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Contractor

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."

Understanding Liability Under the False Claims Act

Understanding Liability Under the False Claims Act

Over the years, government compliance requirements have grown and grown. They've become more intricate, too – as have the tools needed to enforce them. Using a wide array of enforcement methods, the federal agencies work to control and enforce compliance.

There is one tool the government uses that affect contractors more than others – the False Claims Act. While understanding the False Claims Act can be difficult, it's imperative for contractors and surety professionals. The risks associated with violating the Act are significant.


What is the False Claims Act?

Before we get too far in, let's break down the False Claims Act. While complicated, the Act boils down to this: the law imposes liability on companies and individuals who defraud any government program. The federal government uses the act as the primary litigation device in fighting fraud against the government.

Not Too Difficult?

Contractors are typically aware that defrauding a customer, company, or government is completely prohibited and illegal. The False Claims Act extends beyond full-on fraud. A doctrine known as the "false certification doctrine" states that a contractor who falsely states they have complied with a variety of compliance policies imposed by the government can be held liable under the False Claims Act.

Violating the False Claims Act is far easier than committing traditional fraud. The government doesn't have to prove any damages suffered. They simply have to find a contractor who has submitted a claim that was "known" to be false.

Due to how the Act is enforced and the "false certification doctrine" – it is incredibly simply to violate the False Claims Act. Once you do, the violations can add up. Most contractors find a violation can be exceptionally costly.


Volatile and Expensive

There are two different types of liabilities the government can dish out to violators of the False Claims Act. Both actual damages and statutory penalties can be lobbied against violators.

The penalties can be between $10,781 and $21,563 for each claim submitted by the government. As individual invoices are treated as separate claims, a large penalty can be enforced – even when the government hasn't suffered any actual harm.

Not only are the fines costly, but they can be unpredictable, too. Even subcontractors without a direct relationship to the government can be subjected to liability – just like federal prime contractors.

Due to the whistleblower provisions in the False Claims Act, individuals with knowledge of a company's operations can bring suit on the government's behalf. This clause often catches contractors flat-footed and unaware of the consequences that may be coming.


What Sureties & Their Contractors Should Know

Paying attention to the False Claims Act is mandatory these days. While it seems to be tougher and tougher to stay in compliance with the Act than ever before, the consequences for failing to do so continue to get higher and higher.

As a surety, it's imperative to educate contractors on the perils of the False Claims Act. Contractors can take a number of steps to ensure risks are minimized. For example, a contractor could:

  • Implement a mandatory independent review of every single invoice by a project manager before submitting and completing the project.
  • Continual communication with the federal government through counsel. Details of contractual difficulties that arise and compliance issue may be discussed.
  • Fully implementing a compliance, monitoring, and training program for all employees that covers a majority of significant contractual requirements.

On top of these ideas, a contractor may seek to consult with outside counsel regarding changes to federal regulations and implementation. By doing so, a contractor can limit exposure to liabilities under the Act. 

To learn more about liability under the False Claims Act and how this effects your business contact Skyline Risk Management, Inc. at (718) 267-6600.

The Strength of the Surety Market

The Strength of the Surety Market

It's not too complex. Naturally, the power of the surety market strongly correlates with the success of the construction industry. The stats show that when the construction industry is down – so are the surety markets.

With over $5.5 billion in 2008, the construction markets took a dive following the recession. Once the economy improved, the markets rebounded, and construction activity increased to over $5.5 billion once again in 2015. Looking at statistics isn't the only way to know the markets have bounced back.

According to Susan Hecker, director of national contract surety and area executive vice president, Arthur J. Gallagher & Co:

"One way I measure what's going on in the construction industry is how many tower cranes I can count on my drive to work every day. Over the past few years in the San Francisco area, it has gone from a handful to more than 50."


Understanding the Upswing

Private projects are thriving, and more bonds have been issues on these plans as of late. Most see this as a great thing for sureties, as lending institutions have started to require bonds for financing projects in the private sector.

However, spending on public projects has not found the same level of bounce-back. State and local governments don't have the funding that they did before the recession. While there is still a demand for projects, the government has to get creative in finding ways to meet their needs.

Enter P3s. One creative manner many government entities are working on is public-private partnerships or P3s. While the name is self-explanatory, the surety side has been working to offer bonds that fill this ever-growing market. Typically, a P3s bond offering will need to be more liquid.


Is All Growth Good?

