0. Theory vs. Reality: Does Default Insurance deliver a better claims process and result?
Willis Construction Risk Management Conference
New Orleans - September 11, 2013
Bill Noonan, VP of Risk Management at StructureTone
David Dekker | Pillsbury Winthrop Shaw Pittman LLP
Luke Nolan, SVP Willis
Brian Carpenter, SVP Willis

1. AGENDA Claims Comparison Notice of Default Proof of Loss
Proof of Loss Administration of Claim
Payment of Claims
Subrogation

2. Default Insurance Carrier
Subcontract rights
Traditional Surety
Premium
Policy
Claim Pmt.
General
Contractor
General
Contractor
Payment
Claim PMT.
Default
Insurance
Bond
Subcontract
Subcontract
Subcontractor
Subcontractor
Premium
Surety for
Subcontractor
Indemnity
Subrogation
Three Party Surety Relationship
Two Party Insurance Relationship

3. Default Insurance Carrier
Proof of
Loss
Subcontract rights
Proof of Loss
Policy
Claim Pmt.
General
Contractor
Subcontract
Subcontractor
Subrogation
Two Party Insurance Relationship

4. Claims Comparison Zurich Arch XL Loss Trigger Default Termination
Claims Handling
In-house
TPA
Notice of Loss
180 days (30 days)
180 days
5 days waive co-pay
30 days
Claims Reporting
Earlier of 10 years or statute
Earlier of 5 years or statute (up to 10 years available)
Claims Payment
30 days of POL;
No payment if any deficiency
Pays non-deficient portion
Subrogation
Carrier recovers full loss first
Insured receives 5% of recovery

5. Notice of Default REALITY Subcontract terms guide
“Default” is triggering event
Subcontract terms guide
“Formal” notice of default issue (not a “threat)
Carrier notice period
Within 180 (5) days of becoming “aware”
Carriers have been soft in enforcing
Contesting of a default
Carrier cannot contest
“as determined by you (insured) or a legally binding authority”
REALITY

6. Proof of Loss - Defined
“Written description and supporting evidence that document a claim is a covered loss and quantifies the amount of the loss”
Direct Loss:
Completing scope
Correcting defects
Professional expenses
Insured’s costs
Indirect Loss:
Not directly attributable to subcontract/PO
LDs, acceleration, extended OH

7. Proof of Loss - Administration
Indemnity policy – insured has burden of proof Earlier of 10 years (generally) or statute “Deficiency” in proof of loss May or may not hold up entire claim 30 days to cure deficiency Interim proofs of loss Documentation is the key!

8. Payment of Claims
Payment within 30 days of satisfactory proof of loss Interim proofs of loss paid les 5% Subrogation & recovery Carrier will pursue the subcontractor

9. QUESTIONS?
Thank you for your time!