Presentation on theme: "Local Agency Certification Training The Nuts and Bolts of Insurance March 12, 2010 Ronda Hollis, CPCU ODOT Intergovernmental Agreements and Procurement."— Presentation transcript:
Local Agency Certification Training The Nuts and Bolts of Insurance March 12, 2010 Ronda Hollis, CPCU ODOT Intergovernmental Agreements and Procurement Risk Manager
What is the purpose of Insurance in a Contract? Insurance is a financial source to make claims against in the event a contractor is negligent and this results in a loss e.g. bodily injury, property damage, or personal injury.
Where Does Decision-Making about Risk, Insurance, and Bonding Fit in the Procurement Process? At the inception of an idea that something needs to be procured. This is an essential part of the procurement planning process. Far down the road, the value is greatly diminished.
How Does Insurance Work? Insurance policies tend not to overlap with other types of policies. There are some perils that insurance policies just dont cover: Intentional Harm or wrongdoing, other than self-defense. Crimes, other than defense coverage until found guilty. Specialty markets exist for those perils that are too risky, too small, unpredictable, or not profitable for traditional insurance markets: Pollution Liability Professional Liability
How Do Contractors Get Insurance? Usually from an insurance Broker that is licensed to do business in the State of Oregon. Most insurance companies dont sell insurance directly to the contractor. The premium can widely vary and is based on: –Financial condition. –Previous claims. –Reputation (jobs gone good or bad). –Market Conditions.
What About Insurance Company Ratings? Commonly referred to as Bests Rating. Denotes the insurance companys: –Financial Condition and solvency. –Claims Payment timeframes and issues. –Complaints and lawsuits. –Quality of investments. While the contractors insurance companys rating is important, it is difficult for procurement offices to have the rating information readily available. Many construction companies buy insurance coverage from what are called surplus lines companies. –These insurance companies are not rated.
Types of Insurance Companies Insurance is provided by both admitted and surplus lines carriers. –Admitted insurers have Certificates of Authority to sell insurance in this state. –Surplus lines carriers are insurers that do not have Certificates of Authority in Oregon, but they can still insure contractors who cannot get coverage in the regular, admitted market. –85% of the carriers that provide the majority of contractor liability coverage in Oregon are admitted insurers.
Are Contractors Required to Purchase Liability Insurance? Oregon law requires building contractors to carry Commercial General Liability insurance. The State Construction Contractors Board will not issue or renew a contractor license without proof of insurance. There is generally no requirement of insurance for other types of contractors. Coverage limit requirements vary depending on the contractors license category. –Many contractors carry coverage in excess of CCBs requirements.
What About Self-Insurance?
What is Self-Insurance? A company or entitys self-funded insurance program. Some entities have funded self- insurance pools, others just pay losses as they happen. For the most part, only very large companies or public entities self-insure. Sometimes self-insurance has excess commercial insurance coverage for catastrophic events.
Before Accepting Self-Insurance Make sure the contractor has the financial stability to be self-insured. Ask for: Audited financial statements of their self-insurance fund. Assurance that funds have been set aside in a funded reserve to pay claims. Ask for policies, procedures, or other adequate documentation demonstrating the contractors ability to adjust, process, settle, litigate, and pay claims.
The Insurance Market
What are the Current Issues Surrounding Contractor Insurance? Premium rates for contractor liability insurance were greatly increasing from The DCBS analysis from 2005 indicates contractor premiums are flattening out or possibly even decreasing. More insurers are entering the market, and capacity has increased. Insurers criteria for issuing policies has grown much tighter. In some cases contractors find that while they are readily able to get or renew coverage, that coverage is more limited and thus leaves them with increased exposure to liability risk.
How Much Has the Cost of Contractor Insurance Increased? Rate filings submitted to the DCBS Insurance Division in 2004 by admitted carriers show overall average premium rate increases of 19 percent. In the 2005 analysis premium increases had greatly declined. Some premiums have been decreasing. The more dramatic rate changes experienced by many individual contractors has decreased. Insurance availability has increased. Coverage continues to be less extensive than in the past (more exclusions).