While the upswing in the construction and bonding demand is a good thing, there are still concerns. Many worry about the availability of high-skilled employees and workers. It can be hard to find a qualified workforce for many construction companies these days.

The lack of skilled workers comes from a few factors. First, baby boomers are retiring. This leaves a lot of knowledge at the trade level off the table. There is a void to fill. And while the unemployment rate for construction workers is lower than it has been in the last decade, the available labor force has been strained. According to Ed Titus, senior vice president of surety for Philadelphia Insurance Cos:

“We see the Texas, California, and Florida construction markets struggling with not having enough of an available trained, skilled workforce for contractors to start bidding on new projects."


Cause & Effect

With a lack of skilled labor, most sureties have been keeping a close eye on the industry. Many have found a rise in claims. A lack of workers makes it difficult to finish on time. Projects that take longer often find more damages, too.

Plus, the flow of money slows down. Often, owners can't pay sub-trades until things get completed. When this happens, a claim can be triggered. Bonds often guarantee labor providers and suppliers are paid. If the flow of cash is slow, then it comes back to the claims.


Energy Sector Issues

Construction isn't the only industry sureties work heavily in. The energy sector has been problematic for the surety markets lately, too. Bankruptcy in the energy sector has become all too familiar.

The largest surety loss of all time was an energy company, Enron. Thus, when sureties see a number of energy companies file for bankruptcy, there's a legitimate call for concern.


Understanding the Surety Marketplace

With the construction industry coming up, sureties are looking to expand their business. Professionals in the space are hungry for new business. But with pricing becoming hyper-competitive, one can expect the industry to remain active and engaged – if profitable results are to continue. 

For more information on bonds and surety contact Skyline Risk Management, Inc. at (718) 267-6600. 

New York Labor Law

New York Labor Law

  • What it means for property owners, their agents, managers and commercial tenants.
  • What you need to know to protect your assets.
  • How GNY can help.

New York Labor Law:

New York State’s Labor Law (NYLL) represents an onerous burden for property owners and managing agents in New York, making them financially liable for virtually any work-related accident on their premises. So as building owners and managing agents routinely hire contractors to do work on their properties, they routinely face huge liability exposures.
To insulate themselves from high-value lawsuits brought by injured workers, building owners and managing agents should enter into hold harmless and indemnification agreements, backed up by the contractors’ own insurance, which transfers liability for such injuries from themselves to the contractors and subcontractors whose negligence caused the injuries. Failure to do so can cost building owners millions of dollars.

GNY can help navigate this challenging landscape.


Three Key Sections:

1. Section 200 requires building owners and managing agents to provide workers with safe places to work.

2. Section 241(6) makes building owners strictly and vicariously liable for worker injuries at their buildings if improper or inadequate safety equipment causes a worker’s injury. Damages from resulting lawsuits can be reduced or eliminated if building owners can show that the injured worker was partially or fully responsible for his injuries.

3. Section 240(1), commonly known as the Scaffold Law, makes the building owners as well as their contractors and project managers “absolutely liable” for all gravity-related construction accidents at their buildings, subject to a few hard-to-prove exceptions. The building owner is liable even if it did not hire the injured worker or his employer, even if it did not know that the worker or his employer was working at the building, and even if the worker is partially or fully responsible for his own injuries. These lawsuits often result in summary judgment for the plaintiff on the issue of liability, leaving only the damages portion of the lawsuit to be tried against the building owner and property manager. Because these lawsuits often present serious injuries, verdicts in such cases can be quite high.

  • A good safety record will not protect building owners, managing agents and construction contractors from liability under any of these statutes. In addition, litigation can become a part of your loss history, which may drive up your insurance rates. Don’t let this happen to you.

  • GNY Recommends The Following Steps To Protect Your Business And Assets Under These Statutes: 

1. KNOW YOUR CONTRACTOR:

  • Verify the contractor is properly licensed, insured and experienced in the type of work it is being hired to perform.
  • Verify whether the general contractor uses subcontractors. If the general contractor uses subcontractors, find out how it screens its subcontractors and confirm with your contractors that its subcontractors are properly insured.
  • Verify there are written agreements in place between the building owner and its general contractor, as well as between the general contractor and its subcontractors, with proper indemnification and insurance-procurement clauses. The contractor and subcontractors should name the building owner and the managing agent as additional insureds on their liability policies on a primary and non-contributory basis.
  • Verify before entering into contracts with your contractors that the contracts make the contractors responsible for worksite safety and for having a safety-and-employee training program in place.
  • Verify contractors have obtained all necessary permits before they begin their work.
  • Verify your contractors and their subcontractors do not have a history of Occupational Safety and Health Administration Law violations.

