Contractors Errors & Omissions, Contractors Professional and Pollution Incident Liability. Program Overview

Transcription

1 Contractors Errors & Omissions, Contractors Professional and Pollution Incident Liability Program Overview Presented to: <<ENTER AGENCY NAME>>

2 Disclaimer The purpose of this presentation is to provide information, rather than advice or opinion. It is accurate to the best of the speaker's knowledge as of the date of the presentation. Accordingly, this presentation should not be viewed as a substitute for the guidance and recommendations of a retained professional. Any references to non- CNA Web sites are provided solely for convenience, and CNA disclaims any responsibility with respect to such Web sites. To the extent this presentation contains any examples, please note that they are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. In addition, any examples are not intended to establish any standards of care, to serve as legal advice appropriate for any particular factual situations, or to provide an acknowledgement that any given factual situation is covered under any CNA insurance policy. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All CNA products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright 2013 CNA. All rights reserved. 2

3 Construction Segment and Architects & Engineers Segment Overview History, Facts and Alignment 3

4 CNA Architects & Engineers History #1 provider of professional liability insurance to architects & engineers in the United States, more than 16,000 customers and 18% market share 55 years experience insuring architects & engineers Includes CNA s Contractors Professional Liability (CPL) & Pollution Incident (PI) Liability programs (launched 1996) Includes CNA s Contractors Errors & Omissions (CEO) program (launched 2012) CNA s Architects & Engineers programs are commended by the NSPE (National Society of Professional Engineers) Architects and engineers on staff as risk managers, program managers and senior underwriters Key target classes include: Architects, Engineers, Land Surveyors, Landscape Architects, Environmental and Miscellaneous Consultants, Contractors and Design One Property & Casualty Effective with January 1, 2014 effective business, CNA s Branch Middle Market Underwriters will quote and write CEO, CPL and PI products directly with CNA appointed agents Effective with January 1, 2014 effective business, CNA s Branch Middle Market and Small Business Underwriters will quote and write Design One products directly with CNA appointed agents Effective with January 1, 2014 effective business, Schinnerer will continue to handle all Architects & Engineers business for appointed & non-appointed agents, as well as CEO, CPL, PI and Design One business for nonappointed agents only 4

5 CEO, CPL & PI Direct Offering Facts Effective with January 1, 2014 effective business, CNA s Branch MM Underwriters can quote and write CEO, CPL and PI product directly with CNA appointed agents (previously managed through Schinnerer / non-appointed agents will continue to access these products through Schinnerer) Benefits of Offering CEO, CPL and PI Liability products in-house include: Premium growth CNA is targeting this class for aggressive growth, both as enterprise sell against our P&C insureds and mono-line CNA will provide indications on all accounts that qualify for the ECCP, MBAP, NRCA and SMAP programs Ease of doing business - As more construction contracts mandate coverage for professional and pollution liability exposures, CNA would have the capability to seamlessly address this need CNA s Underwriters will be the best Construction Liability Underwriters in the industry because of the deep expertise across all of a Contractor s Liability exposures High-level Comments / Points of Interest The CEO, CPL and PI Liability products are Claims-made, non-admitted products (agents must have an E&S license to access or utilize a CNA appointed wholesaler Availability in all 50 states, D.C. and U.S. Territories (U.S. Virgin Islands excluded) Limits are available up to $5 million for CEO and up to $10 million for CPL Policies can be issued on a stand-alone basis for CEO, CPL and PI, or combined with a professional and pollution offering (shared limits) The CEO, CPL and PI Liability products are eligible for a 5% credit when CNA writes the P&C business 5

6 Appetite Alignment with Construction CAM ASCC Our 12 Construction CAM Programs Concrete contractors (endorsed 25 years) BEAR Building equipment installation and repair contractors (launched 2008) ECCP LICA MBAP NRCA NUCA Electrical contractors (endorsed 24 years) Grading / excavation contractors (endorsed 10 years) General contractors Roofing contractors (endorsed 42 years) Underwriting Appetite Focus 12 CAM Programs and a Non-CAM Best-in-Class Focus All programs supported by our newest strategic partnership by Associated Builders & Contractors, Inc. (ABC), effective January 1, 2012 CEO, CPL and PI are strategically aligned with our CAM programs, providing opportunity to exploit our industry expertise and association relationships Utility and excavation contractors (endorsed for 24 years) PLANT Landscaping and lawn care companies (endorsed for 30 years) REC Renewable energy contractors (launched 2010) ROAD SMAP Highway / street and road contractors Sheet metal, mechanical, A/C and plumbing contractors (endorsed for 17 years) SPLASH Spa and swimming pool contractors (endorsed by NESPA since January 2010 and APSP since March 2011) 6