Why Have Costs Increased? The insurance industry and others frequently cite a variety of factors that contribute to increased premiums and tighter underwriting standards, including: –Increased claims and losses stemming from the introduction of new building products that resulted in water damage, mold, and other problems. –Increased litigation stemming from contractor performance issues. –Lower than expected investment return due to the recent recession.
Common Insurance Policy Parts & Pieces Declarations Page – Outlines the coverage types and limits under the policy. Coverage – The Insuring Agreement. Exclusions – What isnt covered. Who is an Insured – Who is covered by the policy. Limits of Insurance – How much the insurance company will pay. Policy Conditions – Restrictions, duties, responsibilities. Definitions – What the terms mean.
Important Terms Used in Insurance Policies
What Does Claims Made or Occurrence Mean? Insurance policies are written on a claims made or occurrence basis. These terms address claims reporting time periods.
A Claims Made policy covers all claims reported and filed during the policy period.
An Occurrence policy covers all claims arising out of incidents occurring during the policy period, regardless of whether or not the policy is still in effect at the time that the claim is made.
Tail Coverage Can be purchased to extend the period of time a claim can be reported for a claims made policy. Should be required when a contractor provides insurance coverage that is on a claims made basis.
What Do Project Policy, Per Project Aggregate Endorsement and Policy Aggregate Limits of Coverage Mean?
Project Policy A policy purchased specifically for the project. Coverage only applies to the project and events that arise out of the project. Limits of coverage are dedicated to the project and cant be diluted elsewhere in the contractors operations. Premiums reflect the exclusive coverage and are substantially more than Per Project Aggregate Endorsements.
Per Project Aggregate Endorsements Means that the limits of insurance coverage apply to your project only – they are not shared with other customers of the contractor. More reliable means of assuring insurance limits will be available. Important coverage on projects where negligent acts, errors and omissions can result in catastrophic losses or claims.
Policy Aggregate Limits of Coverage Sometimes referred to as practice policies. Means you are sharing the limits of coverage with all other customers of the contractor. Less reliable than Project Coverage or Per Project Aggregate Endorsements. Limits of coverage could be exhausted by another claimant and not available if needed by your entity. May increase the chance your entity will be sued if claimant cannot get satisfaction from contractor for harm done.
Coverage Assessment What kind of insurance or bonds?
What Does Insurance Really Cover?
Common Types of Insurance Coverage Commercial General Liability Automobile Liability Professional Liability Workers Compensation
Less Common Types of Insurance Coverage Crime Excess or Umbrella Liability Pollution Liability Various Inland Marine Policies Aircraft Garage and Garagekeepers Legal Liability Tail Coverage
Commercial General Liability (CGL)
We Arent Ignoring the Exposures Other than Construction… General Liability (CGL) coverage is most applicable to the construction industry. It is the most common type of insurance required in contracts and sometimes can be thought of as a catch-all. Professional types may find little actual coverage under their CGL policies because the bulk of their work arises out of professional judgment.
Commercial General Liability (CGL) Insurance covering Third Party: Bodily injury. Property damage. Limited Contractual liability. Products and completed operations. May also cover personal and advertising injury liability.
General Liability Insurance Myths General Liability insurance covers the indemnification provided in the contract. –FALSE General Liability insurance will cover your entity if the contractors work is done negligently. –FALSE There is contractual liability coverage in a General Liability policy. –MOSTLY FALSE
Summary of the Case Emerald Pacific Homes (Emerald), Inc. contracted to build a custom home. Satisfied with neither the quality nor the speed of construction, plaintiffs brought legal action against Emerald and its owners for negligence and breach of contract. The court withdrew the negligence issue from the jury by instruction, ruling that the only duties the defendants allegedly breached derived from the contract and not from independent source of law.
