground pipeline or storage tank that causes the release of hazardous materials.

All of the episodes listed above can affect General Contractors and subcontractors as well. Any contractor or subcontractor that becomes a party to a project can be held directly or indirectly responsible for a pollution claim and the significant costs of remediation.


Environmental Insurance Coverage

Fortunately for construction-related contractors, there is a stand-alone Environmental Insurance product that can provide financial protection for defense costs, settlement agreements, and judgments awarded by the court.

Typically, Environmental Insurance Coverage will provide several coverage options:

  • Can be purchased on a claims-made or occurrence basis.
  • Will provide coverage for third-party claims of bodily injury or property damage and environmental damage that results in remediation costs.
  • Can be site-specific for properties owned by the contractor.
  • Coverage for storage and staging of equipment used at a covered job site.
  • Ability to expand the definition of pollution conditions.

SKYLINE

Knowing that your contracting business is operating in a highly regulated and litigious industry, it is incumbent upon each general contractor and subcontractor to transfer the very present risk of polluting the environment and the costs associated with cleaning up the mess you caused. 

To better under your pollution risk and the most effective way to transfer your risk, contact the insurance professionals at Skyline Risk Management, Inc. (718) 267-6600.

Contractors are Now using Drones for Large Construction Projects

Contractors are Now using Drones for Large Construction Projects

Drones are becoming a household concept. More and more industries are looking for the best way to utilize drones safely and effectively to help save time and money for any task. Drones are even becoming something discussed around the home for personal use, especially when dealing with repair and maintenance issues around the house. However, using a drone for business is not that cut and dry. At home they may cause issues, however, businesses must adhere to regulations for their industries as well as insurance issues that could ultimately cause more trouble if ignored. The construction industry sees drones as a huge asset to their business. However, if the proper steps to obtaining and using drones are ignored, the fines and lawsuits could easily put a construction company out of business. Therefore, it is important to know and follow the rules before purchasing a drone for your site.


The Preliminary Work

Before you even purchase a drone, first you must complete some preliminary research and work. For instance, did you know you must receive approval from the FAA to operate a drone? The FAA has guidelines that must be learned and understood when applying for approval for use of a drone (or UAV: Unmanned Aircraft System) on a construction site. In addition to applying for approval from the FAA, you must have a new section of your employee handbook or operations manual that deals with the use of drones, risk management, and safety procedures. This includes proper employee training regarding drones and their proper usage on a job site. In addition to training your employees and receiving an FAA approval, you must prepare to hire drone operators or train current employees on drone operations and have those operating employees pass the required aeronautics test for them to serve as a drone operator.

Finally, the last piece of preliminary work that must be completed before purchasing your first drone is the insurance test. It is important to contact your insurance provider or broker to determine the following items:

  • Does your insurance cover drones?
  • If not, do you need a policy or rider that will cover drones on your worksite?
  • How much will this extra coverage cost, and is it cost effective in the long run?
  • Once coverage is purchased, how long will it take to go into effect?

Your insurance broker should be able to sit with you to discuss these and other issues which may pop up as the results of drone usage on a job site. Most importantly, when dealing with insurance, never assume anything.  Many policies specifically exclude drone usage and specific policies need to be purchased just for this type of issue.


Continuing Issues

Once you have set everything in motion and have purchased your first drone, your job has not ended. Each job site must be analyzed properly to ensure you are within the proper guidelines of the FAA in regard to drone usage. For instance, drones are not allowed to fly over people that are not directly involved with your project.  Therefore, if you are in a busy commercial district, it may be wise to leave the drone at the office or only do work with the drone during off business hours. This and many other regulations will play a constant issues for each job.

Furthermore, since drones are a relatively new technology, the issues involving drones are constantly changing and being updated.  Should you choose to utilize drones for your construction projects, dedicate an individual within your company to constantly check for updates regarding drones in your industry and adjustments you may need to make to accommodate their usage.

Finally, be prepared to always mitigate risks for each job that may occur. Drones are a great opportunity to save money and keep employee injuries down. However, they are new and still being analyzed and understood. Therefore, there is still quite a bit of unknown risk involved. Each job site may offer a different risk as well, therefore, it is important to know your risks in advance and prepare accordingly.  

