Contract & Insurance Issues

1. Contract & Insurance Issues Potential Indemnification Pitfalls Potential Insurance Pitfalls

2. Where Are the Issues General Contracts IGA’s Use of Recreational Facilities

3. What Are Main Issues Indemnification Language Proper Coverage – Type and Limits Additional Insured Status Appropriate Endorsements

4. Indemnification Language Broad Indemnity • A is required to indemnify B for claims arising out of A’s negligence including claims arising out the sole negligence of B or its officers, employees, agents or any other for which B may be liable. Intermediate Indemnity • A is required to indemnify B for claims arising out of A’s negligence but not for claims arising out of the sole negligence of B or its officers, employees, agents, or any other for which B may be liable.

5. Indemnification Language Limited Form • A is required to indemnify B for claims arising out of A’s negligence but not for the negligence of B or its officers, employees, agents or any other for which B may be liable. Comparative (Vicarious) Form • A is required to indemnify B for claims arising out of A’s negligence but only to the extent A’s negligence or that of A’s officers, agents, employees, or any other person for entity for which A is liable, cause the claim.

6. Suggested Language Part of our IGA suggestions prepared by Bill Sims: “If any provision of this Agreement is rendered or declared illegal or unenforceable by reasons of any existing or subsequently enacted statute, rule or regulation, or by order of or judgment of a court, all other terms and provisions of this Agreement shall remain in full force and effect as stated and set forth herein.” This language is helpful if the legislation making specific indemnity obligations illegal and unenforceable is adopted.

7. Suggested Language Part of our IGA suggestions prepared by Bill Sims: “To the extent permitted by law, the Town hereby agrees to save and hold harmless, defend and indemnify from loss the State. . . .” This language is helpful if the legislation making specific indemnity obligations illegal and unenforceable is adopted.

8. Insurance Indemnification language is set Now what? Indemnification may not be worth much unless the proper insurance is obtained and obtained properly

9. Certificate of Insurance

10. What is a Certificate of Insurance Provides information about the policy Issued by an Agent/Producer It does not provide coverage

11. Elements of a COI Although the COI will state that you have additional insured status, the top paragraph states that the COI is issued as a matter of information only and confers no rights upon the certificate holder We will review the sample COI box by box to identify the coverage and the issues

12. Producer The producer represents the person or entity that you have requested insurance from People often confuse the producer/agent and the carrier Can not change policy on a COI – class 5 felony to do so Producer needs to send the insurance request to the carrier to make the actual changes

13. Insured The person or entity that you are getting insurance from. Seems obvious? Be careful. Only the entity named has insurance Sub-contractors or any other entity claiming to be covered by the policy are not covered unless their name appears

14. Insurers The insurance carrier or carriers that are providing coverage Good idea to check status of the carriers AMBest is a good source to check status Watch out for off shore carriers

15. General Liability Covers bodily injury or property damage while the event/project is taking place • Occurrence vs Claims Made • Aggregate: Policy/Project/Location • Policy Number and Effective Dates • Limits/Aggregates

16. Automobile Liability Needed when the person/entity you hire are using their vehicle as part of their work for you • In AZ insurance follows the vehicle • Your policy could drop down as excess • Not needed if person/entity is just commuting to your site

17. Umbrella/Excess Policy An Excess Policy goes on top of the primary policy and follows the primary coverage An Umbrella Policy goes on top of the primary policy and follows the primary coverage and may have some additional coverage Umbrella/Excess policies are used to increase the per claim limit and/or the aggregate limit

18. Workers’ Compensation In AZ a sole proprietor does not need WC. In that case a sole proprietor form should be obtained. WC is required when an entity has one or more employees If an entity you hire fails to provide WC you can become the statutory employer and would need to cover their WC The value of the contract gets added to your WC payroll for premium!