Current Case Law Id. at 479. A tort claim, where there is a contract between parties, may only proceed where there is some kind of obligation owed by one party to the other beyond the duties that the contract imposes. Id. at 477. Examples of such relationships are those between lawyers and clients, doctors and patients, or trustees and beneficiaries. The court has called these special relationships. Jones v. Emerald Pacific Homes, 188 Or App 471, id at 477 & 479
Special Relationships Only Exist When: One party has relinquished control over the subject matter of the relationship to the other party; and Has placed its potential monetary liability in the others hands.
What Does this Really Mean? Claims for defects in workmanship are generally not covered by Commercial General Liability coverage because they arise from a contractual obligation rather than negligence. Contractual disputes or obligations are excluded. Performance Bonds are the best tool to protect against faulty workmanship and time delays.
CGL Policy Definitions Bodily Injury: The injury of physical tissue by an outside force, bodily harm, sickness, or disease. Personal Injury: Libel, slander, false arrest, and invasion of privacy.
CGL Policy Definitions "Property damage means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
CGL Policy Definitions "Property damage means: b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence that caused it. For the purposes of this insurance, electronic data is not tangible property.
CGL Policy Definitions "Property damage means: As used in this definition, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMS, tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
What Does This Really Mean? A CGL Policy will not pay for losses due to a contractors work on or damage to your agencys electronic data!
"Products-completed operations hazard means: a) Includes all "bodily injury" and "property damage occurring away from premises you own or rent and arising out of "your product" or "your work." CGL Policy Definitions
Except: (1) Products that are still in your physical possession; or (2) Work that has not yet been completed or abandoned. CGL Policy Definitions "Products-completed operations hazard (continued)
However, "your work" will be deemed completed at the earliest of the following times: (a) When all of the work called for in your contract has been completed. (b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site. CGL Policy Definitions "Products-completed operations hazard (Continued)
(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project. Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed. CGL Policy Definitions "Products-completed operations hazard (Continued)
Does not include "bodily injury" or "property damage" arising out of: (1) The transportation of property, unless the injury or damage arises out of a condition in or on a vehicle not owned or operated by you, and that condition was created by the "loading or unloading" of that vehicle by any insured; (2) The existence of tools, uninstalled equipment or abandoned or unused materials; or
(3) Products or operations for which the classification, listed in the Declarations or in a policy schedule, states that products completed operations are subject to the General Aggregate Limit. CGL Policy Definitions "Products-completed operations hazard (Continued)
What Does This Really Mean? Products and completed operations coverage pays claims on behalf of the contractor for damage or injury to third parties resulting from something the contractor made, repaired, or installed. The bodily injury or property damage to third parties resulting from the service would be covered not the contractors actual product.
CGL Policy Definitions (Continued) Contractual Liability: A portion of Commercial General Liability coverage that allows limited coverage for liability assumed under the contract. The coverage allowed by Contractual Liability includes: Liability assumed under an insured contract. Liability that the insured would have in the absence of the contract or agreement.
What is an Insured Contract? Per the CGL Policy Definitions, an Insured Contract means: A contract for a lease of premises. A sidetrack agreement (a railroad term). Easements. Agreements required by municipalities as a result of ordinances (not for work done for municipalities). Elevator maintenance agreements. Liabilities that would be imposed by law in the absence of any contract or agreement.
Important CGL Exclusions 1) Personal property in the care, custody or control of the insured; What Does This Mean? CGL will not cover property left in the care, custody or control of a contractor. This exposure should be covered with an Inland Marine Policy for the Goods of Bailees Customers.
2)That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage arises out of those operations; or Important CGL Exclusions What Does This Mean? CGL will cover property damaged by the contractor, except for the particular part they are performing work to.
Particular Part Example A plumbing subcontractor working on a building owned by your entity and accidentally starts the building on fire while soldering copper pipes, and the entire structure is burned down. If your entity sues the builder for the loss, the exclusion in question will apply only to that particular part of the structure on which the plumber was working.