Interested in using drone technology for your construction company? Contact the experts at Skyline Risk Management, Inc., (718) 267-6600 to get proper coverage for all your business needs. 


FMCSA: New Rules for Trucking

FMCSA: New Rules for Trucking


For insurance professionals who deal with small truck risks or even artisan contractors, it's time you learned about the Federal Motor Carrier Safety Administration (FMCSA) and how new rules may begin to apply to your customers.

As of June of this year, the FMCSA announced it will broadened its scope of vehicles that will require registration and be placed under FMCSA oversight. This was accomplished by setting the GVW threshold at 10,001 pounds. The new regulations for obtaining a USDOT number now apply to more businesses than ever.


Who is Required to Register?

Vehicle owners who fit within the following parameters must obtain a USDOT number from the FMCSA:

  • If your vehicle is used to transport the types of hazardous materials that require a safety permit described in 49 CFR 385.403.

OR

  • If the vehicle has a GVW of 10,001 pounds or more, or:
  • Is built or used to transport more than eight passengers (includes the driver) for a fee, or:
  • Is built or used to transport more than 15 passengers and you don't charge a fee

AND if the vehicle crosses state lines.

Also, according to FMCSA, it is the vehicle owner's responsibility to know and comply with these regulations regarding your vehicle.


Who is Affected by the Change?

For most trucking businesses, the rule change will have no effect since these businesses typically use vehicles with GVWs much greater than 10,000 pounds. The affected segment of commercial businesses will be artisan contractors who drive light trucks such as the F350, which has a GVW of just a little over 10,000 lbs. In fact, many may say that this change was specifically targeted at these types of businesses to increase revenue.

Your drywall contractor who uses a 1-ton pickup, van, or light box truck and crosses a state line is now under the FMCSA jurisdiction, and you need to be prepared to have an informed discussion about their need to comply. If the businesses choose not to comply with FMCSA regulations, there are some stiff penalties that will apply depending on the specific violations involved.

Example: Your insured landscape and lawn business uses an F350 with a trailer, and operates in North Jacksonville, FL., and has picked up a new account in South Georgia. Once they begin operating in Georgia, even for only one account, they are required to register their business and vehicle with the FMCSA.


What are The Affects on the Business?

As in the example given above, this lawn business now has some hoops to jump through because they use a vehicle with a GVW of more than 10,001 pounds, and they are doing business across state lines:

  • They must apply for and obtain a DOT identification number and sticker from the FMCSA.
  • They must display the DOT sticker on the side of the vehicle during operations.
  • They must pay the required fee to the FMCSA for registration.
  • They must know and operate under the rules and regulations of the FMSCA.
  • Drivers must be at least 21 years old and carry proof of having a DOT medical exam.
  • If a driver travels over 100 miles from the starting location, they must keep a log of their driving time.
  • The driver is now subject to the same driving restrictions that a semi driver is subject to.

Your Next Step

Assuming that you hold your agency and yourself out as a trusted adviser to your clients, your next step should be to visit the Federal Motor Carrier Safety Administration's website and become intimately familiar with the rules and regulations that might affect your contractors. You should reach out to those contractors and help them become compliant with the new FMCSA rules before they are stopped and fined for compliance issues.

For more information on commercial auto insurance and the upcoming changes to the FMCSA rules and regulations, contact Skyline Risk Management at (718) 267-6600 and speak with an insurance professional.


Construction Joint Ventures, Subcontractor Bonds, and More

Construction Joint Ventures, Subcontractor Bonds, and More

One trend in the construction business is joint ventures. These ventures have become increasingly common in recent years as construction projects continue to get bigger and bigger. As size grows, so does complexity, and many construction companies find themselves in need of help.


What is a Joint Venture in Construction?

Enter the joint venture. Instead of passing on a lucrative job they cannot handle alone, a company enters into a partnership between one or more other construction outfits to take on a large commercial job.

These partnerships ensure companies can share risks while increasing their expertise and expanding their market reach. Often, it's a win-win for all involved. When entering into joint ventures, the key is covering each other's bases.

