OCIPs and CCIPs

A recent article in the Construction Executive (April 2009) points to the need to have the insured place collateral for two types of financial loss...paid loss and incurred losses. To me this is much like the analysis one does with a workers comp fund, that is requiring negotiation of collateral, reviews of history of claims, identifying those areas of the country and projects that bring the most exposure to the table and of course a determination of which contracting entities should be part of your plan. What other criteria do you look for in evaluating how to create and protect your OCIP or CCIP?

Missouri Construction Contract Subrogation Claim Allowed Even Though A Waiver Exists

The Western District decision of Knob Noster R-VIII School Dist. v. Dankenbring, 220 S.W.3d 809 (Mo. Ct. App., W.D. 2007) interprets A201-1997 to not apply to work beyond the scope of the contractor's work.  Interesting........

Design professional insurance

What are the reasons behind third parties, especially owners being added to to design professional policies....or not being added?

Ken Holland brings up some interest points....and notes changes in Texas laws concerning the same, effective December 2006.

First, the expansion of coverage to additional insureds could expand the designated coverages beyond that traditionally outlined for design professionals.  One point Ken outlines is a traditional change order could now be asserted against the design professional policy. Better talk about the issue of insurance coverages shared with someone other than a design professional with you insurance underwriter.

Texas has appeared to expand design consultants and their insured's risks dramatically. I have not reviewed the exact language but I will need to look into it as soon as possible.

How about you?

Insurance coverages

Insurance, insurance, insurance......does umbrella coverage cover ALL possible gaps in coverage that would exist with CGL policies? A recent article in the CFMA magazine points out the deficiencies in CGL coverages may NOT be picked up in an umbrella coverage including pollution, professional liability, uninsured motorists, additional insured coverages, "wrap-ups" (OCIP\CCIP) and the like....I would suggest that you contact your insurance professional to completely review ALL of your coverage issues.

Fiduciary Duties of Business Owners and Insurance Policies

How often have you decided to purchase a policy of insurance for your employees or for a benefit plan? Well most folks I know rely heavily upon an insurance agent for direction in the purchase of a plan.

A recent case (Gregg v. Transportation Workers (6th Cir., 2003)) stands for the proposition that you can NOT simply rely upon the representations of an insurance agent. As the Court noted "requiring that a fiduciary read the policy he signs and that he have a basis understanding of its most important provisions does not ask too much."

So if you sit on a committee overseeing benefit plans or you are owner of a company who purchases policies for employees, you had better understand the policy of insurance!

Greg Ash of Spencer Fane Britt & Browne LLP turned me on to this case. Call him at 913-451-8100 for more information.

"Collapse" of a Building and insurance coverage

J. Kent Holland of ConstructionRisk.com reported on an interesting case where a building that was in need of serious repair was reported to the insurance company for handling or should I say coverage as in "pay the claim"........but the claim was denied as the building had not "collapsed". On appeal the decision was reversed and coverage was allowed.

The point is that with every insurance policy there will be a battery of attorneys seeking to limit payment of claims...in this instance it did not work, but note that you should document factually and legally your basis for a claim and not assume all claims will be paid easily and quickly.

Some times collapse really does mean the building is still standing!

Captive insurance companies

Now I am a deal killer…A Construction Magazine article appearing in the April 2006 edition of the magazine  is advanced by the authors Reg Wilson and R. Wesley Sierk III in support of the use of captive insurance companies to lower costs and increase profits.  A few articles in the same magazine there is an article entitled “A Surety User’s Best Practices Checklist:, suggesting a construction company should review closely the surety company.  One should not suggest that all captives are suspect, but given the tax, liquidity and solvency issues that have plagued these entities, it is essential to examine the creditworthiness of these entities should you decide to do create one for your business please be sure that you understand the financial risk to you in insuring yourself. through a captive.  If you insure through a captive, especially those set up through an offshore corporation, be guided by the following maxim in dealing with such companies…“Trust but verify” the fiscal condition of such companies.

Insurance coverage for multi-family residences

The Construction Magazine for April 2006 notes that the only way to obtain a general liability coverage for multifamily development for developers is through an OCIP. I conducted a couple of seminars for a local mechanical contractors association and for the monthly teleseminar I conduct on this point…but is it true as the article would suggest that it is the only tool available?  Not to my recollection…what say you?  I would suggest that this is a growing phenomena, one that will require an increased awareness and understanding.  Yet I am not sure this product has been fully developed or understood.

OCIP\CCIP

In most of my prior "rants" concerning OCIP\CCIP's I failed to mention the tax advantages of these entities. If created as a captive, certain deductions as permitted by the IRS can be obtained for your corporation.  Yet another reason why this insurance device should be closely examined....and scrutinized.

ERISA Plans and Insurance Policies

A recent case involving Raytheon points out the continuing need to review insurance policies...this time in the context of fiduciary liability policies related to ERISA plans. Seeking insurance coverage where former participants in Raytheon's ESOP plan filed suit against the company and its executives for mischaracterzing the strength of the company stock, Raytheon was dismayed to learn the insurance carrier did NOT have to defend or extend coverage pursuant to an exclusionary provision in the policy. As Greg Ash of our firm reported to me "The result [was] that Raytheon is on the how for all of its defense costs, as well as any damages ultimately awarded".

Add these policies to your list of insurance policies you review annually. Call Greg Ash for specifics on this case at 913-327-5115 and what to do to protect your plan.