7 Contractors Professional Liability (CPL) and Contractors Errors & Omissions (CEO) Overview 7

8 Contractors Professional Liability Product (CPL) Target Risks: General Contractors with design-build exposure and Construction Managers Aligns with MBAP program Policy Features: Professional design services are either handled in-house or subbed to a design firm By professional services we mean services performed by licensed professionals: architects, engineers, landscape architects, land surveyors; we also include interior designers, LEED consultants and agency construction management services Rectification cover, a first party cover that allows an insured to report a design defect without waiting for suit by their client, keeping the project on schedule and uninterrupted Coverage for transportation pollution liability and non-owned disposal site Specifications: Claims-made/non-admitted form Minimum premium: $6,000 for CPL and $2,000 for Pollution, $10K SIR 8

9 Contractors Errors & Omissions Product (CEO) Target Risks: Artisan/Specialty Contractors Aligns with the ASCC, BEAR, ECCP, LICA, NRCA, NUCA, PLANT, REC, ROAD, SMAP, SPLASH The ECCP, NRCA and SMAP programs present the greatest opportunity for enterprise sell opportunities due to the nature of their work Policy Features: Covers the insured's faulty workmanship Covers negligent errors or omissions by contractors or on contractors behalf in the design of their work Covers the use of defective materials or products Available either stand-alone or combined with Pollution Liability Claims-made/non-admitted form. Specifications: Minimum Premium: $3,200 for the CEO; $4,200 for combined CEO and Pollution Minimum SIR: $3,000 & Co-Insurance starts at 0% but is dependent upon size of firm. Limits: Up to $5 million. 9

10 What are the Differences between CEO & CPL? Contractors Professional Liability and Pollution Incident Liability Policy (CPL) The CPL policy for general contractors with design-build responsibility and for agency construction managers covers liability in the performance of architectural, engineering and construction management services If they are eligible for MBAP, they are eligible for CPL Contractors Errors & Omissions and Pollution Incident Policy (CEO) The CEO policy for specialty contractors covers liability arising out of faulty workmanship, use of defective material or product or design errors that result in loss of use of or recall of work or installed product or diminution of value If they are with any other CAM, they are eligible for CEO The CEO Product Pays for the Cost of Rework 10

11 Contractors Errors & Omissions New policy for specialty contractors eliminates coverage ambiguity between design or judgment used in construction and faulty workmanship (launched 2012) GL Exclusions Typically Covered Under E&O (Regional Competitors) Damage to Property - that particular part of real property on which you are performing operations, if the property damage arises out of those operations Damage to Products property damage to your product when the damage is caused by your product Recall of Products, Work or Impaired Property damage claimed for loss, cost, or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of: (1) your product, (2) your work, or (3) impaired property GL Exclusions Typically Covered under PL (National Competitors) Professional Liability architectural, drafting or engineering services provided by you or anyone acting on your behalf Pollution damages arising from pollution conditions created during the performance of construction activities by you or anyone acting on your behalf Impaired Property damage to an impaired property or property that has not been physically injured, arising out of (1) a defect, deficiency, inadequacy, or dangerous condition in your product or your work, (2) a delay or failure by you or to perform a contract or agreement in accordance with its terms Offers broad environmental cover, including mold, transportation pollution liability and non-owned site disposal First national carrier offering this coverage CNA s CEO Product Covers BOTH Sides 11

12 Contractors Professional Liability (CPL) and Contractors Errors & Omissions (CEO) Coverage Highlights 12

13 What is Faulty Workmanship? CEO coverage fills the gap created by general liability exclusions for property damage to an insured s own work or from use of faulty products or materials. (Specifically Exclusions J, K, M, N of CG /07). Faulty Workmanship: Property damage to, loss of use, or recall of work performed by the insured. Property damage to, loss of use, or recall of products installed by the insured. Property damage to, loss of use, recall or diminution of value to impaired property. Bodily injury arising out of the insured s work after it is completed. 13

14 Design Coverage applies to the design services performed by or on behalf of the insured, provided that the person performing the design services is duly licensed in accordance with the laws of the jurisdiction to perform such services. 14