2. USE RISK TRANSFER TACTICS:

Using written contracts to transfer the risk of liability and damages from you to your contractors can protect you from claims of serious injury and potentially large damage awards. The following clauses have proven successful:

  • Hold Harmless and Indemnification Agreements

Every contract between you and your general contractors, as well every contract between your general contractors and their subcontractors, must contain a clause requiring the general contractors and their subcontractors to “defend,” “indemnify,” and “hold harmless” the building owner and the managing agent from liability, loss or other damages that arise because of any of the contractors’ negligence. It is important that this agreement be properly worded, dated and executed before the work begins.

  • Insurance Procurement Requirement

Contractors and their subcontractors must agree to add building owners and their managing agents as additional insureds to their insurance policies for any liability arising out of their work. The limits of these policies should be at least $1 million for a primary commercial general liability (CGL) policy and $5 million for an umbrella policy. Also, the additional insured coverage should be written on a “primary and non-contributory basis.”

  • Insurance Requirements and Certificates of Insurance

While it is common practice to request a Certificate of Insurance (COI) from contractors and subcontractors, the certificate alone does not confer or prove the existence of additional-insured coverage on your behalf. A proven “best practice” is to require your contractors to submit a copy of their primary liability and umbrella policies for review by an insurance professional. All COI’s and insurance policies must be provided to the building owner or managing agent before the work begins. The COI and insurance policies should also show that the building owner and managing agent are named on the primary and umbrella policies as additional insureds.

GNY will review your contracts with your contractor or subcontractors free of charge. Simply ask your broker to forward the contracts and insurance policies to your GNY underwriter.


SPECIAL CONSIDERATIONS FOR ...

 

COMMERCIAL PROPERTY OWNERS:


NYLL’s unfavorable liability provisions can adversely affect the owners of commercial buildings when tenants hire contractors to perform construction, alteration, repair or maintenance in their units, and those tenants are inadequately insured or indemnified by the contractors they hire.

As part of their commercial leases with tenants, building owners should use the same strategies suggested above for the transfer of risk from themselves to their contractors:

  • Obtain copies of the CGL and umbrella policies and COI’s from all commercial tenants and their contractors.
  • Set up a notification system alerting you to renewal dates for these policies.
  • Make sure tenants have sufficient CGL and umbrella policy limits.
  • Require tenants and their contractors to name the building owner and the managing agent as additional insureds on their CGL policies on a primary and non-contributory basis.
  • Require tenants to sign agreements indemnifying and holding the building owner and managing agent harmless for liability arising out any of the tenants’ work in their units.
  • Review your leases with an attorney to ensure these clauses have been included in the leases.

GNY will review the relevant contractual clauses and policy provisions for you free of charge. Simply ask your broker to forward the contracts and insurance policies to your GNY underwriter.


RESIDENTIAL CO-OPS

To protect the board, the shareholders and the co-op corporation, the same risk-transfer strategies mentioned above should be in place whenever a shareholder in a co-op has work done in his unit. This work ought to be done under an Alteration Agreement, which should require the shareholder’s contractors to indemnify and hold harmless the shareholder, the co-op and the managing agent, and to name these entities as additional insureds on the contractors’ general-liability policies on a “primary and non-contributory” basis.

The Alteration Agreement should also require the shareholder to indemnify the co-op and the managing agent and to have proper liability insurance in place to cover these exposures. The co-op must mandate, preferably in the lease agreement, that contractors cannot begin work in a unit until the shareholder submits to the co-op and the co-op approves all of these construction contracts and insurance policies.

Insurance companies insuring contractors have come up with broad exclusions and limitations designed to protect them from having to defend and indemnify you as additional insureds under their policies. This is very unfair to the co-op. By showing you what to look for in these policies, GNY can help protect you and your finances.

GNY will review the relevant contractual clauses and policy provisions for you free of charge. Simply ask your broker to forward the contracts and insurance policies to your GNY underwriter.

GNY can also supply you with an exemplar of an “Alteration Agreement” incorporating these conditions for the co-op, the shareholder and the contractors to sign.

