Understanding General Liability Forms and Endorsements

Author, Lauren Stumpf, Media Communications & Client Services Specialist, Rancho Mesa Insurance Services, Inc.

Two agency leaders within Rancho Mesa Insurance Services, Inc. made a special appearance in a recent episode of the StudioOne™ Safety & Risk Management Podcast. During episode 293, Executive Vice President Daniel Frazee and Vice President of the Construction Group Sam Clayton discussed the important forms and endorsements in general liability policies.

Sam and Daniel highlighted 3 key terms they commonly see within the construction insurance space. Sam started out with explaining residential work, and how it is defined within the scope of general liability underwriting.

Next he explained subcontractor’s warranty endorsement, a term that is recognized by insurance professionals, but may confuse trade and general contractors. Sam dives into the term, explaining the importance of knowing how the warranty on one’s policy actually reads.

Lastly, Sam explains what minimum and earned premium is and how contractors’ can use it to their advantage when negotiating terms through their broker.

The pair wrapped up their conversation educating listeners on first steps contractors can take to learn more about the policies they currently have in place.

Daniel and Sam’s episode, Ep. 293 General Liability Forms and Endorsements, can be listened to below, or via your favorite podcast listening platform.

2021 Insurance Game Plan

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

As we come to the end of 2020, the most challenging year most of us have ever experienced, where COVID-19, wild fires and other natural disasters took their toll emotionally, physically, mentally and financially on all of us, we can only hope for a brighter 2021.

The insurance industry did not escape the impact of COVID-19 and the natural disasters, either. Insurance companies, along with their reinsurance companies, suffered catastrophic losses as a result. As with many industries, there will be lagging actions that will take place in 2021 to help these companies in their efforts to recover.

While there really isn’t a line of insurance that wasn’t impacted, the lines of insurance that suffered the greatest losses and impacts include:

• Property

• General Liability

• Excess/Umbrella

• Workers’ Compensation

• EPLI

• Cyber Liability

• Surety

• Employee Benefits

For this article, I will limit my discussion to the property and casualty lines and leave surety and employee benefits to another day.

To offset these losses, I anticipate any number of steps insurance companies will take as we move into 2021. But, let me just touch on those that I think will have the greatest impact and need for attention to business owners in 2021. 

Let’s review these and I will try and give you a small sampling of the implications for each action.

• Non-renewing policies

  • Carriers in many cases will not offer renewal terms.

• Reducing coverage limits and terms

  • Increasing deductibles, lowering aggregate limits particularly in the excess/umbrella marketplace.

• Add new exclusions

  • Businesses will start to see “communicable disease” exclusions added to various lines of insurance.

• Increase underwriting information needed

  • A higher emphasis on information particularly as it relates to a business’s policies and procedures to mitigate COVID-19.

• Raise premiums

  • This is the ultimate consequence and one we are all anticipating to see beginning in early 2021.

To many businesses, this will seem daunting and hopeless - one more hurdle to overcome to keep their businesses going. However, there are proactive steps you can take to mitigate these circumstances and have a strong year despite the adversity.

I’m a firm believer in being pro-active and not re-active. Following are steps you can take to meet this challenge head on:

• Meet with your insurance advisor 90-120 days from your renewal date.

• Understand the specific challenges you will be facing.

• Create a strategy on how to approach the insurance marketplace to ensure the most cost effective and comprehensive risk management program.

• Review and enhance your existing safety program. Rancho Mesa offers our RM365 Advantage Safety Star™ certification program. This is a comprehensive web-enabled training course designed to enable your employees from supervisory to front-line workers to be trained and certified in safety best practices. The insurance marketplace already places a high value on these types of safety trainings and certifications, so this will help your company’s productivity through fewer claims but also position you in a more favorable position in the marketplace.

• Benchmark your company’s safety performance to your industry and see which areas you are outperforming your peers and areas that need your attention. Rancho Mesa offers a benchmarking report we call StatTrac™ to our clients or to other companies who want to see where they stack up.

To close, let me reassure you there is light at the end of the tunnel for 2021. Be proactive; start 90-120 day out from your renewal; don’t let insurance issues sneak up on you; attack them head on and I believe you can make 2021 a great year for you and your company.

If you have any questions or want any help in devising a plan and you are a construction company, please reach out to Sam Clayton, our Construction Group Leader at sclayton@ranchomesa.com. If you are in the human services industry, schools, non-profit, healthcare, assisted living, etc., please reach out to Sam Brown, our Human Services Group Leader. And finally, we can be reached at (619) 937-0164 or at our website, www.ranchomesa.com.

