Insurance Requirements in Contracts www doa louisiana gov

Insurance Requirements in Contracts www. doa. louisiana. gov 9/1/2004 1

PURPOSE OF WORKSHOP u. Limit State’s liability u Necessity of insurance requirements u L. R. S. 9/1/2004 38: 2195 2

TYPES OF BIDS OR CONTRACTS u IFB - Invitation for Bids u RFP - Request for Proposals u CONSTRUCTION u PRINTING u SOLE CONTRACT SOURCE u EMERGENCY 9/1/2004 3

WHAT’S NEEDED u. Coverages u. Limits u. Hold-Harmless Agreement 9/1/2004 ? 4

TYPES OF COVERAGE Workers Compensation and Employers Liability Maritime Liability Commercial General Liability Automobile Liability Property Damage Coverage Bond Coverage Crime and Fidelity Wet Marine Coverage Aviation Coverage Medical Malpractice 9/1/2004 5

STANDARDIZATION OF FORMS 1. Insurance Services Organization ISO Standard Forms: CG 00 01 [10 01] -- CGL CA 00 01 [10 01] -- Auto 2. Manuscript Forms Company-written 9/1/2004 6

ADVANTAGES OF STANDARD POLICY FORMS u. Set rates using pooled data u. Coverage generalizations u. Comparison 9/1/2004 of policies 7

ADVANTAGES OF STANDARD POLICY FORMS (Continued) u. Case law scope of coverage u. Simplified 9/1/2004 claims-settlement 8

Commercial General Liability Forms u OCCURRENCE u CLAIMS - MADE 9/1/2004 9

ISO Occurrence Form CG 00 01 10 01 July 1, 1999 July 1, 2000 Will pay these sums that the insured becomes legally obligated to pay. . . DISCOVERY PERIOD u Occurrence during policy period u NO TIME element when claim is reported/paid u Statute of limitations 9/1/2004 10

ISO Claims-Made Form CG 00 02 10 01 July 1, 1999 July 1, 2000 Will pay these sums that the insured becomes legally obligated to pay. . . DISCOVERY PERIOD u 9/1/2004 Claim made DURING policy period or extended reporting period. 11

ISO Claims-Made Form (Continued) 1. BASIC EXTENDED REPORTING PERIOD: 60 days - no additional premium 2. SUPPLEMENTAL EXTENDED REPORTING PERIOD: Up to 200% additional premium DOES NOT REINSTATE OR INCREASE LIMITS 9/1/2004 12

COMMERCIAL GENERAL LIABILITY 1. Premises Operations 2. Off Premises 3. Products and Completed Operations 4. Contractual 5. Personal Injury and Advertising Liability 6. Broad Form Property Damage 7. Watercraft 9/1/2004 13

Coverage B Personal Injury & Advertising Liability Personal Injury: Other than bodily injury u False arrest u Malicious prosecution u Wrongful entry u Libel or slander u Violation of privacy 9/1/2004 14

Coverage C Medical Payments A. Medical expenses for accidents: 1. rent On premises you own or 2. On ways next to premises you own or rent 3. Because of your operations 9/1/2004 15

Coverage C Medical Payments (Continued) B. Reasonable expenses for: 1. First aid 2. Medical, surgical, x-ray, dental services 3. Ambulance, hospital, nursing, funeral expenses 9/1/2004 16

Common CGL Exclusions u Pollution (Asbestos and hazardous wastes) u Workers compensation, unemployment benefits, etc. u Aircraft and watercraft over 26 feet 9/1/2004 17

Common CGL Exclusions (Continued) u Intentional Acts u Automobile u Some Liability Professional Liability u Property Damage to Property 1. You own, 2. Loaned to you, 3. In your care, custody and control 9/1/2004 18

PROFESSIONAL LIABILITY (Errors and Omissions Coverage) u ACCOUNTANTS u ARCHITECTS u ENGINEERS u MEDICAL PROFESSIONALS u ATTORNEYS u HAZARDOUS ACTIVITIES 9/1/2004 19

BUSINESS AUTOMOBILE POLICY CODES 1 Any auto 2 Owned autos only 3 Owned private autos only 4 Owned autos other than private autos 5 Owned autos subject to no-fault 6 Owned autos subject to a compulsory uninsured motorists law 7 Specifically described autos 8 Hired autos only 9 Non-owned autos only 9/1/2004 20