For example, let's say you have one giant construction company in Las Vegas. This company has the resources, experience on massive projects, and ability to bond whatever is necessary. Although this company typically stays in their area, there's a huge development going on in Grand Junction, Colorado.

Next, you have a local construction company in Grand Junction. They aren't big enough to handle this project alone. They simply don't have the experience handling big developments like this one, nor do they have the bonding capability. However, they do have the local knowledge and expertise.

A joint venture could form between these two companies to tackle the huge project. The local company can provide the local knowledge and manpower. The huge company provides the expertise, planning, and bonding capacity. It's a win-win for all involved.


What is a Subcontractor Bond?

Why is bonding capacity so critical to these joint ventures? First, it's important to understand what a subcontractor bond is. A subcontractor bond is an explicit contractual agreement that guarantees the completion of a subcontract by a surety, if the original subcontractor fails to complete the full scope of work for the project.

Owners know that requiring every subcontractor to be bonded on large projects ensures their protection against any downside risk that a contractor fails to perform work they were hired to do. Once obtained, these bonds make sure the labor is completed in a faithful and honest manner.


Why Owners Prefer Subcontractor Bonds

Many owners and project planners require any subcontractor to be bonded before beginning to work together. While contractors can use subcontractor default insurance to transfer risk, many prefer bonds for a number of reasons.

One of these reasons is using a surety to investigate the capacity, character, and ability of any subcontractor. Through detailed underwriting, the surety will be able to note exactly what a contractor is capable of. This removes the vulnerabilities for many owners when hiring for large projects.

Subcontractor default insurance also encompasses a catastrophic insurance policy. This means high deductibles, co-pays, and more. A subcontractor bond covers extra costs and offers no resistance to getting the job done. These bonds cover 100% of the entire scope of the project for the contractor. As an owner, you'll never have to be worried about only getting a percentage of that.


Subcontractor Bonds & Security

Owners tend to prefer subcontractor bonds to all else these days. The reasons listed above were just a few of the many reasons bonds beat out default insurance on large construction projects, especially joint ventures.

Due to the surety underwriting, these bonds tend to foster a relationship of trust between owners and subcontractors. And as anyone in the construction industry can attest to – a relationship built on trust has a much better chance of lasting than most built in the industry. 

 

If you have questions about Joint Ventures & Sub-Contractor Bonds contact Skyline Risk Management, Inc.(718) 267-6600 to voice your concerns. 


4 Steps to Mitigate Risk In Your Supply Chain

4 Steps to Mitigate Risk In Your Supply Chain

It's becoming increasingly difficult to avoid litigation in today's society. Many businesses, big and small, have been hit with lawsuits that hinder profits. Some firms even have to file for bankruptcy as a result of these claims.

To avoid such lawsuits, it's important to use common sense. Make sure your workplace is as safe as it can be. Fall into compliance with any and all regulations. Write out all your safety policies and procedures, and then make them readily available for all to read.

Just Imagine

Think about a scenario where a company hires a contractor to remove natural gas lines. This contractor is known and trusted, but he then hires two subcontractors to help with the project. One of these contractors makes a grave error, which results in two employees suffering from severe burns.

So who is on the hook for medical bills and the forthcoming lawsuit? In this example, the original company that hired the contractor is now responsible. Now, this may not be a big deal. If your company has workers' compensation and employer liability insurance, then you might be all set.

The Scary Thing About Contractors

Contractor lawsuits can be scary ordeals, and they're becoming increasingly common in today's contractor economy. In industries where the majority of employees are contractors (say 50-75 % of employees), the risks are greatly magnified.

It's hard to manage employees and ensure safety when the workforce is out of your company’s immediate supervision. In those cases, employees complying with your company's safety procedures and policies cannot be guaranteed.


The First Step to Protection

If you own a company or manage a supply chain, then protecting your business should be high on your priority list. While contractors can bring vulnerabilities, you understand that it's impossible to get many jobs done without them. Using contractors is just a part of doing business these days.

To keep your company protected, there is one thing you can do – create a verification process. Had the perfect contractor pre-qualification process been in place, the situation described above could have easily been avoided.

Here's how to implement a verification process:

1. Emphasize Safety

Create safety expectations and standards. Communicate these rules to any contractor before hiring. Hold meetings with your regular contractors regarding safety. Offer safety policies and procedures in written format for all involved.