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

New And Improved Workers’ Comp Rehabilitation Programs

New And Improved Workers’ Comp Rehabilitation Programs

The end goal in a workers’ compensation claim is to get the employee in the position to be able to go back to work. Work rehabilitation has long been a factor that contributes to this goal. By providing employees with the proper physical therapy to be able to successfully do their job once more, it is not only improving the well-being of the employee, but also benefits the employer as the carrier can typically closer the claim quicker. However, work rehabilitation programs have changed, and new and more efficient programs have mostly replaced the more scattered, outdated rehab plans of the past.


Work Hardening and Conditioning

A term that many often use in correlation with workers’ comp is "work hardening." Work hardening is a multi-focus regiment used to physically and mentally prepare employees to return to work. Sessions run several hours long, are often five days a week, and can take as long as eight weeks to complete. In the past, this type of return to work effort was used mainly for skilled laborers who needed to regain dexterity to perform their job again. The problem with work hardening is that most employees injured on the job do not need rehabilitation to the extent that it is designed to provide. The cost of the problem often outweighs the value.

Work conditioning is another method of workers’ comp rehabilitation that is more boot camp-like. The regiment includes an individualized plan for recovery, but focuses more on the physical aspect of returning to work only.


New and Improved Rehabilitation

Today, new return to work programs are using a mixture of the two techniques to create the advanced work rehabilitation plans that health care professionals commonly use for the modern injured worker. There are a few key factors contributing to the success of the program.

  • Personalizing: Crafting the rehabilitation plan to each employee is important to make the program as efficient as possible. Each workers’ comp injury can be vastly different from the next, and so it stands to reason that every rehabilitation plan should be different as well.

  • Focus on Job-Specific Functions: The primary goal in back to work rehabilitation is for the employee to get back the ability to do their job unhindered. Returning to work may require small steps to accomplish, but by focusing on the specific functions they need to perform their job tasks, workers’ are typically able to return to work faster than they are with multi-function rehab plans. By strengthening the functions that the employee uses on a daily basis on the job, there is also a lower chance of re-injury. 

  • Faster Recovery: With the specificity of today’s return to work programs, workers’ are often able to return to the job much faster than they had in the past. The employer clearly benefits from this as the cost of the workers’ comp claim is less, but it also benefits the employee as well. The longer one is out from work, the harder it is to return. Benefiting from a quick recovery, the worker can get back into the flow of things faster and become a productive member of the workforce once again.


Recap

Getting injured on the job is not an ideal situation for anyone. Typically, neither the employee nor their employer wants to see the worker undergo the arduous and sometimes painful process of rehabilitation. Though it can seem like a daunting task to undertake, by utilizing the personalized workers’ comp rehabilitation programs available today, employees are now able to get on the path to recovery and return to work faster than ever.

For more information contact: Skyline Risk Management, Inc. at (718) 267-6600

The Upside of Tech-Savvy Construction

The Upside of Tech-Savvy Construction

In a world full of bad news, good news comes in the form of the rise of the construction market. While it has not quite hit pre-recession levels, numbers are expected to increase in 2017. So now that the market is recovering, the next goal to tackle is how the construction industry can be improved.  It turns out that technology might play a big part in the future of the business. New technological tools are already bringing new advantages to the worksite and opening up the doors for new and possibly better ways of doing things.


Loss Reduction

The ability to predict, detect, and counteract losses is game-changing possibility that new technology tools are turning into a reality. Damages to construction from weather and nature-related losses have always been an unfortunate side effect of the trade.  One does not have to look too far back to find a time when technology limitations made weather difficult to track and therefore more frequently devastating. With advancements in technology, weather prediction became more accurate, and contractors were able to prepare better for the coming storms. In the same manner, new technologies are making risks that were hard to predict more manageable.


Building Information Model

A Building Information Model (BMI) is a digital, 3D model of a building that contains combined resources between engineers, architects, and members of other construction trades to help more accurately and more efficiently make development and designing choices. With the shared knowledge of all parties involved, everyone becomes more informed about the other areas of construction. Increased knowledge and awareness makes for a safer and more accurate construction environment. BMIs also provide for less duplication of work, easier conflict resolution between trades, and the ability to be closer to perfection than ever before.