Owners Protective Liability (OPL) u Protects the employer of an independent contractor u Employer can be liable for contractor’s negligence 9/1/2004 21

WORKERS COMPENSATION Per Labor Code of the State of Louisiana Disability Benefits Updated annually in Sept. 9/1/2004 $438 max $117 min 9/1/2004 75% of average salary (from Dept. of Labor) 22

BID BONDS u Guarantee the good faith of the bidder u L. R. S. 38: 2241 (A) (2) 9/1/2004 23

PERFORMANCE AND PAYMENT BONDS 1. Financial protection 2. Prompt completion upon default 3. Defective work / materials 4. Payment of bills L. R. S. of 1950 Title 38 Chapter 10 Sections 2241 to 2248 9/1/2004 24

“ADDITIONAL INSURED” I. BLANKET ADDITIONAL INSURED ENDORSEMENT Example: “The State of Louisiana is added as an additional insured on the above liability policies. ” 9/1/2004 25

“ADDITIONAL INSURED” CONTINUED II. LIMITED ADDITIONAL INSURED ENDORSEMENT Example: “The State of Louisiana is added as an additional insured as regards the (sole) negligence of XYZ contractor. ” 9/1/2004 26

“ADDITIONAL INSURED” CONTINUED III. NAMED INSURED ENDORSEMENT (Owners Protective Liability) Example: “The State of Louisiana, as the owner, is added as a named insured on the above policy. ” 9/1/2004 27

WAIVER OF SUBROGATION: The right of one who has taken over another’s loss to also take over the right to pursue remedies against a third-party NOTE: ORM will NOT accept contract language which allows waiver of subrogation with regard to damage to State-owned property 9/1/2004 28

HOLD-HARMLESS AGREEMENTS u Deductibles u Under-insured u Exclusions to insurance policies 9/1/2004 29

TYPES OF HOLD-HARMLESS AGREEMENTS All liability, except that arising out of the sole negligence of the agency (State) u All liability without regard to fault u Own negligent acts (Contractor) u Agrees to share responsibility when both parties contribute to a loss 9/1/2004 30

COMMON ERRORS u Neglect to review certificates u Using old insurance requirements u NO insurance requirements in bid u Insurance Company Ratings taking company’s word on it 9/1/2004 31

COMMON ERRORS CONTINUED u Neglect to review policies for exclusions u NO hold-harmless agreements u Not enforcing rating requirements u Leaving some insurance requirements out of bid 9/1/2004 32

UNACCEPTABLE INSURANCE u Risk retention groups (unless A. M. Best rated) u Self-insurance funds (except WC) u Companies rated below insurance requirements u Claims-made coverage (some exceptions) 9/1/2004 33

FINANCIAL RATINGS OF INSURANCE COMPANIES 9/2000 34

A. M. BEST 2003 Property/Casualty Ratings

BEST’S Financial Size Categories 9/1/2004 36

BOND COMPANY RATINGS www. fms. treas. gov/c 570. html 9/1/2004 37

DEPARTMENT OF INSURANCE Regulates insurance companies licensed to do business in Louisiana DOMESTIC COMPANIES - 28 FROM 1978 TO 2002 583 insurance companies under rehabilitation or liquidation 9/2002 38

CAPITALIZATION REQUIREMENTS Insurance Company Capitalization: $2, 000 1989 $3, 000 Premium Limited By Law: 4 times policyholders surplus Example: $3, 000 X 4 = $12, 000 Exposure to company = $100 millions 9/1/2004 39

Louisiana Insurance Guaranty Association LIABILITY {CGL & Auto} $150, 000 per claim - $100 ded. $300, 000 per accident - $100 ded. WORKERS’ COMPENSATION Follows law - limits do not apply PLUS Unearned premium up to $10, 000 (in addition to above limits) 9/1/2004 40

PROOF OF COVERAGE Certificates of Insurance u State’s Form (State Designed) u Accord Form (ISO Designed) u Manuscript Form (Company Designed) 9/1/2004 41

BEST’S Key Rating Guide Property/Casualty Edition A. M. BEST COMPANY Oldwick, NJ 08858 Phone: (908) 439 -2200 Fax: (908) 439 -3296 www. ambest. com 9/1/2004 42

ORM Website uwww. state. la. us/orm u. Click on Underwriting u. Click on Procedures Manual for Insurance Requirements in Contracts 9/1/2004 44