 

2. Dig Deeper

Dive into the data. Look at objective measures to grade the contractor's performance. Use supply chain risk management audits with written protocol to ensure objectivity.

 

3. Create Criteria

Once you have settled on criteria by which you will judge your contractors, clearly communicate these criteria to any contractors you may hire.  Let each contractor know that safety is more important than price and your company will select the safest people to work with, not just the cheapest.

 

4. Manage

Keep company-wide rules and standards in place by maintaining a real-time database of every contractor. Continually update this database. Any possible user should be able to access the information at any time of the day.


Your Verification System

By keeping an up-to-date database of verified and reliable contractors, your company will avoid the vast majority of frivolous lawsuits that are a result of the contractor economy.

Your system can verify that every contractor has the necessary insurance and endorsements. This would remove a company's liability if an issue and lawsuit were to occur. In this scenario, both the contractors would be fighting a lawsuit – not the company.


It's Worth It?

If you keep updating your contractor verification system, you will mitigate a significant amount of risk in your supply chain. Not meeting contractual requirements and regulatory issues will become a thing of the past. In the present, you'll find reduced risk and often cost savings. 

 

If you have questions about sub-contractor insurance standards contact Skyline Risk Management, Inc., (718) 267-6600 to voice your concerns. 


OSHA's New Final Rule on Silica Dust

OSHA's New Final Rule on Silica Dust

It took some time, but OSHA finally made a decision on silica dust. The ruling, which takes effect on June 23, 2016, provides significantly more stringent rules and regulations. Construction companies and employers will have one year after the judgment takes effect to comply fully. The goal of the ruling is to limit all employee exposure to respirable silica as much as possible.

OSHA's decision culminated from a yearlong push to reduce employees’ exposure to this dangerous dust for the first time since 1971. In theory, the new regulations should be beneficial to the industry. However, many battled long and hard to ensure the law would not get passed. Why?


The Industry Against Regulation

Nearly every employer within the construction sector was against adding additional rulings with regards to silica dust. Many claimed the current rules did more than enough to combat the dangers of silica– when enforced properly. OSHA didn't agree, nor did they believe laws were being enforced properly.

Construction industry insiders also claimed the new regulations would hinder profits and be exceptionally costly to implement. Again, this was not OSHA's concern; when it came to silica dust, employee safety was the only concern.


Why Is Silica So Dangerous?

Nearly 2.3 million workers in the United States are exposed to silica in the workplace every year. This can lead to numerous health issues, including death, lung cancer, lung disease, kidney disease, and more. Even inhaling a small amount of silica dust can lead to significant health issues. Many times dust is inhaled during workplace activities like sawing, drilling, jackhammering, milling, and crushing.


The Major Changes

The new OSHA ruling regarding silica dust offers significant changes. The major one is the sharp reduction in acceptable levels of silica dust per cubic meter of air. 250 uG of silica per cubic meter of air used to be acceptable. Now, they only permit 50 uG of silica per cubic meter of air on a construction site.

This isn't the only change, either. OSHA went further and requires engineering controls like water and ventilation to make sure the acceptable limit is not exceeded.

OSHA now requires that respirators be provided if engineering controls cannot keep levels below the exposure limit. Restricted access to any high-exposure areas is now a requirement.

Written exposure control plans are mandatory now, too. A competent individual must be put in charge of implementing these written plans. Medical exams must be offered to all employees required to wear a respirator for more than 30 days each year.

Employers must also train employees on the dangers of silica dust and what they can do to avoid it. A detailed record must be kept of medical exams and silica exposure over time.


Silica Dust, OSHA, and Upset

Overall, the silica dust rulings have not been met with great fanfare from those within the industries. However, OSHA is not backing down. The regulatory agency claims many concessions were made when creating the new rulings, especially with the benefit of construction companies in mind.

OSHA has created many special programs for small to medium-sized businesses in high-hazard industries. These programs are designed to help these employers efficiently meet regulations while reducing costs. Many of the programs offer free and confidential help, including tips on complying with the new standards, advice on identifying any hazards within the workplace, and improving or implementing safety and health management systems. 