Detectors and Predictors

As mentioned earlier, the weather has always been a significant risk in construction. Enhanced forecasts are a plus, but the precision of weather predicting is reaching higher levels than ever before. A weather predictor or application is an invaluable tool to use on the job site. The ability to anticipate potentially devastating weather provides for the time to take the necessary precautions to lessen or eliminate damage completely.

Water leakage is another area where technology has provided a tool to assist. New water leakage detection technology can determine where there is possible water leakage on a job site. Catching water leaks fast can mitigate any further damage that may have otherwise occurred.


Other Technologies

The development of functional and sophisticated drones has also lead to a convenience in the industry regarding surveying usage. Could the forefathers in construction ever have dreamed that one day we could survey a job site without ever setting foot on it? Another piece of technology that brings a whole new wave of possibility is the 3D printer. The ability to recreate just about anything is a mostly yet untapped potential in the construction field but could provide endless benefits in the future. Mobile Apps are also an area of technology that is teeming with advantage for the tech-savvy tradesman. From calculating apps to assist with supply configuration to blueprinting gadgets, there is a whole market of construction-related apps available.

The fact of the matter is that we are living in the 21st century and as a benefit of life in our time, we are privy to technological advances that those that came before us could ever imagine. The construction industry is no exception to these advantages. The construction market is changing, and technology is beginning to play a bigger and bigger role. Now is the time to make use of the tools that are out there. 

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

Sureties Still a Construction Asset

Sureties Still a Construction Asset

The construction industry has been an ever-changing environment over the last decade or so because it has had to adapt to the rise and fall of the marketDemand has changed, requirements have changed, and desires have changed. Will all these changes in play, it becomes a fair question as to whether sureties are still an important part of the business. The answer to that question is a resounding yes.  With the changes to the construction industry, risks have increased if anything, making sureties a more important part of business than ever.

The primary purpose of a surety is to financially protect the obligee if the principal does not fulfill their contractual obligations. With the changes in the market, there are new reasons why the need for this promise is so vital for contractors.


Tougher Competition

Increased competition in the marketplace presents more than one factor to the changing construction climate.  Everyone in America knows that during the recession, construction was one of the hardest hit industries. Although still recovering, the industry has yet to see conditions equivalent to what they were before the fall of the market.  Even though the market has not fully rebounded, demands of owners have changed and become surprisingly stringent.  More responsibility than ever falls on the heads of the contractors from the expectation to finish uncompleted designs to the need to lower overhead costs significantly just to be able to stay in the market. With increased responsibility comes an increased opportunity for risk.


Enormous Risk

The likelihood of subcontractor default is a scary, but relevant factor in construction. A recent risk study conducted by the Associated General Contractors of America (AGC of America) places the risk of subcontractor default as one of the three highest risks in the construction industries.  Other major risks include highly-detailed contract language and a shortage in skilled laborers. The fact that the very purpose of a surety for a contractor is to protect against subcontractor default and statistics are showing that default is still a huge risk, is alone enough to warrant a surety.

It seems as though subcontractors are not adjusting to the new industry standards in the same manner that others in construction have been forced to.  Maintaining the high overhead or pre-recession times is not going to cut it in today's industry. As an unfortunate side effect, this takes many who may have proven their worth as a subcontractor out of business as they fail to match the bids of others who have adjusted.  The fact that experienced subcontractors are losing bids links to the other risk factor of a lack of skilled laborers. With the shortage, the workload for those who are skilled is increased and falling behind on that workload is a major contributor to the trend of subcontractor default.


Surety Benefits

A surety, then, becomes a great way to combat these risk factors.  Not only does a surety guarantee that if the subcontractor falls behind and fails to live up to their promise, the financial institution will financially compensate you but it also serves a wonderful second purpose. To be guaranteed a surety, the subcontractor must live up to the scrutiny of the bank or lender.  By undergoing this process, contractors can be more assured that the subcontractor they hire is reliable.

Contractors are in many ways in a more precarious position than they were ten years ago with more liability risks being tossed to them every day. However, the risks are manageable. With proper management of these risks, contractors can know that they are protecting their business. One of the most important ways of doing that is a surety, and it is clear that now more than ever not only it is important, it is necessary.

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

Getting Familiar with Rectification Coverage

Getting Familiar with Rectification Coverage

Recently there have been some significant changes to contractors’ professional liability coverage that has expanded the types of coverages available and also opened the doors for more carriers providing for a more competitive market.  It is no surprise then, with the influx of options available, that contractors may be unfamiliar with some of the coverages or their benefits. One such critical coverage relatively new to the game is rectification coverage, and by looking at the benefits and the ways in which it differs from other coverages, one can begin to understand its usage.