I really believe there is no limit to what you can do – best of luck in 2021.

Autonomous Mowing – Are you Covered?

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

Autonomous lawn mowing is becoming more common in commercial and residential landscape management. As the market begins to adapt and utilize this technology it creates a very unfamiliar and unique exposure for you and your general liability carrier.

Commercial General Liability Policies should be written specific to your type of operations, including the coverages needed to protect your landscape company in the event of claim. The insurance marketplace has a general understanding of the common exposures that face a landscape contractor; from installation, to maintenance, and chemical application. Policies are written on the basis of annual sales or field payroll. When automated mowing is offered as a service from the contractor, the insurer would need to charge a premium to pick up the exposure. If the policy is written on a payroll basis then a direct premium will not be charged for the automated mowing operations, as there is no payroll associated with the mowers performance. The policy could also be written on a sales basis with clarification of estimated sales between autonomous mowing vs. the remainder of your operations to the insurance underwriter, so the appropriate rate can be charged. In either case, it is very important that the underwriting carrier has a clear understanding of your operations in order to determine the final pricing.

Whenever you have a change in your operations, such as the use of autonomous mowing, it is critical that you notify your insurer so they can properly assess the exposure and acknowledge that coverage would extend in the event of a claim.

Here are a few questions we use to help negotiate with the insurance marketplace when autonomous mowing is a part of the operations:

• How quickly will the blades disengage if the unit was picked up while moving?

• If the mower was to bump into someone/something will it divert the other way?

• What is the set back of the blades from the perimeter of the mower?

• How does it maintain its boundaries?

• Will it be left on site?

• What time of day will it run?

• How is it powered?

• Who has control of the mower while it is on?

• How can the mower be turned off?

Do not let the carrier find out about your autonomous mowing operations at audit, or worse at the time of a claim.

Finally, consider coverage for the machine itself if it were to be stolen, damaged, or totaled. Adding the mower to your Commercial Inland Marine policy will provide coverage for the equipment. The valuation of this coverage would be detailed in the policy. Be sure to communicate where the mowers will be stored while not in use and the security functions installed on the device to protect against theft.

For more information or questions you might have about this topic or landscape insurance in general please contact the Drew Garcia at (619) 937-0200.

Steps to Understanding and Managing Subrogation

Author, Daniel Frazee, Executive Vice President, Rancho Mesa Insurance Services, Inc.
Author, Jim Malone, Workers’ Compensation Claims Advocate, Rancho Mesa Insurance Services, Inc.

Definition

Subrogation is defined as the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by a transfer of any associated rights and duties. It occurs in property/casualty insurance when a company pays one of its insured’s for damages, then makes its own claim against others who may have caused the loss or contributed to it. Subrogation crosses into many areas of the insurance world including workers compensation, general liability, property, and auto. As an employer, developing an effective Incident Investigation Plan is a key first step to managing the potential impacts of subrogation on your organization. 

Employer Level Investigation

Identifying the potential for subrogation should occur immediately after an injury or accident occurs with an employer-level investigation. This includes visiting and securing the scene of the accident. If there are hazards or dangerous conditions still present, address them by taping off the area or removing the hazardous element. All potential witnesses need to be identified with securing their name, employer, telephone number, address, copy of their driver’s license, etc. These witnesses should be provided a witness statement for their completion. 

It is also imperative that the employer preserve the evidence by taking possession of the tool or equipment that caused the injury. If a ladder broke causing a fall and injuries, take possession of the ladder and keep it secure until needed later. If a tool malfunction is the cause of injury, take possession of that tool until it is needed for the next step of the investigation. Removing the injury-causing item prevents the chance of additional injuries or accidents. 

Additionally, take photographs or measurements of the entire area, building as much visual evidence as possible. Be aware too that changes can and will occur to the scene of the accident within minutes or hours of the incident. Entire crews are known to be removed from the area to avoid being identified as potential witnesses of an at-fault third party incident. 

