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Wraps: “Everything Is Negotiable”

There is no such thing as a standard wrap policy: “Everything is negotiable and has the potential to be manuscripted. It’s whether the insured is willing to pay the price.”

That was the advice from Bob Pedersen, AVP, of Chicago’s Brown & Riding Insurance Services, Inc., a wholesale broker specializing in construction. His talk to this month’s Construction Practice Group teleconference was arranged by Don Aberbook, risk manager/in-house counsel at Moody Insurance Agency.

Brown & Riding can provide an estimate of insurance costs as far as a year in advance with no more than geotechnical reports based on soil samples, Pedersen told the group.

“Traditionally most owners see their liability as contingent to the contractors and mostly for premises liability, but is there more?” he asked. Consider these questions:

  • What about completed operations through the statute?
  • What happens if the contractor goes out of business?
  • What if the GC’s limits have been exhausted from other claims?
  • What happens if you sell the property as the owner?

Extended completed operations tail coverage is important, he added. Carriers traditionally will endorse the policy to extend it through the completed operations statute in a specific state or 10 years, whichever time period is shorter.

He advises purchasing tail coverage for several reasons:

  • Dedicated limits for the owner and general contractor on the one specific project.
  • Reduced litigation between the general contractor and owner, since they are on the same policy.
  • Broader coverage.
  • Some potential cost savings, as credits can be removed from the general contractor’s bid.

He also listed the advantages of wrap-ups:

  • Cost savings: Lower costs to the property owner as bulk purchase of insurance lowers total cost. Contractors will be bidding on projects without the possible inflation of their insurance premiums.
  • Bid credits from contractors: Subcontractors will not include the cost of insurance in their bids because the coverage is already being provided for them by the wrap-up policy. All of the contractors have to enroll into the wrap for a specific fee that typically is based on the rate of their current policies as well as the percentage of work they are doing. The insured usually hires a third party wrap-up administration firm for a designated fee to handle all of the enrolling process as well as multiple other services to the insureds.
  • Improved control: Wraps provide improved control of the insurance on the project and remove possible uncertainty when it comes to relying on the insurance coverage of various subcontractors. It is a significant worry whether subcontractors carry the appropriate coverages under their insurance, whether subcontractors insurance will continually be renewed through the state statute, and whether the subcontractor will even be in business by the time a claim arises.
  • Extended products/completed operations coverage: There are varying thoughts on whether the standard ISO policy provides an extended period of time for the completed operations. Most wrap-up policies remove the possible discrepancy by placing an extended completed operations endorsement on the policy. It states that the completed operations period is extended up to the applicable statute in the specific state where the policy is written.
  • Repair work coverage: When placed correctly, the wrap-up policy will extend this to give premises coverage for any repair work the insured needs to do after the policy has expired. This would be something that one would think would typically be covered under an insured’s practice policy but it is standard these days for a carrier to put a wrap-up or project-specific exclusion on policies. This could prevent the insured from having coverage while back on the job site.
  • Dedicated limits: On wraps a dedicated set of limits applies to one project.
  • Reinstating aggregate limit: Wrap-up policies often reinstate the general aggregate limit on an annual basis during the ongoing operations phase of the project. This is more common for commercial than residential placements.
  • Better safety and loss control procedures. Owner control of the insurance broker and insurance underwriter makes it possible to require more stringent safety and loss control procedures of the GC and subcontractors
  • Reduction in time required for contractors to obtain insurance certificates.
  • Improved risk control and claim handling.
  • Peace of mind to the owner. This is the owner’s investment. It should be up to the owner to ensure that it is appropriately protected in every aspect of construction, including the insurance.

A future blog will talk about ways to make administration of wraps easier.