What is Rectification Coverage?

Depending on the insurance carrier, rectification coverage may also be known as mitigation of damages coverage or other similar names. Rectification coverage provides first-party coverage to a contractor for the costs that come from fixing design errors made during construction. The coverage’s purpose is to cover the type of serious flaws that, if not corrected, would result in a professional liability claim.

Benefits

-Prevents litigation. The main advantage of rectification coverage over similar coverages is that it prevents the contractor and owner from having to file a liability claim. If the contractor or owner does file a liability claim, negligence has to be determined, and the case could then go to court.

-Help maintain a positive relationship with the owner. By preventing litigation, rectification coverage also allows the contractor to keep the professional relationship with the building’s owner intact.


Important Factors

-Claim Reporting. Because of the seriousness in nature of the type of design flaw that warrants a rectification claim, most insurance carriers require that the contractor reports the claim immediately. In addition, many will also require that along with the reporting of a claim, the contractor must also submit a plan detailing how they will fix the problem.

-Project Specific. Rectification coverage is typically a sub-limit on your standard contractor’s liability policy, but some carriers will allow the insured to add the coverage on a project specific basis. However, they also will additional requirements in correlation with the project specific coverage.


Limitations

-Cost. A rectification claim is not a claim that the contractor will come out of scot-free. There is a significant financial responsibility that they must assume in the event of a claim. Professional liability policies typically have a self-insured retention (SIR) of $250,000 and upwards that the contractor is responsible for in the case of a claim. This SIR applies to any claim on the policy, including a rectification claim. Aside from the SIR, the insurance carrier requires a co-insurance on a rectification claim and most companies require a 20% co-insurance. The substantial out-of-pocket expense for the contractor for this type of claim often means that more feasible for large contractors. However, as things continue to change in the professional liability insurance hopefully, it will become more financially accessible to more contractors.

-Future consequences. If you do need to make a claim under your rectification coverage, it may be difficult to obtain insurance in the future as it suggests that you are a higher insurance risk. In the event you can purchase coverage, it will likely be much higher than you paid before.


How does Rectification Coverage Differ from Other Coverages?

You may be familiar with protective indemnity coverage, which is covered in excess of a professional liability coverage and protects the owner of the building from damages incurred by the contractor. Rectification coverage differs in that it is not an excess coverage, but replaces the liability coverage when used. Also, it is a coverage that protects that contractor rather than the owner. As touched on earlier, rectification also differs from contractors’ liability coverage as there is no need to determine negligence or to go to court.

Rectification coverage can be a very useful coverage, but may not be appropriate for every situation. Contact your insurance agent or carrier with further questions or you are in need of rectification coverage.

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

Small Business Subcontracting Faces More Scrutiny (Compliance)

Small Business Subcontracting Faces More Scrutiny (Compliance)

Gone are the good old days of wheeling and dealing. If you're working with subcontractors, you need to keep an eye on compliance. It doesn't matter if you're working on federal, state, local or prime contracts – you need to know the legal ramifications of every action, and explain them to your subcontractors.

As a construction contractor, you pay close attention to your local subcontracting community. You need to know where you can get great work done when you need it. You even need to know where you can get cheap work done now and then. You know the subcontractors in your area, but are you familiar with the legal ramifications of working with subcontractors on federal contracts?


Get It Right the First Time

Unless you fancy yourself the center of a federal investigation that could end up costing you millions, it's imperative to stay on top of compliance right from the start. You must employ robust compliance measures when working on any and every government contract.

If you don't, you could find a number of government agencies banging on your door. Just a few of the organizations that deal with subcontractors include:

  • The Small Business Administration (SBA)
  • The Federal Acquisition Regulation (FAR)
  • The U.S. Department of Transportation (DOT)
  •  Disadvantaged Business Enterprise Program (DBE)

While we won't go into all the federal regulations, these agencies enforce (as that would take a number of full-length books), a few examples should help illustrate how these organizations work. Take note that negligence is not punished as severely as purposeful actions. 


Tired Trickery

Nationwide Supply and Fence found themselves in a lot of trouble in 2015. They claimed to have used a DBE-qualified company on a number of federally funded projects. In reality, the company had hired a non-DBE company to supply the materials. Then they directed the DBE company they claimed to be working with to make it seem as though they were providing the materials – not the non-DBE business.

