HM-MMA Powerpoint When Crap Rolls Uphill 2015 AGC

When Crap Rolls Up Hill!

Presented by: Michelle Lounsbery J.D., MBA, CRIS

ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC

INTRODUCTION

• Grew up on a custom harvesting crew

•http://www.youtube.com/watch?v=_lqR-KpNUx4

• Daughter of

• Sales Executive/Business Compliance for Howalt+McDowell Insurance

2May 1, 2023

http://www.youtube.com/watch?v=_lqR-KpNUx4

http://www.youtube.com/watch?v=_lqR-KpNUx4


• “Except in the middle of a battlefield, nowhere must men coordinate the movement of other men and materials in

the midst of such chaos and with such limited certainty of present facts and future occurrences as a huge

construction project. …Even the most painstaking planning frequently turns out to be mere conjecture and accommodation to changes that must necessarily be of

the rough, quick and ad hoc sort, analogous to ever-changing commands on the battlefield.”

– Blake Construction vs. Coakley

• https://www.youtube.com/watch?v=Pk7yqlTMvp8

• 3May 1, 2023

https://www.youtube.com/watch?v=Pk7yqlTMvp8

ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC 4May 1, 2023

OBJECTIVES:

• What is risk

• Ways you transfer risk

• Contracts

• Insurance

• Insurance certificates

• Managing insurance certificates

• Crappy Advice


What is risk?• Risk is the foundation for this discussion and why we are here

today!

• A situation involving exposure to danger

• Questions to ask in regards to risk?– Which party has the risk? – Which party has the ability to manage the risk?– How do we want to handle the risk?

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Ways you transfer risk• By Contract provisions

– Allocate, limit and exclude certain risks– Indemnification, Limitation of liability, Wavier of Consequential damages,

waiver of jury trial – Best way to transfer risk

• Insurance – Assure the financial viability of a party, fund the recovery of damages

suffered by the negligence of a party, and insure the risk assumed by a party in the indemnify provisions

• Both can and should be used

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Contracts

1) Can completely eliminate risk How do you do this?

2) Can be verbal or written• Best in Writing• Email can serve as writing

3) Contract triggers insurance coverage

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Insurance

• For You

• For Your Subs• What should you request? • Can you request more than that is asked of

you?

• How do you know what your Subcontractors have for insurance?

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Insurance Certificates• Contrary to what appears to be a common belief, a certificate

of insurance has no bearing on the insurance coverages being represented in the certificate

• ACORD PROVIDES: – A Certificate of Insurance is NOT an insurance policy, and

does not serve to provide, endorse, amend, extend or alter in any way the terms of an insurance policy. Only an endorsement, rider or amendment to the policy can effect changes in coverage. Reference to a contract between the client and a third party on a certificate does not provide coverage.

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Managing Insurance Certificates and Requirements

How do you do this now?

What do you consider managing?

Do you ask to be an additional insured?

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You may not have, what you think you have!

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Test Case• American Risk Management Resources Network LLC

(IRMI July 2015)

• Conducted an Audit of Insurance Requirements vs. Insurance certificates received and Actual Insurance Policies

• Simple insurance requirements

• Material defect rate was 9 out of 10

• 90% of required insurance coverages were not met by vendors/subcontractors/suppliers

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ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC 13May 1, 2023

WHAT!!!!!!!!!


WHAT? Did you say 90% failed…YES!• In the review, there were two phases:

• 1) First reviewed requirements to insurance certificates received. Found all certificates to have compliant coverages If the certificates came back with non-compliant coverages they would

not have been allowed to work for the organization. Does your organization review certificates?

• 2) During the 2nd phase of the audit, a comparison was done between the insurance actually provided in the generally liability policies purchased by the contractors against the insurance requirements in the contract. This part revealed that more than 90 % of the contractors had insurance in place that failed to meet the insurance requirements in the contract in a material way!

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What Areas?

•Two major issues: 1)Additional Insureds 2)Environmental Insurance

Coverages

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It's a standard, run-of-the mill, you've seen one you've seen them all recommendation—make

sure you get listed on someone else's commercial general liability (CGL) policy as an

additional insured. Maybe more importantly, you have just agreed to list someone on your CGL policy. What did you give? What did you get?

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IRMI DEFINITION of Additional Insured

A person or organization not automatically included as an insured under an insurance policy who is included or added as an insured under the policy at the request of the named insured. A named insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party or to comply with a contractual agreement requiring the named insured to do so (e.g., project owners, customers, or owners of property leased by the named insured). In liability insurance, additional insured status is commonly used in conjunction with an indemnity agreement between the named insured (the indemnitor) and the party requesting additional insured status (the indemnitee). Having the rights of an insured under its indemnitor's commercial general liability (CGL) policy is viewed by most indemnitees as a way of backing up the promise of indemnification. If the indemnity agreement proves unenforceable for some reason, the indemnitee may still be able to obtain coverage for its liability by making a claim directly as an additional insured under the indemnitor's CGL policy. See also Additional insured endorsement; Additional named insured; Contractual risk transfer; Loss payee; Named insured.

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https://www.irmi.com/online/insurance-glossary/terms/a/additional-insured-endorsement.aspx


Backing up the promise of indemnification

• Having the rights of an insured under its indemnitor's commercial general liability (CGL) policy is viewed by most indemnitees as a way of backing up the promise of indemnification.

• Backing up the promise of indemnification

• Insurance pays…..

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IF

• If, the Subcontractor has the correct additional insured endorsements and you have a written contract (Contract triggers the additional insured status)

• How many of you have written contracts with every subcontractor on every job? – Service only? – Material only?– Vendors? – Suppliers? – How many of you have verified the additional insured

endorsements for every subcontractor? What about just auditing 10 or 20 every year?

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When Crap Rolls Up Hill• Only in construction will the crap roll up hill….

• Meaning if you have Subcontractors that are not properly securing insurance coverage, it will eventually become your issue….your crap.

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How to prevent Crap From Rolling Up Hill

• 1) Make sure that you have sufficient insurance requirements for your subcontractor

• 2) Implement a way to track certificates of insurance and verify actual insurance coverage by asking for endorsements– Implement a risk management tool – – Generate a spreadsheet

• 3) What happens if they do not meet the insurance requirements? – Put on your big kid pants and make a business decision?– If they have lower limits, not proper endorsements are you

willing to take the crap that rolls up hill?

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Crappy Advice #1

• 1) Make sure that you have sufficient insurance requirements for your subcontractor– You can ask for higher limits than what you are being required to under

a contract– When would you do this? – Ask for enough time to cover statute of limitations and statute of repose

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Crappy Advice #2• Implement a way to track certificates of insurance and verify actual

insurance coverage by asking for endorsements– Implement a risk management tool –

Howalt McDowell Risk Management Center Tracks, sends letters, etc.

– Generate a spreadsheet and manually generate letters of non-compliance

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The Final Crap• What happens if they do not meet the insurance

requirements? – Put on your big kid pants and make a business decision?– If they have lower limits, not proper endorsements are you

willing to take that shit?

24May 1, 2023

Legal/regional regulatory statement to be added here if required.

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Howalt+McDowell Insurance, a Marsh & McLennan Agency LLC Company shall have no obligation to update this

document and shall have no liability to you or any other party arising out of this document or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and

are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially

affected if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.

Documents

HM-MMA Powerpoint When Crap Rolls Uphill 2015 AGC