Thus, your entity would be covered (on an excess basis over any builders risk coverage on the work) for damage to all parts of the building other than the plumbing and all parts of the plumbing system other than the particular part being worked on at the time of the loss. Particular Part Example (continued)
3) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it. Important CGL Exclusions What Does This Mean? CGL will not cover a contractors faulty work. This exposure can be covered through a Performance Bond as long as the project has a specific time frame and specifications for the work.
Important CGL Exclusions Pollution (1) "Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants. What Does This Mean? CGL will not cover any type of pollution, except under very limited circumstances. If your agency needs to remediate pollution or has a pollution exposure, Pollution Liability coverage is needed.
Important Exceptions to the CGL Pollution Exclusion "Bodily injury" if sustained within a building and caused by smoke, fumes, vapor, or soot from equipment used to heat that building; "Bodily injury" or "property damage arising out of heat, smoke or fumes from a "hostile fire";
"Bodily injury" or "property damage arising out of the escape of fuels, lubricants or other operating fluids which are needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of "mobile equipment" or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold, store or receive them. Important Exceptions to the CGL Pollution Exclusion
Automobile Liability Insurance that provides coverage for third party bodily injury or property damage arising out of the use of an insured vehicle.
When Do you Need Automobile Insurance Coverage? When the contractor needs to use an automobile to provide the services.
Commercial Automobile Coverage vs. Personal Automobile Coverage? Commercial Automobile Coverage is needed whenever the contractor will be transporting your entitys employees, clients, etc. or your entitys property. Use of Personal Automobile coverage instead of Commercial or Business Automobile coverage may be appropriate for sole proprietors. Note: The sole proprietor must either carry a Business Use Endorsement or insure that business use is covered under their personal auto policy. Personal Automobile coverage will not name your entity as an Additional Insured.
Automobile Liability Coverage Considerations Ask questions, such as, but not limited to: –Will the Contractor transport groups of people for your entity? –Use vehicles or carry cargo that could make an accident severe? –Have multiple vehicles on the road at any given time? –Travel out-of-state to do contract work? –Bring heavy equipment or trucks onto your property?
Automobile Liability Coverage Considerations –Will driving be only a small part of the contractual activities? –Is there little or no chance that your entity could be held responsible for the Contractor's actions while driving?
Use whenever a Contractor transports mobile equipment to the work site: –CGL insurance does not cover the transport of mobile equipment. –Ensure automobile liability includes coverage for owned, non-owned or hired vehicles. –Require CGL coverage for the liability exposure arising from the Contractor's operation of the mobile equipment. Note: Mobile equipment is not considered to be an automobile, therefore an Automobile Liability policy provides no coverage for the operation of this equipment. Automobile Liability Coverage Considerations
Professional Liability or Errors and Omissions Coverage
A Professional Liability Policy Insuring Agreement We will pay damages and claim expenses in excess of your deductible, subject all other provisions of this policy, that you become legally obligated to pay because of claims that arise from your negligent act, error or omission in the performance of your professional services…..
The Terms Professional Liability and Errors and Omissions Coverage are used interchangeably.
Who Should Have Professional Liability or Errors and Omissions Coverage? Licensed and accredited specialists such as: Doctors or medical practitioners. Engineers. Information technology specialists (computer programmers, etc). And non-licensed professionals such as interpreters, recorders, testing facilities, and research laboratories.
What Does Professional Liability or Errors and Omissions Cover? Pays the financial loss of the your entity, when the covered person fails to perform their professional duty. The coverage is specific to the nature of the profession. Covers malpractice, misconduct, negligence, errors, omissions, or incompetence in the performance of a covered act.
Workers Compensation Insurance covering employee injuries, disability or death. The policy protects the employer from being sued by the employee for injuries. Oregon law requires all employers, unless exempt, provide this coverage for all subject employees working in Oregon.
When Should I Ask Questions About Oregon Specific Workers Compensation? When the contractor has one or more employees performing services under the contract in Oregon.