19. Workers’ Compensation - IGA Under the Workers’ Compensation Statutes, if an employee “works under the jurisdiction or control of orwithin the jurisdictional boundaries,” both Parties must post a notice pursuant to A.R.S. § 23-1022(E). Failure to post the required Workers’ Compensation notice may increase the liability exposure to both parties by allowing an employee to maintain a right of action. If the IGA requires both parties to post such notice, if a party fails to post and if the other party is damaged (e.g., loses the protection of the Workers’ Compensation Statutes and is liable for common law damages), the damaged party has a contract claim against the party failing to post. Even for existing IGAs, the parties can subsequently agree to require this Workers’ Compensation notice.

20. Other Less Common Insurance Builders Risk Garage Keepers Liquor Liability Aircraft Bonds

21. Subrogation The person or entity you hire can waive subrogation as long as it is done at the beginning of the contract. For WC the entity and their carrier can agree to waive subro for WC but that may not hold for the injured employee.

22. Description Needs to be a description of operations/locations/vehicles etc. Needs to be clear as to what is covered Don’t be too vague or too narrowly defined A contract number etc., can be placed on the COI

23. Certificate Holder That is you or your client. Make sure the Certificate Holder named is exactly the entity that needs to be covered. Example: The City of ….. should be named not the City of …… Police Department You can have both

24. Cancellation Used to be able to require 10, 15 or 30 day notice if policy is cancelled or non-renewed Today carriers will “endeavor” to notify you or will not commit at all The reason: Certificate Holder addresses are often incorrect or they change and carrier has no way to make contact. You can still require the entity to notify you

25. Signature The Producer/Agent or their representative must sign the COI

26. Endorsements What is an endorsement and why do you need them?

27. Endorsements An insurance policy is a legally binding contract Once it has been issued no change can be made unless a representative of the carrier makes the change and issues an endorsement

28. Endorsements How should this all work? • You request insurance and give the entity your requirements • That entity goes to their Producer/Agent with the request • The Producer/Agent prepares the COI and reports to the carrier • The carrier agrees (or not) and makes the changes and issues an endorsement(s) • The Produce/Agent gives you the COI and Endorsement(s)

29. Endorsements Why are endorsements so important? • It’s the only way to confirm any changes were made to the policy such as naming your client as an additional insured etc. • There are a variety of endorsements and if the wrong one is used it might present problems • The endorsement(s) might have conditions or exclusions you won’t know about until after you make a claim

30. Endorsements There may be a specific endorsement that is attached to the policy There might be a generic endorsement that is built into the policy Carriers can use any type of form as endorsements there is not necessarily any consistency between carriers

31. Pitfalls Actual issues we’ve seen: • Push back from Producers/Agents • Claims they never had to issue a COI/Endorsement before • Claims they don’t know what a COI is • Claims they don’t know what an endorsement is • Totally bogus endorsement issued.

32. Pitfalls Some specific and general endorsements will only grant additional insured status if there is a written contract or agreement requiring it. Likewise, subrogation usually will only be waived if there is a written contract or agreement that requires it. The wrong endorsement can be used or the policy doesn’t even provide the coverage you need!

33. Pitfalls Most if not all insurance policies have a “Other Insurance” clause. Often that clause will state that their policy is excess only At best, it might be contributory A written contract or agreement is usually needed to make their policy primary and non-contributory.

34. What Could Go Wrong? Even when all i’s are dotted and t’s are crossed we’ve seen the following issues: • Denial that our client was a valid additional insured • Insistence that their policy was excess • Refusal to provide defense • Denial of coverage because they didn’t understand the description • Efforts to place liability on our client

35. Examples Mine claim – failure to get a COI Bike Race – carrier not understanding the event Rodeo – no AI status, excess, no liability Balloon event – loss not a result of the event

36. Questions? • Questions? • Thoughts? • Comments? • Experiences?

37. Thank You! Ed Bantel AMRRP Program Administrator ebantel@berkleyrisk.com 602-368-6618