Have questions about Silica dust and Silicosis?

Contact Skyline Risk Management, Inc., (718) 267-6600to voice your concerns. 


4 Builders Risk Coverage Trends Affecting Contractors

4 Builders Risk Coverage Trends Affecting Contractors

 Construction of the Twin Towers - NYC - Early 1970s

Construction of the Twin Towers - NYC - Early 1970s

Construction is big business in the United States, and it's booming. Due to this fact, the market for builders risk insurance has soared. Yet many insurance agencies have not been able to turn this potential source of considerable revenue into any type of profit.

Many cite the lack of insurance agencies offering builders risk insurance to the unique nature of these policies. Every single carrier offers different types of policies, and many find that builders risk plans tend to be significantly more complicated than other property policies.

Plus, a single construction company may be required to hold numerous different types of policies. This can be confusing for even the most knowledgeable contractors. As such, it's important to pay attention to recent trends in the industry. This will ensure you can accurately obtain builders risk coverage for your business:


1. Flexible Limits

Demand has skyrocketed for flexible limits regarding builders risk coverage. Changeable limits are vital for ordinance, law, landscaping, and temporary structure projects. You can wrap the heightened sub-limit into a premium charge for your business if you seek this type of coverage. Builders love increasing the sub-limit above the traditional $100,000 average, and the premium is usually worth paying for such a feature.

 

2. Soft Costs and Delays

Agents and brokers have a job to scrutinize any project that seeks builders risk insurance and ask every "what if?" possible. Many items are only examined after a loss, especially when soft costs and delayed expenses are considered. Investigate these issues by conducting meetings regularly and educating your workforce on builders risk hazards. 

 

3. Policy Warrants

Many insurance companies are now requiring warrants to go along with builders risk insurance. For example, a company will say there are certain things you must have as part of the project to ensure your builders risk policy will kick into effect in the event of an emergency. Most of the time, these warranties are loss prevention techniques that a contractor or builder may not have had on the job site initially.

 

4. One-Stop Shopping

Back in the day, there were dozens of different types of coverage forms constructions companies and builders could utilize. These coverages included separate installation, general liability, riggers liability, and so many more. Different sectors within the construction market could get what they needed quickly and easily.

However, things have changed. With crossover between markets and trades increasing in the construction industry, there is a need for a one-size-fits-all policy for builders. To that end, insurance companies have come through. Complex construction operations now require a builder's policy that covers any and every construction operation and project.


Understanding Builders Risk Coverage

By diving deep into builders risk and noticing current trends, you'll stay ahead of the game and ahead of competitors Remember to read the fine print and understand that every builders risk policy is unique.

 

If you have questions about Builder's Risk policies contact Skyline Risk Management, Inc., (718) 267-6600 to voice your concerns. 

Understanding Risk Management

Understanding Risk Management

For any organization to appropriately manage the risks involved with being in business, the management has to be more than simply renewing insurance policies. Yes, your insurance is always a key part of any risk management strategy, but there is more than one piece to the puzzle.

Identification

To properly approach the task of risk management, the first thing that has to happen is the identification of any existing risks that can jeopardize your business financially.  Although simple to say, this task can be difficult. After all, risk management involves predicting the future based on past experience and expertise. A risk manager must look to their key employees and management staff for insights and look externally to professionals you trust and other specialists.

Risk Appetite

Before the risk management strategy begins, the organization will need to determine how much risk you're willing to afford and accept, or your "risk appetite." After which you'll need to identify the measures the organization currently has in place and what is still needed in order to help manage the risk. Once the risks have been identified and prioritized, the organization will then determine how they should be managed. There are three options to consider:

1.      Avoidance - Avoidance is when the organization decides not to embark on a certain activity because the risks exceed the expected benefits

2.      Acceptance  - Acceptance happens when an informed decision is made to accept a potential risk because the benefit is significantly greater than the risks.

3.      Transfer  - This takes place when the organization elects to transfer the risk to a third party insurance company or by contract with a non-insurance organization, however, when transfer is elected, it is typically not 100% because of the deductibles involved

When risks are transferred to an insurance company, the deductibles act as a motivator because the insured will typically attempt to reduce the risk because of their responsibility to accept a portion of it. For example, if your business that is acting as a General Contractor, requires all subcontractors to obtain and pay for their own insurance, the subcontractors are motivated to reduce risks that could result in a claim where they will have to pay deductibles out-of-pocket.