What is Employers Liability Coverage? Workers compensation coverage and employers liability coverage interact and work together (Part B in Oregon). Workers compensation pays benefits to employees injured on the job without regard to fault. In return, the injured worker gives up his or her right to sue the employer. Workers compensation coverage is usually the exclusive remedy for employee injuries but not in all cases. Situations develop from time to time where an employer is liable for injuries to its employees and can be sued.
Employers Liability (continued) Examples of Employers Liability situations include: Claims for injuries or diseases not covered by state workers compensation laws; Intentional tort claims; Third-party over actions; Consequential injuries to an injured employee's family members, such as loss of services or loss of consortium; and Dual capacity claims, in which an employer is said to also be in an additional capacity. This is one involving its relationship to the public and for which it can be held liable for employee injury damages under common law, liability or tort principles.
Specific questions about Workers Compensation? Call the Department of Consumer & Business Services, Workers Compensation, Employer Section at (503)
Employee Dishonesty, Third Party Fidelity and (when applicable) Money and Securities Insurance covering loss to money, securities, and other property (other than money) caused directly by employee dishonesty.
When Do You Need to Ask for Employee Dishonesty Coverage? When the contractor is handling money, securities, other valuable property, or data.
Third Party Fidelity Bond If the Employee Dishonesty coverage is not specifically endorsed to include a Third Party Fidelity/Crime Bond, in most cases, it will not be comprehensive enough to provide coverage for a claim for theft by your contractor or their employees that results in a loss for your agency.
What is the Difference Between an Umbrella Policy and Excess Coverage?
Umbrella Policies Provide excess coverage over another underlying liability policy. Many times provides broader coverage than the primary (underlying) liability policy.
Excess Liability Pays after the primary (underlying) liability policy limits have been exhausted. May not be as broad as primary (underlying) liability policy.
Pollution Liability Coverage
Contractors Pollution Liability Coverage (CPL) & (CPO) Contractors Pollution Liability (CPL) and (CPO) protects contractors against claims for third-party bodily injury, property damage or cleanup costs/environmental damages arising from pollution conditions caused in the performance of covered operations.
The coverage applies to sudden and gradual pollution events and responds to cleanup costs, both on and off the work site. CPL provides coverage for damages due to pollution arising from the performance of covered operations by the Insured or their subcontractors, claims alleging improper supervision of subcontractors against the Insured, and coverage for claims arising out of environmental work performed by the Insured or their subcontractor. Contractors Pollution Liability Coverage (CPL) & (CPO)
CPL provides this coverage in a claims made basis and Contractors Pollution Occurrence (CPO) provides this coverage on an occurrence basis. CPL and CPO can have a Professional Liability component added. This coverage would likely be needed for Environmental Consultants. If the contractor will be transporting hazardous materials or pollution that has been removed through remediation, check the policy to make sure that the transportation exposure is included in the coverage. Contractors Pollution Liability Coverage (CPL) & (CPO)
Inland Marine Coverage
What is Inland Marine Coverage? Coverage for property which involves an element of transportation. Either the property is: –Actually in transit, –Held by a bailee, –At a fixed location which is an important instrument of transportation, –Or is a movable type of goods which is often in different locations.
Various Inland Marine Coverages
Kinds of Inland Marine Insurance 1.Domestic goods in transit; 2.Goods of Bailees customers; 3.Moveable equipment and unusual property; 4.Property of certain dealers, and 5.Instrumentalities of communication and transportation.
Goods in Transit Types of Carriers: Common carriers are airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their services. Contract carriers do not hold themselves out to the general public but rather furnish transportation for certain shippers for which they have contracts. Private carriers haul their own goods or goods entrusted to them.
Goods in Transit Common Carriers Are regulated by the Interstate Commerce Commission or a state public utilities commission and are liable to shippers for the safe delivery of freight entrusted to them. The amount of liability to the common carrier may be limited by the bill of lading, which is the contract between the shipper and carrier.