 

 

How IT Departments Cope with 24/7 Requests

Handling requests 24/7 and managing personal use of Wi-Fi by employees were among the topics at this month’s IT practice group teleconference. Here is some of the advice members shared:

  • Some IT managers are on call 24/7 for major problems, even if it means driving to backup servers in remote locations. Others have a partner or outside consultant who can step in to help.
  • One agency uses Veeam, a paid service that keeps a snapshot of servers in the cloud and offers high-speed data recovery.
  • When it comes to contacting all employees when there is a problem with a server or a potential emergency such as a hurricane, agencies use Twitter or text messaging. “We had to explain to people that they can access Twitter messages even if they don’t have their own Twitter accounts,” one member said. Setting up text-messaging groups can be effective for issues that affect only certain departments.
  • One agency has a help desk composed of a trainer, an account manager and an accounting systems staff member. Emails sent to the help desk go to all of them, and the first person available will answer the question.
  • Procedures vary for responding to after-hours texts requesting help. “If it’s reasonable, I’ll respond,” one person said. “Otherwise, I’ll say I’m not at my desk.”
  • Most are using the same devices for printing and copying..
  • Personal use of Wi-Fi by employees can be a challenge. One has a 5 MG Wi-Fi network dedicated to mobile phones and guests. “If there’s too much use, I can change the password and shut some of them out.”

 

Three Ways to Make Wrap Administration Easier

Three types of third-party firms can make the administration of wrap-up construction insurance policies easier. These are the suggestions from Bob Pedersen, AVP, of Chicago’s Brown & Riding Insurance Services, Inc., a wholesale broker specializing in construction.

  • Wrap Administrator –Third-party firms will administer the wrap-up policy and handle the enrollment of all parties.
  • Quality Assurance/Quality Control firm – These companies, usually owned by engineers or former contractors, provide peer review. They will take photos of good construction procedures as work progresses, so that the contractor can have a file showing the quality control if a construction defect claim arises.
  • Coverage Counsel – Having the insured’s legal counsel review the policy in advance is important, particularly in major projects.

Be cautious of general contractors that offer to provide wrap-up coverage and may view it as a profit center. It is usually more economical for the project owner to provide the wrap-up coverage.

Pedersen’s talk was arranged by Don Aberbook, risk manager/in-house counsel at Moody Insurance Agency. See previous post on the advantages of wrap-up policies.

 

How RPNI Members Approach Personal Lines Renewals

RiskProNet members begin reviewing personal lines policies as much as 100 days in advance of renewal dates. Initial steps include talking to the client and carriers about changes that may affect client needs.

These were among the comments at this month’s Personal Lines Practice Group teleconference:

  • “Check with clients on lifestyle changes. Have they started acquiring collectibles? Inherited valuables?”
  • Face-to-face renewal meetings get clients to pay attention to the process rather than the cost. It’s a good time to offer extra products, such as travel insurance..
  • “One of the biggest challenges is getting clients to compare apples to apples. The industry has shot itself in the foot to a degree with television ads commoditizing policies.”
  • No one has had claims experience with private flood insurance claims, but prices “are out of the park” and as much as double the prices in federal programs.
  • “The question is not if the ‘big one’ will hit, but ‘when.’ We want clients to understand the value of a good policy and a reputable company that will be there if they have a claim.”
  • “We always look for upselling opportunities. Perhaps a client wants to increase the deductible and reinvest the premium in higher liability and umbrella limits.”

Also see the previous blog on factors influencing the personal lines market.

Thanks to Practice Group Chair George Pester of JKJ for chairing the discussion.

 

How Online Tools Stack Up for Total Compensation Statements, Performance Reviews

Total compensation statements, benchmarking salaries and performance reviews —including the use of online tools to simply these processes, were the major topics at this month’s Human Resource Practice Group teleconference.

Recommendations and concerns expressed at the roundtable discussion include these:

Total Compensation Statements

  • ADP payroll service provides total compensation statements for employees.
  • Insight E-Tools has been used successfully by one RPNI member.
  • Two agencies have developed proprietary software based on Excel spreadsheets. Contact RPNI Executive Director Gary Normington for permission to use these models.

Benchmarking Salaries

  • Some major cities have employee councils that conduct surveys. A challenge is that many large employers see no benefit in taking the time required to participate, while smaller companies may be reluctant to share proprietary information.
  • Data from national surveys needs to be adjusted to reflect the local market.
  • If a position is unusual, it can be worthwhile to ask a trusted contact at a similar company to share salary ranges.
  • The Property Casualty Insurance Association of America offers some salary data.