In cases where a General Contractor is purchasing Wrap-Up insurance that covers the General Contractor and its subcontractors, the limits and deductibles will be significantly higher which increases the exposure for the General Contractor. As the general contractor, your deductible responsibility would could be increased to $50,000 or $100,000. Knowing this, you could build this risk into your project bid or transfer it to your insurer who could pay the difference between your chosen deductible and the higher deductible under Wrap-Up policy.

Every industry contains unique risks and exposures that must be properly managed to avoid the inherent financial consequences that can result. It's important for the risk manager to be able to call on experts in the industry to define and ultimately mitigate them. After implementing a comprehensive quality assurance and safety practices program that are targeted to minimize the identified exposures, the risk manager can make an informed decision to avoid, accept, or transfer the risks that remain.

For professional advice about your organization's exposures, contact Skyline Risk Management, Inc. (718) 267-6600 for help with identifying your exposures and how to mitigate them in the best possible manner.

Best Practices for Buying Builders Risk Insurance

Best Practices for Buying Builders Risk Insurance

Many contractors and real estate investors are somewhat familiar with Builders Risk Insurance but rarely are they familiar with determining their limits of coverage. The coverage was designed to insure against the risk of loss for damage to property under construction or renovation. Although the coverage covers business and residential buildings, it also provides coverage for issues not normally associated with a commercial or residential building.

Before deciding on limits of insurance, the property owner, risk manager, or other responsible party must thoroughly review the construction documents. There is a very important relationship between the insurance policy and the construction documents. The documents will determine certain insurance coverage requirements, including indemnity provisions, who is to be listed as named insured(s), any waivers of subrogation required, and limitations on liability.

Although certificates of insurance are typically provided by the agent or broker, it's recommended that you do not rely on them for coverage accuracy. A certificate will not guarantee that the coverage in place represents the coverage required by the construction documents. Always compare the construction document insurance requirements with the quote, binder, and then the issued policy. If discovered, any coverage discrepancies should be immediately addressed with your agent or broker.

Covered Property

Typically the very first question is what property needs to be insured? For renovations, this is very important since the policy needs to insure both the existing structure along with the new construction. As an example, if a project is designed to convert industrial space to residential or retail space, the existing building is usually gutted, and all new systems and interior space are constructed. The current exterior envelope will be a key component of the project which means this portion as well as the interior construction will need to be insured.

A problem that could exist is that many builders risk policies insure at cash value for the existing structure, not at the replacement cost. This means if a fire causes severe damage to the existing structure, the claim would be settled at the depreciated cost to repair the exterior envelope, which would result in a significant shortfall. This shortfall could certainly be enough to ruin a project that is operating on a very tight budget

For new construction, it's important to insure foundations, underground pipes, costs of site preparation, scaffolding, and temporary structures. Each item, if uninsured, could be very expensive to replace in the event of a covered loss. Depending on the needs of the parties involved, the builders risk policy should also provide coverage for tools and equipment, or materials that won't become part of the structure.

Persons or Entities Insured

Certainly, the named insured(s) are as important as the property being covered. Typically, the construction documents will require that the general contractor and the project owner be covered under the policy. Subcontractors should also be covered which will eliminate the need for waiver endorsements among the contractors and subcontractors. Just as in the case of property being covered, the construction contract should specify who should be listed as named insured and who should be listed as additional insured.

Time Element

Time element coverage is made up of business interruption, expediting expense, extra expense, and coverage for "soft costs." Soft costs, which can be significant, represents the economic risks associated with project delays brought on by a covered peril. This is important because depending on the policy language, normal business interruption coverage may not pay for all economic losses resulting from a delayed project.

Builders Risk Insurance should never be considered "cookie-cutter" coverage. Each project has its specific risks that need to be mitigated, and the best place to start is with the construction contract.  If you have questions about purchasing builders risk insurance contact Skyline Risk Management, Inc. at (718) 267-6600 to discuss your concerns.