Goods in Transit Common Carrier - Bill of Lading A straight bill of lading fixes no limit on the amount of recovery. A released bill of lading does limit recovery to a specified amount. –Generally low and usually are quoted as dollar amounts per pound or parcel. The shipper generally has the option to pay an insurance charge and declare a value for the shipment thereby increasing the limit of the carriers liability and obtaining broader coverage.
Goods in Transit Contract Carrier The liability of contract carriers is defined by the contract between the carrier and the shipper. If contracts are initiated by the carrier, they often release the carrier from substantial responsibility except in the case of extreme negligence.
Goods in Transit Private Carriers Private carriers usually are carrying their own goods and are exposed for the full value of those goods if they are damaged or destroyed, subject to the Terms of Merchandise Sale.
F.O.B means free on board and indicates the point at which ownership and exposure to loss shift from the seller to the buyer. For example: –F.O.B. shippers loading dock means that the transit exposure would be the buyers once the goods are on the shippers loading dock. –F.O.B. destination means that the transit exposure would be the sellers until the goods reach the buyers destination. Goods in Transit Private Carriers – Terms of Merchandise Sale
Goods of Bailees Customers A bailment exists when goods are left to be held in trust for a specific purpose and returned when that purpose has ended. The bailor is the owner of the goods. The bailee is the one in possession of the goods. Almost any person or enterprise that accepts the property of your entity for storage, service, repair, or processing needs to carry an Inland Marine Policy for the Goods of Bailees Customers in order for this property to be covered for loss or damage while in the bailees possession.
Inland Marine Coverage Instrumentalities of Communication and Transportation Exposures related to transportation (rolling stock, bridges, and tunnels) can be insured using inland marine insurance. Inland marine insurance can also be provided on instrumentalities of communication such as television towers and transmission equipment.
Other Types of Inland Marine Coverage Tractors, mobile equipment, cranes, and backhoes. Computer equipment. Livestock. Fine arts. Patterns, molds, and dies. Partially completed products that are sent to another location for completion or processing. Valuable papers, records, records of accounts receivable. Goods on exhibition.
When Should Your Agency Require Inland Marine Coverage? When agency goods or property are being transported by another entity. When agency goods or property are left in the care, custody, and control of another entity. When a contractor is transporting state equipment from one place to another. When state property is placed on exhibition by another entity e.g. artwork, historical documents, artifacts, etc.
Builders Risk Coverage Inland Marine Insurance that provides direct damage coverage to buildings or structures under construction. Also covers foundations, fixtures, machinery, and equipment used to service the building, materials, and supplies used in the course of construction. Can be purchased to cover property damage during construction to bridges, roads, culverts, etc. Fire, theft, and vandalism are the most frequent claims.
When Does Your Agency Need to Ask for Builders Risk Coverage? When a building is being constructed. When substantial alterations will be made to an existing structure i.e., bearing walls, lifting foundations, extensive construction.
When Your Agency Doesnt Need to Ask for Builders Risk Coverage For construction to an existing building that does not involve structural modifications, or substantial alteration of the building. Generally for construction of structures other than buildings e.g. tunnels, bridges, roads, culverts, etc.
Builders Risk Installation Floater Usually an add-on to a Builders Risk Policy, but may be purchased separately by subcontractors on the project. Insurance that covers machinery and equipment of all kinds during transit, installation, and testing at the purchasers premises. Theft and vandalism are covered.
When Should You Require a Builders Risk Installation Floater When a building is being constructed, repaired, or remodeled and there will be: More than $10,000 in building materials and supplies at a storage location, or in transit that are intended to become a permanent part of the building.
An add-on to a Builders Risk Policy. Allows Builders Risk coverage to continue once the owner or tenants occupy a building under construction prior to substantial completion of the building. If not purchased, Builders Risk coverage ends once the building is occupied by the owner or tenants. Builders Risk Occupancy Clause
Aircraft Liability Covers liability for bodily injury and property damage to others (i.e., injury to, or death of persons outside the aircraft as well as property damage or destruction done with the aircraft), arising out of the ownership, maintenance, or operation of an aircraft.