Performance Reviews

  • “We’re moving away from a one-time annual meeting to check-ins several times a year. Are you ahead or behind of our goals?”
  • “We base merit increases on whether the person’s responsibilities have increased and whether they’re going above and beyond what is expected. Are they growing or are they on cruise control?”
  • “We have ratings of 1 to 5, but haven’t given 5s. We’re revisiting why we have a rating of 5, if we don’t use it.”
  • “We haven’t had performance reviews for years. Our turnover is low, it was time-consuming and managers didn’t feel it was working for them.”
  • “I’ve never heard of a manager who loves performance reviews. However, it we give one person a 5 percent raise and another person a 3 percent raise, we need reasons that are objective and in writing. If we ever ended up in court, we’d have a hard time convincing a jury it isn’t discrimination.”
  • “We switched this year to Reviewsnap. It’s powerful and easy to use.”
  • “If you use technology for performance reviews, keep an open mind. It’s unlikely that it will match exactly what you are doing on paper.”

This’ month’s discussion was led by Amanda Ross, SHRM-SCM, SPHR, of Moody Insurance Agency. The next Human Resources Practice Group meeting will be July 13 and will focus on succession and workforce planning.

 

What’s Driving Cost Increases in Personal Lines

Personal lines policies are increasing in price – occasionally by double-digit percentages, Personal Lines Practice Group members agreed at this month’s teleconference.

The Consumer Price Index data shows that auto insurance costs grew by 7.6 percent in February 2017. This was among the statistics that JKJ’s George Pester, practice group chair, presented. Some of the others follow:

  • Accidents and injuries are increasing, as more people are driving now that the economy has rebounded and the price of gas has dropped.
  • The National Safety Council estimates that 40,200 people died in auto accidents in 2016, up 14 percent since 2014. This is the largest year-to-year increase in more than five decades.
  • The Federal Highway Administration shows a 9.4 increase in miles driven from 2013 to 2015. Increased congestion on the roads means a greater chance of an accident. The last two years also have brought more accidents caused by distracted driving, more complex and sophisticated auto parts and increased accident frequency and severity.
  • The cost of hospital services increased by 3.4 percent from 2016 to 2017, meaning higher bodily injury costs.
  • Vehicles are more complex than ever. Repairing a taillight broken in an accident may involve replacing an entire portion of a vehicle rather than just the taillight today. This trend affects not only comprehensive and collision claims, but also property damage liability.
  • Prices for motor vehicle bodywork are up by 3.0 percent since last year.
  • Awards in lawsuits are increasing, with a median award of $75,000 in 2014, compared to $70,000 in 2014, the latest year for which figures are available. Awards of $1 million or more accounted for 18 percent of all personal injury awards in 2013 and 2014, up 17 percent from the prior two-year period.
  • Incurred losses and loss-adjustment expenses grew by 7.6 percent in the first three quarters of 2016 versus a rise of 2.7 in the comparable period the previous year.
  • Underwriting expense grew by 2.6 percent.
  • Against this background, insurers’ investment income has dropped because of prolonged low interest rates.

A future post will discuss how RiskProNet members are handling renewals in light of these factors.

 

Tim Brady, Senior VP of Brady, Chapman, Holland & Associates, Inc., Joins Board of RiskProNet International

Tim Brady

The following press release was distributed via Business Wire today.

HOUSTON – Tim Brady, shareholder and senior vice president of Brady, Chapman, Holland and Associates, Inc., has been elected to the board of directors of RiskProNet International, an association of leading independent insurance brokers in North America.

RiskProNet member firms have combined annual revenues of $548 million and more than $5.5 billion in annual written premium.

Tim Brady joined the firm in 2008, following in the footsteps of his father, Jeff Brady, BCH president and CEO; his aunt, Jan Clark, senior vice president and chief operations officer; and his grandfather, Tim Brady, founding partner and chairman of the board.