Referring a Claim and Protecting the 2 year Statute

As you continue with your internal investigation, ensure that the claim’s assigned adjuster sends your third party information to the insurance company’s subrogation department. Most claim professionals do not have experience nor handle the details of subrogation cases. As a subrogation adjuster and attorney build their respective files, they will benefit significantly from the information obtained in a thorough post-injury investigation. They can then focus on obtaining additional discovery that can solidify their subrogation efforts. Reach out promptly to your subrogation adjuster and attorney as they will value your contribution to the investigation. We also recommend requesting regular updates, which would include participating in regular interval claim reviews. 

Be aware that the California Statute of Limitations for personal injury cases is 2 years from the date of the injury and/or accident. “Protecting” this statute means ensuring your insurance company formally files a civil lawsuit against the identified third party in a timely fashion.

Pursuing Subrogation

While injured employees are barred from suing their employer for their workers compensation injury due to the Exclusive Remedy Rule, that same employee may still bring a personal injury claim against a third party who shares responsibility for the injury. The employer also has the right to bring a civil claim against a third party to be reimbursed for the workers compensation benefits it is providing. If the employee pursues the third party, the workers compensation carrier can join as a party to this litigation. In this scenario, the workers compensation carrier simply provides a summary of their costs, or their workers compensation lien. The carrier then has first lien rights once a judgment is reached against the at-fault party. 

As subrogation cases move toward settlement, there are many factors impacting the net recovery for the injured worker and insurance company (employer). Many incidents have shared negligence alleged by the employer and even by the employee. The civil arena does not have the same thresholds or tolerances for extent of injury, need for medical care, resulting temporary disability, permanent disability and / or future medical care as does the workers compensation system. Many times the workers compensation liens are considered liberal and excessive by the civil arena. Therefore, it is difficult for the workers compensation carriers to be fully reimbursed for the total costs of their claims.      

Waiver of Subrogation

In the Construction space, many trade contractors are asked via contract to provide waivers of subrogation in conjunction with other insurance requirements. Waivers do not prevent a subcontractor’s injured worker from filing suit against the general contractor. The waiver bars the subcontractor's workers compensation carrier from pursuing subrogation in the event the employee does not pursue relief from the aggrieved party. If the employee files suit, the subcontractor’s work comp carrier can then join the action. If the employee does not file suit, then the subcontractor’s carrier cannot pursue subrogation on its own against the General. Consider this example: A general contractor responsible for erecting scaffolding on a jobsite subcontracts drywall work to a subcontractor who will use the scaffolding in the scope of their work. An employee of the drywall contractor falls from the scaffolding and it is later determined that the General did not secure the base of scaffolding properly. Typically, the employer’s workers compensation carrier could look to subrogate the costs of the work comp injury claim incurred by the injured worker from the general contractor. However, the drywaller provided a waiver of subrogation to the general as a condition of securing the contract. Therefore, their right to subrogate against a general contractor has been waived. Subrogation between subcontractors; however, remains a viable avenue of subrogation if the involved parties are subcontractors.    

Closing

Becoming comfortable with the many facets of subrogation is crucial as your team builds an overall plan to manage risk. This process includes incorporating third party questions into your Incident Investigation Plan, overseeing the claim and recovery process, creating reasonable expectations as settlement draws near and paying closer attention to waiver requirements. While these are only initial steps, they represent a solid base to building a greater awareness and deeper understanding of subrogation. 

To learn more, email Daniel Frazee at dfrazee@ranchomesa.com or Jim Malone at jmalone@ranchomesa.com.

Pollution Liability for Landscape Contractors

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

Most landscape contractors believe their exposure to pollution is limited to the herbicides, pesticides, and fertilizers they apply. In order to provide some limited coverage for this it is common to see the Herbicide/Pesticide Endorsement added to the Commercial General Liability Policy. Although the endorsement extends some coverage, Contractor’s Pollution Liability would help fill the gaps created by the General Liability Policy for all of the landscape contractor’s pollution exposures. 

Remember, General Liability Policies do not provide coverage for pollution. Contractors Pollution is protecting your environmental liability, and in today’s world the awareness to preserve the environment has never been stronger. A landscape contractor’s exposure to environmental liability is considered “high” and classed as “high” along with drilling, subsurface, site/dirt work, paving, mechanical and electrical contractors to name a few. 

Landscape contractor operations are almost exclusively performed outdoors in the environment which is the result of the high exposure. Beyond herbicide, pesticide, chemical applications and the property damage or bodily injury that may arise from such operations, other material exposures would include but are not limited to; fuel, oil, fumes, hydraulic fluids, silica, foundry sand, manure, dust, waste, water, natural gas, propane and mold. 