This dog-and-pony show resulted in $1.75 million in fines to settle allegations stemming from the project. In addition, one of Nationwide Supply and Fence's former officers was personally dinged over $350,000 to settle further allegations resulting from the trickery.


Masked Markups

Nationwide wasn't the only company in trouble. Yonkers Contracting in New York found themselves ordered to pay over $2.5 million after they violated a DBE program on a federally funded contract.

The company hired Global Marine Supply to provide steel on a DBE federal contract. Global Marine Supply bought the steel from a non-DBE company, then added a 1% markup and sent it to Yonkers. All the while, Yonkers Contracting knew exactly what Global was doing and had signed off on it.  


SKYLINE

As is clear from the above examples, construction contractors can’t afford to ignore subcontracting requirements on federal contracts. If you do so, you could be held accountable for quite a costly sum. Focus on reducing your compliance risk by making sure all subcontractors understand DBE guidelines. 

Have questions about compliance regulations for your business? Contact Skyline Risk Management, Inc. (718) 267-6600 to voice your concerns. 

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. 


Who Is the Named Insured on Your Policy?

Who Is the Named Insured on Your Policy?

In most cases, any business owner understands who the named insured is on their commercial insurance because they see it listed in black and white on the declaration page. However, many business owners do not understand that the named insured could change during the term of the policy depending on the obligations of the business. In many cases, affiliates of the business or interests in the business may change during the term of the policy. Yes, it can be confusing for the business owner and the agent, but it's better to get it done right in the first place, than to go to court and prove your intentions after a loss.


Named Insured

For personal insurance like a homeowner or personal auto policy, the named insured is very apparent and typically refers to the person taking out the insurance and their spouse. But, if you dig a little deeper in the policy jacket, the company usually defines what a named insured is, and it may be a little broader than the names on the policy. For example, an auto policy may define a named insured as the person(s) listed on the declaration page and resident relatives. Since the text in an insurance policy package is written by lawyers and insurance experts, the best method is to have an agent or broker explain the terminology for you.

In the case of business, the business and its owners and subsidiaries are typically considered "named insureds." The "named insured" in a business policy has the broadest coverage protection regarding coverage and indemnity under the policy. They are the party or parties that choose the coverage, limits, and deductibles, and receives the important notices from the insurer. Once again, most commercial insurance policies will provide a definition of the "named insured" somewhere in the policy package, typically at the beginning.


Additional Insured

An additional insured (AI) typically refers to a person or entity that is added to the "named insured's" policy by an endorsement (policy change). This endorsement is used to provide coverage for the person or entity named on it only for claims that arise out of the acts or omissions of the primary insured. The additional insured is not included on the list of parties that receive notices concerning the policy.

For example, if you are the owner of a painting business and you hire a subcontractor to paint a building that you have been contracted to paint, you would require your subcontractor to add your company as an additional insured on the subcontractor's general liability policy. Therefore, if a claim arises that the subcontractor is liable for, your company would be protected to the extent of liability limits in the subcontractor's general liability policy.

Although some insurers will automatically add additional insured status that results from contractual obligations, many will require the agent of record to submit an endorsement to get the additional insured coverage and charge an additional premium per request. This means that if you are the party requesting to be listed as additional insured, you should request proof that the change was completed by other means than an insurance certificate. Anyone can print out a blank certificate since they are available online.

Finally, it's important to point out that an additional insured is only entitled to coverage for claims related to its relationship and dealings with the named insured.


Additional Named Insured

An "additional named insured" is typically a party named elsewhere in the insurance contract than the declaration page. This party has the same coverages afforded to the named insured and is entitled to notices of policy changes and cancellation notices, but is not responsible for premium payment. For practical purposes, the "additional named insured" is typically an affiliate, co-owner, or partner of the primary insured.

In the case of an "additional named insured," the party is covered for claims, whether the named insured is named or not and whether the loss is related the dealings that the "additional named insured" has with the primary "named insured."


SKYLINE

The good news is that for most businesses, you need only to be concerned about the named insureds and on occasion, additional insureds. But, you are not alone. Your business can rely on the insurance professionals at Skyline Risk Management to make certain that your interests are well protected in every business relationship you share with us. 

If you have questions or concerns regarding additional insureds contact Skyline Risk Management, Inc. at (718) 267-6600.  


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.