When Do You Need Aircraft Liability Coverage? When the contractor is using an airplane to provide the contracted service.
If the contract involves the aerial application of any chemical, fertilizer, seed, or bait add Aircraft Aerial Application Liability Coverage. Check the qualifications and certifications of the pilot. If carrying state passengers on behalf of your entity, make sure that: (1) The pilot is certified to carry passengers and (2) The Aircraft Liability provides coverage for the passengers on a per seat limit. Aircraft Liability Coverage Considerations
Garage and Garagekeepers Legal Liability Coverage
Garage Liability Coverage Covers garage operators for liability, medical payments, and automobile physical damage arising out of the operations of auto dealers, service stations, auto repair shops, and parking lots. Includes General Liability coverage for garage operations.
Garagekeepers Legal Liability Coverage Coverage for autos left for service, repair, storage, or Safekeeping. The limits of coverage should be high enough to cover the total value of any autos left for safekeeping (yours and others) at any time.
Supplemental Clauses ICING ON THE CAKE
Additional Insured Protects your entity when named in an action that is not its responsibility or fault. Ensures that the contractor or service providers insurance company will expend funds to have your entitys name removed. Your entity benefits by not having to use its assets for litigation purposes. Does not cover your entity for your own negligence (ref. Walsh Construction Co. vs. Mutual of Enumclaw and ORS (1))
Should be issued as an endorsement to the contractors insurance coverage. The endorsement to the contractors insurance coverage may be issued on a blanket basis that applies to any entity the contractor enters into a contract with. Additional Insured
Notice of Cancellation or Change Requires the contractor or service providers insurance company to notify us if: There is a possibility of the policy limits being exhausted. The policy is cancelled or non- renewed.
What is a Bond?
A Surety Bond is a risk transfer mechanism that performs the following functions: Guarantees that the bonded project will be completed according to the terms of the contract and at the determined contract price. Guarantees that the laborers, suppliers, and subcontractors will be paid even if the contractor defaults. Relieves the owner from the risk of financial loss arising from liens filed by unpaid laborers, suppliers, and subcontractors.
What is a Bond? (Continued) Reduces the possibility of a contractor diverting funds from the project. Provides an intermediary (the surety) to whom the owner can air complaints and grievances. Lowers the cost of construction in some cases by facilitating the use of competitive bids.
Bonds? Bonds are different from insurance. A bond is a simple guarantee. If there is a loss, the bonding company (Surety) will pay but will seek full reimbursement from the contractor. Premium is based on the contractors loss experience, assets, and finances.
Why Require Insurance and Bonds? You can contractually make the provider of the good or service responsible for their negligence. However, if the contractor does not have a way to pay for these losses, then the contract alone will not protect your entity. Insurance and bonds are ways to backup contract indemnity statements.
What Are The Typical Kinds of Bonds Used in Contracts?
Bid Bond Provides financial assurance that the bid is submitted in good faith and that the contractor intends to enter into the contract at the bid price and if stated in the bid, provide the required performance and payment bonds.
Performance Bond Protects your entity from financial loss should the contractor fail to perform the contract in accordance with contract terms and conditions.
Payment Bond (Labor & Materials Bond) Guarantees that the contractor will pay certain subcontractors, laborers and material suppliers associated with the project.
Maintenance Bond Protects your entity against defects in workmanship or materials (usually for two years) after the contractor has completed the work.
Additional Bond Information Bond terms are usually 12 – 24 months. The bond amount requested depends on the risk of the contract. In most cases, bonds cost about 1% - 3% of the contract amount.
Scenario A city needs to procure construction services for the removal of an old foot bridge and construction of a new foot bridge in town. The old bridge railings contain lead, but it will not be remediated on-site. Traffic will be detoured during construction, however, it is imperative that the project take no more than 3 weeks to complete or businesses will be negatively impacted. What kinds of insurance or bonds should be required of the contractor for this procurement?