Prior to joining BCH, he began his insurance career in the wholesale brokerage and insurance company sectors at AmWINS Brokerage of Texas. While at AmWINS he worked with both property brokers and casualty brokers. He also worked for a key construction and manufacturing insurer, Amerisure Insurance Company, where he completed the developmental marketing underwriter program. The program included a focus on underwriting, loss control and claims.

In addition to holding numerous professional designations, he is a member of Community Associations Institute, Growth Advocates and CEO Network Partners.

He is a graduate of Texas Christian University with a bachelor of business administration degree in finance and economics.

At RiskProNet, each member is an equal owner in the association, which gives the network the geographic diversity and shared knowledge base to serve clients with national, international or highly specialized exposures to risk.

In addition to BCH, RiskProNet members are AHT Insurance, Virginia; BFL Canada Insurance Services, Inc. in Canada; BHS, Michigan; Buckner Company, Inc., Utah; Connor & Gallagher Insurance Services, Inc., Illinois; Crane Agency, Missouri; Dawson Companies, Ohio; Eustis Insurance & Benefits, Louisiana; Herbert L. Jamison Co., LLC, New Jersey; InterWest Insurance Services, Inc., California; Johnson, Kendall & Johnson, Inc., Pennsylvania; M3 Insurance, Wisconsin; Moody Insurance Agency, Inc., Colorado; ONI Risk Partners, Indiana; Regions Insurance, Inc., Arkansas; Reynolds & Reynolds, Inc., Iowa; SterlingRisk, New York; SullivanCurtisMonroe Insurance Services, LLC, California; and Watson Insurance, North Carolina.

RiskProNet International is headquartered in Menlo Park, Calif. Additional information is at http://www.riskpronet.com or at (650) 323-1929.

For additional information about BCH, visit http://www.bch-insurance.com or call (713) 688-1500.

 

If Property Is Stored on a Construction Site …

Considerations in insuring the property of others range from special coverage of artwork to deductible buy-downs. These were among the topics at the recent Construction Practice Group teleconference led by Sonya Moore of Eustis Insurance and Benefits.

Renovations and expansions. A builders risk policy may be unnecessary for renovation and expansion projects. However, it is worthwhile to consider increasing the value of the building coverage. If coverage includes time elements or soft costs, also consider including the general contractor and subcontractors as named insureds.

Theft of building materials. Be aware that ISO property forms do not cover theft of building materials and supplies before they are attached to the structure. Builders risk coverage, in contrast, can protect property in transit en route to storage or construction sites.

Protecting subcontractors’ interests. Subcontractors should be alert to the fact that even though there is a single builders risk policy, their interests may not be protected adequately. “Subcontractors are often better off buying their own installation floaters,” one person suggested, as it can be difficult for a subcontractor to even get a copy of the general contractor’s policy. “This allows subcontractors to file their own claims if necessary.”

Premium increases for owner’s property. Contracts should spell out who is responsible for insurance and any premium increases if the owner stores property on the site before the building is completed. One RiskProNet member recalled getting a telephone call from a client saying that more than a thousand mattresses for a hotel were about to arrive and needed to be stored at the site.

Deductible buy-downs. Insurance for deductible buy-downs is available, and may be advisable if the deductible is in the $50,000 to $100,000 range. “Use a specialist in the area of ocean/inland marine insurance, not your standard underwriter,” one conference call participant advised.

Artwork & historical artifacts. Builders risk and installation floater policies often exclude items such as historical building materials and artwork. Consider a separate policy for these.

Soft costs. Clients should insure at least 15 percent of the soft costs on a construction project, although it is sometimes hard to persuade them to do so.

See the previous post on insuring the property of others for additional considerations.

 

Insuring the Property of Others When It’s In a Client’s Care

Rolls of carpet, ready to be installed on Monday, were delivered to the contractor’s premises on Friday. They were stolen over the weekend.

Determining who has the insurable interest in such a situation can be problematic, participants in this month’s Construction Practice Group teleconference agreed. If the customer has paid for the property, the insurable interest may belong the customer. Or it could be the contractor, because the property is in the contractor’s care. It’s also possible that the contract has language covering the insurable interest.

