MUNICIPAL INSURANCE ISSUES

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1 MUNIIPAL INSURANE ISSUES Presented to: ity Attorneys February 2001 ontinuing Education Seminar February 22, 2001 Los Angeles, alifornia Presented by: Steven P. Kahn, PU, ARM Managing Director ARM Tech (949)

2 LIST OF EXHIBITS 1 Five Basic Sections of All Insurance Policies 2 Insurance a ity Should Purchase 3 Types of Insurance to Require of ontractors 4 Other Insurance Requirements for ontractors 5 Insured, Named Insured and Additional Insured 6 Problems to Expect in the Next Three Years Attachments Practical Risk Management Topic: AHow to Read an Insurance Policy@ Practical Risk Management Topic: Aontract Review@ ABasics of Fidelity Bonding,@ Article by Steven P. Kahn G:\FTP\ASSOIATE\LEAGUE\LEGAL_RESOURES\NEWYBRARY\2002\11035_LR.KAHN PAPER.DO

3 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 1 Page 1 of 3 FIVE BASI SETIONS OF ALL INSURANE POLIIES 1. Declarations: Identify key elements of the insurance contract: g Named Insured Policy term Limit or amount of insurance Deductible Premium Name of insurer Policy number Forms and endorsements attached to the policy 2. Insuring Agreements: 1. Identify the types of losses the insurer will pay. 2. In property insurance, this is: Perils insured against Property insured c. In liability insurance, this is: The type of injury you might cause for which you will be protected (e.g., bodily injury, property damage, libel, slander, E&O, etc.). The type of activity for which coverage is provided (e.g., operation of boats, general operations, operation of airplanes, etc.). 3. Exclusions: 1. Identify the types of losses the insurer will not pay. a. In property insurance, this is: Perils excluded Property excluded 2. In liability insurance, this is:

4 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 1 Page 2 of 3 FIVE BASI SETIONS OF ALL INSURANE POLIIES Types of injury you might cause for which you are not covered (e.g., intended injury, injury to employees, etc.). Types of activity for which coverage is not provided (e.g., dumping hazardous waste, operation of airplanes, sexual harassment, discrimination, wrongful termination, etc.). 4. onditions: 1. State what the insured and insurer must do to protect their rights under the contract. 2. Important conditions include: Number of days advance notice that must be given to cancel policy. What insured must do if a loss occurs. When the insurer must pay the loss. Amount of property insurance that must be purchased to comply with coinsurance requirements. What insured must do prior to suing insurer. What happens if Aother insurance@ also covers the loss. Insurer=s right to recover losses it pays on insured=s behalf. 5. Endorsements: 1. Used to alter the basic insurance policy. 2. Should be sequentially numbered. 3. Must be attached to policy. 4. Must be listed on declarations page if part of original policy.

5 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 2 1. Liability Insurance: 1. General liability b. Automobile liability 3. Errors & omissions liability 4. Aircraft liability 5. Watercraft liability 6. Airport liability 2. Property Insurance: 1. Direct damage: Χ Buildings Χ ontents Χ Infrastructure (??) 2. Indirect damage: Χ Loss of revenue Χ Increase in operating expenses 3. rime Insurance: 1. Theft by employees 2. Theft by non-employees 3. Depositors forgery 4. Workers ompensation INSURANE A ITY SHOULD PURHASE

6 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 3 TYPES OF INSURANE TO REQUIRE OF ONTRATORS Type of ontract omm=l General Liability Business Auto Liability Prof. Liability Aircraft and Airport Liability Fire and Extended overage or All Risk Workers ompensation onstruction ontract* (new construction) T T Ž Ž T Lease (tenant of entire building or ground lease with building reverting to district) T T Professional Service ontract (architects, engineers, doctors, etc.) Airline, FBO or Aircraft Transport Transportation ontractor or where contract requires substantial use of automobiles T Ž T T Ž T T T T Ž T Τ = overage normally required in contract situation. = overage often (but not always) required in contract situation. * = For construction projects exceeding $100 million in construction costs, District should evaluate whether it should arrange commercial general liability and workers compensation for all contractors and subcontractors onsite. This is called an owner controlled or wrap-up insurance program.

7 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 4 OTHER INSURANE REQUIREMENTS FOR ONTRATORS 1. Standard limit $1 million 2. ity covered as an insured 3. ontractors insurance is primary 4. ity to receive 30 days= notice prior to cancellation, change or non-renewal of contractors insurance 5. ity to receive a certificate of insurance and, at ity=s option, a copy of the policy 6. Insurers to have A.M. Best=s rating of at least A VII

8 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 5 Page 6 of 2 INSURED, NAMED INSURED AND ADDITIONAL INSURED 1. Named Insured: 1. The person or organization shown on the declarations page. 2. Benefits of being a named insured: Χ overage applies to you Χ You must be notified of cancellation 3. Obligations of named insured: Χ Must notify insurer of claims Χ Must keep records for premium computation Χ Must pay premium Χ Must cooperate in investigation and defense Χ Must transfer subrogation rights 2. Insured: 1. The persons or organizations defined as insureds in the policy, such as: Χ Employees Χ Executive officers Χ Persons using your automobiles 2. Benefits of being an insured: Χ overage applies to you 3. Obligations of an insured: Χ Must cooperate in claims investigation and defense Χ Must transfer subrogation rights 3. Additional Insured: 1. Term not defined in most policies so be careful. 2. ommonly accepted to mean the Aadditional insured@ is added to the policy as an Ainsured.@ 3. You can be added as an Aadditional insured@ many ways:

9 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 5 Page 7 of 2 INSURED, NAMED INSURED AND ADDITIONAL INSURED Endorsement Title Additional Insured Owners, Lessees or ontractors (Form A) Additional Insured Owners, Lessees or ontractors (Form B) Additional Insured Lessor (Auto) Additional Insured Managers or Lessor of Premises Form No. G G A G

10 ity Attorneys February 2001 ontinuing Education Seminar Exhibit 6 PROBLEMS TO EXPET IN THE NEXT THREE YEARS 1. Workers compensation (W) losses have increased: 1. ity W insurance premiums will increase, maybe by a lot. 2. Some contractors may have difficulty getting W insurance, may self-insure when they shouldn=t and may obtain coverage from substandard insurers. 2. Liability insurance premiums are increasing: 1. Monitor the solvency of your coverage source (pool or insurer). 2. Watch contractor insurance.

INSURANCE AND INDEMNIFICATION MANUAL. Supplement to Policy 560 i

INSURANCE AND INDEMNIFICATION MANUAL Supplement to Policy 560 Table of Contents.1 INTRODUCTION... 1.2 EXHIBIT I INSURANCE AND INDEMNITY REQUIREMENTS FOR CONSTRUCTION AND SERVICE CONTRACTS... 1 2.1 INDEMNIFICATION/HOLD