County of Riverside Human Resource Dept. Risk Management Div. Insurance Requirements In Contracts JEFFREY L. HUNTER SR RISK ANALYST
INSURANCE REQUIREMENTS IN CONTRACTS The County s insurance requirements are intended to protect the assets of the County when entering into contracts. Two methods used: Indemnification: Requires the contractor to indemnify, defend and hold harmless the County for any losses, claims, liability, etc that may arise in connection with service provided under the contract. Insurance: The financial tool used to meet the indemnification obligation. Insurance provides funds to pay for losses that occur and provides protection to both the County and the contractor 3
INSURANCE LANGUAGE Insurance requirements are typically included in County contracts through an insurance language. The insurance section explains the types and amounts of insurance required in the contract and details the contractor s responsibility to provide proof of insurance. The County uses a variety of standard insurance language based on the type of work performed and the dollar value of the contract. The insurance language is part of the contract, and the insurance requirements are an enforceable term of the contract. 4
INSURANCE TERMINOLOGY Insured The party who pays the premium for specific coverage from an insurance product Brokers Those who place insurance contracts with underwriters Insurer The insurance company that underwrites the insurance Underwriters The holder of the source of funds to pay claims Adjusters Persons who assess nature and extent of damages in paying a claim 5
Insurance SAMPLE COUNTY OF RIVERSIDE INSURANCE LANGUAGE Without limiting or diminishing the CONTRACTOR S obligation to indemnify or hold the COUNTY harmless, CONTRACTOR shall procure and maintain or cause to be maintained, at its sole cost and expense, the following insurance coverage s during the term of this Agreement. As respects to the insurance section only, the COUNTY herein refers to the County of Riverside, its Agencies, Districts, Special Districts, and Departments, their respective directors, officers, Board of Supervisors, employees, elected or appointed officials, agents or representatives as Additional Insureds. 6
INSURANCE TERMINOLOGY (CONTINUED) Binders Immediate granting of insurance coverage until the full policy can be issued Policy The insurance contract that defines the insurance product Premium The money paid to the insurance company Endorsement An addition to an insurance policy that modifies it Exclusion Defines the circumstances under which coverage will NOT be provided 7
TYPES OF BUSINESS INSURANCE Commercial General Liability Vehicle Liability Workers Compensation / Employer s Liability Professional Liability (Errors & Omissions) 8
OTHER TYPES OF INSURANCE Excess / Umbrella Liability Property Fire & Casualty Fidelity Insurance Construction Aircraft Liability Water Craft Liability Pollution Liability Crime Coverage Builders Risk Special Events 9
COMMERCIAL GENERAL LIABILITY Bodily Injury Property Damage Personal & Advertising Injury Products & Completed Operations County requirements: $1,000,000 Per Occurrence Combined Single Limit $2,000,000 General Aggregate Limit Additional Insured Endorsement 10
WHAT IS AN ADDITIONAL INSURED ENDORSEMENT? Additional Insured is a person/ organization other than the named insured who is protected under an insurance policy (in this case, the County) Other parties who are not an original party to the insurance contract who are named later to receive the same benefit of insurance coverage as the original party/insured to the contract 11
WHAT IS THE PURPOSE OF BEING NAMED AS ADDITIONAL INSURED? Reinforce the contractual transfer of risk away from the County back to the vendor providing the goods or service Obtain third party rights to policy defense in the event of a lawsuit being named as additional insured on a vendor s policy provides the County with insurance coverage and defense costs under the vendor s policy (up to the policy limits) instead of under the County s policy This additional level of protection is necessary because we have no control of the vendor s employees, events, services, products, activities or environments BUT they are working for or on behalf of the County, so the County has some risk exposure 12
COUNTY S REQUIRED ADDITIONAL INSURED LANGUAGE Currently Reads: As respects to the insurance section only, the COUNTY herein refers to the County of Riverside, its Agencies, Districts, Specials Districts, and Department, their respective directors, officers, Board of Supervisors, employees, elected or appointed officials, agents, or representatives as Additional Insureds. Policy shall name the COUNTY as Additional Insured. 13
VEHICLE LIABILITY Covers vehicles (including bodily injury & property damage) used to provide services or deliver goods Any Auto (broadest coverage) Hired Autos (rental or leased) Non-Owned Autos (employees) County requirements: $1,000,000 Per Occurrence Combined Single Limit $2,000,000 General Aggregate Limit Additional Insured Endorsement 14
WORKERS COMPENSATION INSURANCE & EMPLOYERS LIABILITY Covers Employees On-The-Job Injuries Claims for Lost Wages & Medical Expenses Not Required for Sole Proprietor County requirements: $1,000,000 Per Person Per Accident Waiver of Subrogation Endorsement 15
WHAT IS A WAIVER OF SUBROGATION ENDORSEMENT? Subrogation is when an insurer pays a claim to an insured for liability or property damage caused by a third party, the insurer is waiving the rights of the insured to recover from the third party Prevents subrogation attempts by the vendor s insurance company for claims they had to pay and/or seeking reimbursement from the County Waives their right to file a claim against the County 16
PROFESSIONAL LIABILITY INSURANCE Includes Errors & Omissions Applies to Work Provided by: * Architects * Consultants * Doctors * Engineers * Lawyers County requirements: $1,000,000 Per Occurrence $2,000,000 Annual Aggregate Must Continue Five (5) Years Beyond the Termination of the Agreement (5-Year Tail) 17
WHAT IS A CERTIFICATE OF INSURANCE? A Certificate of Insurance is simply proof that insurance coverage exists Serves as proof from the vendor s insurance company of the types of insurance the vendor has in place at the time the certificate of insurance was issued Usually on ACCORD Form For Informational Purposes Only Does NOT amend, extend or alter coverage Does NOT grant any rights under the policy to the certificate holder 18
WHAT IS AN ENDORSEMENT? Endorsements DO Amend, Extend or Alter Coverage Endorsements are REQUIRED TO PROVE the County has been added as an insured to the policy or that subrogation has been waived in favor of the County 19
HOW DO YOU READ CERTIFICATES OF INSURANCE? County General Conditions 20
21
22
23
24
OTHER CONSIDERATIONS Consider the risk when determining the amount of coverage needed Remember risk, not the dollar amount of the agreement, determines the required insurance limits/amount of insurance needed to cover potential loss 25
OTHER CONSIDERATIONS (CONTINUED) Review certificates of insurance & endorsements to make sure they are in order and meet the County s standards Discuss issues/concerns with Risk Management Set up a reminder/tracking system for expiration dates 26
INSURANCE REFERENCE TOOLS County Insurance Provisions Risk Management's Certificate of Insurance Guidelines Sample Certificates of Insurance & Endorsements State of California Department of Insurance: www.insurance.ca.gov A.M. Best Company Website: www.ambest.com 27
RIVERSIDE COUNTY RISK MANAGEMENT DIVISION Jim Sessions Risk Manager Email: jsession@rc-hr.com Main: (951) 955-3540 Jeffrey L. Hunter Senior Risk Analyst Email: jlhunter@rc-hr.com Main: (951) 955-3540 Penny Fonches Insurance Analyst II Email: pfonches@rc-hr.com Main: (951) 955-3540 28
QUESTIONS 29