Under the Uniform Commercial Code, which can vary from state to state, the fact that the customer has paid for the carpet does not necessarily indicate the customer is responsible for insuring it. In many situations, the seller is responsible for risk for loss to goods until the customer receives the goods. If a third party is storing the goods, it may be difficult to resolve the issue in the absence of specific language.

Coverage options in this situation could include the property policy, the builders risk policy or the installation floater, Sonya Moore of Eustis Insurance and Benefits told the group.

In determining whether coverage should come under the property policy vs. the builders risk policy, Moore listed these considerations:

  • Is new construction as covered property included in the definition of building?
  • Is the sublimit for “newly constructed buildings” sufficient for the period of construction?
  • Is the time limit for automatic coverage for “newly constructed buildings” for a limited coverage period, such as 30 days?
  • Will the property insurer extend coverage beyond the automatic coverage period?
  • If the property insurer will not extend coverage after the automatic coverage period, would you be able to find a builders risk insurer to insure new construction that has already started? This is unlikely.
  • How are materials for the new building covered, and are there any overly restrictive distance limitations on storage sites?
  • Will the property insurer provide time element coverage and other soft costs if requested by the owner?
  • Will the general contractor and subcontractors be additional insureds or simply loss payees for their construction exposures?
  • Does the insurer have the technical ability to provide specific loss control services for new construction, such as plan review?
  • Is the premium (including deductible) competitive when compared to a builders risk insurer?

The accompanying PowerPoint for this discussion is available from RiskProNet Executive Director Gary Normington at gnormington@riskpronet.com. The next post will look at special considerations in insuring the property of others.

 

George Forrester, AHT Insurance Principal, Joins Board of RiskProNet International

George Forrester

RiskProNet International issued this press release today. We welcome George Forrester to our board of directors starting April 1.

LEESBURG, Va. – George J. Forrester, principal and senior vice president of the manufacturing division of AHT Insurance in Leesburg, Va., has been elected to the board of directors of RiskProNet International, an association of leading independent insurance brokers in North America.

RiskProNet member firms have combined annual revenues of $548 million and more than $5.5 billion in annual written premium.

Forrester, who joined AHT Insurance in 1996, brings more than 20 years of experience in insurance for manufacturing, construction and hospitality companies as well as specialized private financial institutions.

He has worked with trade associations, industrial engineers, American National Standards Institute committees and litigation advisers.

He is a frequent speaker at insurance and product safety events and has authored articles and white papers for industry publication.

Forrester is a graduate of Lynchburg College in Lynchburg, Va. He holds the professional designation of Certified Insurance Counselor.

AHT Insurance, founded 96 years ago, is employee-owned and one of the largest independent insurance brokerages in the nation. Other offices are located in Chicago, New York, San Francisco, Seattle and Washington, D.C.

Each RiskProNet member is an equal owner in the association, which gives the network the geographic diversity and shared knowledge base to serve clients with national, international or highly specialized exposures to risk.

In addition to AHT Insurance, RiskProNet members are BFL Canada Insurance Services, Inc. in Canada; BHS, Michigan; Brady, Chapman, Holland & Associates, Texas; Buckner Company, Inc., Utah; Connor & Gallagher Insurance Services, Inc., Illinois; Crane Agency, Missouri; Dawson Companies, Ohio; Eustis Insurance & Benefits, Louisiana; Herbert L. Jamison Co., LLC, New Jersey; InterWest Insurance Services, Inc., California; Johnson, Kendall & Johnson, Inc., Pennsylvania; M3 Insurance, Wisconsin; Moody Insurance Agency, Inc., Colorado; ONI Risk Partners, Indiana; Regions Insurance, Inc., Arkansas; Reynolds & Reynolds, Inc., Iowa; SterlingRisk, New York; SullivanCurtisMonroe Insurance Services, LLC, California; and Watson Insurance, North Carolina.

RiskProNet International is headquartered in Menlo Park, Calif. Additional information is at www.riskpronet.com or at (650) 323-1929.

For additional information about AHT, visit www.ahtins.com or call (800) 648-4807.

 

 

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