15 Pollution Coverage for pollution claims including cost for government-mandated clean-up. Proactive coverage for mold. No exclusions for asbestos, respirable dust or silica. Coverage for punitive damages resulting from pollution liability. Coverage for transportation pollution liability and non-owned site disposal. Pollution incident created by the loading or unloading of automobiles are covered. Protection for the generation, transportation, storage or disposal of pollutants. 15

16 Contractors Professional Liability (CPL) and Contractors Errors & Omissions (CEO) Practical Examples of Coverage 16

17 Practical Example Faulty Workmanship ABC Electrical is hired to install 500 yards of electrical conduit to the ceiling of a new construction warehouse. Total job cost is $400,000. Two months after installation, 250 yards of conduit falls from the ceiling. Luckily, the warehouse was empty so there was no bodily injury to employees or property damage to any of the owners contents. After investigation it appears that ABC Electrical did not use the appropriate load bearing brackets the engineer/design called for, thus the weight of the electrical system broke off from the ceiling joists crashing two stories to the ground. Estimated damages to correct the work is $250,000. This claim would be excluded from ABC Electricals GL policy due to Exclusion J (6) Damage to Property. This instance would fit the definition of faulty workmanship and would be covered under the CNA CEO. 17

18 Practical Example Defective Material ABC Roofing was hired by the owner of a one story strip mall to perform a tear off and re-roof on their property. Total job cost $100, months after the job is completed, the client experienced water intrusion from the roof, causing water damage to insulation, drywall, electrical and flooring. After investigation, it appears the decking used was defective causing parts of the roof to rot, allowing water penetration. The total claim cost is $250K of which $150K is for resulting property damage and $100K is for performing the job again using non defective material. Ordinary GL would pay for the $150K resulting PD however would decline coverage under Exclusion K, Damage To Your Product, for the $100K to redo the roof. CNA CEO would cover the $100K due to the wrongful act of faulty workmanship due to the use of defective material. 18

19 Practical Example - Design XYZ Contracting was hired to design and install the fire sprinkler system in an airport passenger terminal. XYZ ended up subcontracting out the installation portion of the work. Five years later the system was tested and the plaintiffs alleged a number of deficiencies were found, including incorrect hydraulic calculations used for the installation of the sprinkler risers. This caused the pressure demand for the sprinkler system to be above the pressure distributed through the firewater system, tripping the dry pipe valve prematurely. Professional liability and CNA CPL and CEO policies will respond to this claim. GL and Competitor s Errors and Omissions policies may not respond owing to the professional liability/services exclusion. 19

20 Practical Example - Pollution Three years after completion of construction on a multi-unit senior citizens facility, mold was found in the mechanical rooms of several units. The mechanical rooms were typically kept locked and were not opened unless the heat malfunctioned. Investigation showed that the condensation discharge pipes were not properly placed over the drains, allowing water to saturate the wallboard and seep around the edge of the drywall and down into the cavity below. Subsequently, the water seeped into the wall and ceiling space of the lower units. In addition, duct tape was placed over the drains during the drywall installation. The duct tape was never removed and subsequent water collection resulted in mold. This was a case of contractor error contributing to the original issue in lack of maintenance. Pollution/mold is generally excluded under GL policies and is excluded under some competitor E&O policies. Our policy includes broad pollution and mold cover for property damage and bodily injury arising out of construction activities. There are no sudden and accidental, or time element restrictions. Cover includes transport, disposal and clean-up coasts. 20

21 Why CNA for Construction? 21

22 Why CNA for Construction? CNA s Construction Segment has developed a deep industry expertise that will allow our underwriters to become industry leaders across all of a Contractor s Liability exposures CNA is the only carrier with 10 leading construction trade association endorsements. This direct, realtime access to contractors allows us to proactively develop specific insurance solutions and respond quickly to our customers business challenges. Not all contractors are alike. After 60 years of industry experience in creating distinctive, trade-specific insurance solutions, when people think of Construction they think of CNA. With specialized claim services including dedicated units for New York Labor Law and Construction Defect our claim expertise is outstanding. With risk control services and resources that are recognized by contractors as industry-leading, we ve set the standard for safety, helping our customers operate at full capacity on the job. CNA holds more IRMI CRIS designations across all disciplines than any other carrier. From underwriting through risk control through claims through premium audit, every CNA construction customer will be handled by someone with the deep expertise of an IRMI CRIS designation. 22

23 Questions & Answers Thank you for the opportunity to discuss CNA s Contractors Professional and Pollution programs. Please feel free to contact me directly with any questions: Odie Wilson Odie.Wilson@cna.com 23