The Herbicide Pesticide Endorsement is an essential piece to any landscape contractor’s insurance program; however, a Contractors Pollution Liability policy is the best way to transfer your environmental exposure. Not all pollution policies are the same: capacity, coverage, exclusions and deductibles need to be examined. Making sure you have a policy that fits your operations and your exposure is critical.

For questions about which policies may match your company’s risk, please contact Rancho Mesa Insurance Services, Inc. at (619) 937-0164.

Three Reasons to Read Subcontractor Warranty Endorsements

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Contractors General Liability Policies provide coverage for bodily injury and property damage for which the named insured is legally liable. This legal liability can result from the company’s direct operations or from other subcontractors hired by the named insured.

Many general liability carriers will include some form of subcontractor warranty endorsement which establishes minimum requirements for subcontractors relative to insurance and other risk management benchmarks. At a minimum, these forms require written indemnification in favor of the named insured, certificates of insurance with additional insured wording, and specific insurance limits required by subcontractors.

These endorsements can vary widely from carrier to carrier; so, contractors may be faced with serious consequences in the event that requirements are not met. Below are three types of penalties policyholders may encounter:

1. Coverage is DENIED relative to any loss resulting from the work of the subcontractors.
2. Coverage is not altered, but a higher deductible or retained limit applies to any loss resulting from the work of the subcontractor. For example, should you fail to comply with the warranty, the deductible on the policy is amended from $5K to $25K.
3. Coverage is not altered, but failure to comply will result in an additional premium charged at the final audit.

It is critical to have a strong contractual written transfer program in place with proper certificates of insurance from your subcontractors, regardless of the contract amount. Lean on your broker to interpret these endorsements and help negotiate the most favorable terms as you head into your renewal. Understanding these nuances can be the difference between a covered loss and an unexpected large capital expense.

For more information about subcontractor warranty endorsements, contact Rancho Mesa Insurance Services, Inc. at (619) 937-0164.

Is your Company Prepared for OSHA’s new Silica Rule?

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

On September 23rd 2017 the Occupational Safety and Health Administration’s (OSHA) new silica standard for construction will go into effect.  This means contractors who engage in activities that create silica dust or are known in the industry as respirable crystalline silica, must meet a stricter standard for how much dust their workers inhale.

What is Crystalline Silica?  
Crystalline silica is a common mineral that is found in material that we see every day in roads, buildings and sidewalks.  It is a common component of sand, stone, rock, concrete, brick, block and mortar.  

What are the Effects?
Exposures to crystalline silica dust occur in common workplace operations involving cutting, sawing, drilling, and crushing of rock, and stone products such as construction tasks and operations using sand products like in glass manufacturing, foundries, sand blasting and hydraulic fracking.  Inhaling silica dust can lead to silicosis, an incurable lung disease that can be fatal.  Those with too much silica exposure can also develop lung cancer, kidney disease and chronic obstructive pulmonary disease.

What is the New Standard?  
The new silica rule lowers the permissible exposure limit from the current standard of 250 micrograms per cubic meter of air to 50 micrograms per cubic meter of air, averaged over an eight hour day, and an action level of 25 micrograms per cubic meter of air.

How will the New Standard protect workers?  
The rule significantly reduces the amount of silica dust that workers can be exposed to on the job.  That means employers will have to implement controls and work practices that reduce workers exposures to silica dust.  For most activities, that means employers will have to ensure the silica dust is wet or vacuumed up before workers can work in the area.  Employers are required under the rule to provide training, respiratory protection when controls are not enough to limit exposure and written exposure control plans, measure controls in some cases limit access to high exposure areas.  Employers are also required to offer medical exams to highly exposed workers.

How can your company protect itself from Silica Related Claims?
In addition to implementing the necessary controls to protect your employees, we would highly recommend you review your insurance policies to make sure that your company is protected from silica related claims.   

Over the last few years, we’ve seen quite a few General Liability carriers putting Silica exclusions on there policies.  This isn’t always the case and may be negotiated out depending on the carrier.  Another alternative is to obtain a Contractors Pollution Policy that would provide the necessary coverage for this exposure.  

Rancho Mesa also recommends taking advantage of the Silica Exposure Training materials available within the Risk Management Center. These materials include an online training course, PowerPoint presentation, training short and quiz in both English and Spanish. Should you have any questions, please contact Rancho Mesa Insurance Services at 619-937-0164.