homeowners beware!

In the past several years, I have had construction related claims submitted to my agency from our clients that have home insurance policies. The two I wish to share with you involve unlicensed and uninsured contractors. The first claim resulted from a general contractor replacing the windows on their hillside home. The general was licensed and insured, but the stucco contractor used to patch in the windows was unlicensed and uninsured and did not have workers compensation insurance. A worker fell off the scaffold in the back of the home and the fall resulted in medical bills, loss of wages, and pain and suffering. Law suits prevailed and the results did not favor the general contractor (who was also fined by OSHA) or the homeowner. The claims reported to the general contractors insurance and the property owners insurance were both declined. In the second example, the homeowner did almost everything right, but in an effort to wrap up the job sooner than later, they hired their own concrete former/ finisher. The general’s concrete guy was just too busy. The finisher who did the work ended up not having insurance or a license. Some years later the owner sold the home and shortly thereafter the concrete started to crack way beyond acceptable limits. The buyer sued the previous homeowner. The homeowner had no recourse against their general contractor since he did not hire the finisher and the homeowners insurance declined coverage as it was not an occurrence. So, I’m sure you are getting the picture here. Do not hired unlicensed or uninsured people to work on your home! It could have severe financial consequences.

New Workers’ Compensation Bill in California

The state of California is subjected to the third highest workers’ compensation rates in the entire US, trailing only Alaska and Connecticut according a survey completed this year. The rate that California businesses pay out is $2.92 per $100 of salary, which is 55 percent greater than the national median rate. In 2010, California was the fifth the last time this survey was taken, so it has been trending upward. This spurred California governor Jerry Brown and the state government to overhaul California’s $17-billion workers’ compensation insurance program. The law is expected to save businesses anywhere between $400 million to $1 billion annually. The reform also hopes to increase the benefits for injured workers. Payments to permanently incapacitated victims of job-related accidents are set to increase by nearly $740 million dollars a year. Money for the boost would come from streamlining the system and by eliminating some payments made to doctors, lawyers, claims administrators and other service providers in the $11 billion-a-year workers' compensation system. The governor called the proposal an extraordinary bill "to reform a broken system." This legislation would "avert an imminent crisis where workers suffer and rates will skyrocket," he said. "We have the chance to make the workers' compensation system better — much better — for workers and cheaper for business." Worker’s compensation is an example of a controllable expense if you are a contractor or in any business. If you have questions about what other liability coverage you need for a job or would like to check your rates, please contact a dedicated insurance agent at Wise Insurance Agency in Marin County today.

As a Contractor, what is a Waiver of Subrogation?

There is a legal term that shows up throughout legal documents regarding real estate, personal guarantees and insurance. The rights of subrogation are generally broken up into five different categories. The first is regarding people’s debts, the right of subrogation allows a person who paid off another person’s debt to seek the repayment from that person. There is another subrogation right which allows creditors of a trust to seek repayment from the beneficiaries of the trust if the trustee does not make payments. In many examples, subrogation rights are a transfer of the right to sue someone to recoup losses. The most important kind of subrogation is regarding an indemnity insurer, which allows an insurance company to seek financial recuperation from the party responsible for the insured’s payout. For example, if a building which you own burns down due to the fault of another, you could sue to recoup your losses. But, if you have insurance for that property, the insurance company will be able to pay for the damages. But that also becomes subrogated to your possible lawsuit against the party at fault. The right to seek payment from the negligent party becomes transferred to the insurance company. For subcontractors, the waiver of subrogation is an essential item included in your insurance certificates before starting work. This proves two things to the general contractor or employer. The first is that the subcontractor has some sort of insurance program. It is also in an attempt to negotiate the terms of an insurance policy held by the sub to result in the benefit of the contractor. A waiver of subrogation prevents the insurer from pursuing reimbursement from the other insurer. If a subcontractor’s worker is injured at a site, the subcontractor’s insurance will be hit with the worker’s compensation claim. In positions were subrogation has not been waived, the insurance company can pursue the contractor as a party culpable for the injury. As a contractor it is important to know the way to navigate through the pitfalls of insurance. Reach out to a skilled insurance agent at Wise Insurance in Marin County today.

Becoming Aware of Worksite Pollutants and Finding Solutions

As a contractor, there are many concerns day to day. Schedules must be kept to finish a job on time and sometimes workers who are hurrying are not as careful as they should be while completing their work. It is easy to remember the need for insurance that covers personal injury claims, property damage claims or other negligence, but it is harder to remember that the work completed at a jobsite can affect the environment. So what is considered a pollutant at a jobsite? From a practical standpoint, almost anything that has to be cleaned up - whether it is from a building, land, air or water - may be a pollutant at a jobsite. Here are some examples of pollutants that occur: • Clean dirt that is washed off of a jobsite and into a salmon stream may be a pollutant • Bags of concrete spilled into a creek in an auto accident may be a pollutant • With inadequate ventilation, paint fumes may be a pollutant • Dirt that is removed that was previously unknown to contain petrochemicals or other chemicals may be a pollutant There are many other things which are considered pollutants depending on local regulations concerning construction. The good news is that with Contractor Limited Pollution Liability, you can be covered for any cleanup as well as defense against bodily or property harms caused to third-parties by pollutants. It is wise to have this insurance for the following businesses: • General contractors – commercial, residential, municipal, highway/road, infrastructure, maintenance, mechanical, demolition, industrial, excavation, grading • Trade contractors – HVAC, paving, carpentry, concrete • Specialty contractors – foundation, pipeline and tank installation, drillers • Remediation contractors If you are a contractor looking to protect your business against unforeseen circumstances, it may be time to contact an insurance professional who is skilled in recognizing the coverage you will need. Contact an experienced insurance agent at Wise Insurance in San Rafael today.

Claims Happen!

Hey, I know these are tough times and insurance costs associated with being a contractor are a burden. What never ceases to amaze me is the number and variety of claims we see in a year’s time. I thought I’d share some of these losses with you. I want you to see that regardless of the quality of your work or the fact that you’ve never had a claim, you should never skimp on insurance! The Indemnification Claim: In this situation, a hardwood floor contractor worked for a general. His work was impeccable. The subcontractor was named in a cross complaint from the general contractor’s insurance policy. The home that was built had some water intrusion problems and the homeowner sued the general contractor who sued the subcontractors. The subcontractor, having indemnified (or taken responsibility for) the general, turned the claim over to his insurance company. Many thousands of dollars later the claim was settled. The Slip and Fall Claim: This was really bad. A new stairway was being built for a second floor addition. The contractors and their employees were using a makeshift ladder to access work on the second level. Over the weekend the homeowner used the makeshift ladder to inspect the progress and fell while descending the ladder. The homeowner was severely injured, and as a result, every contractor on the job was sued. The Subrogation Claim: I will not mention the brand of faucet, but three years after the job was completed, a bushing in the kitchen faucet split and water ran under the sink, unnoticed for hours. The homeowner made a claim on her home insurance policy and the damages (over 250K) were taken care of by the home insurance carrier. This claim should have ended at this point, but the home insurance carrier saw that there was a permit pulled to remodel the kitchen three years prior. They turned their loss over to a law firm who subrogated the claim to both the general contractor and the plumbing contractor who did the kitchen remodel. I hope you never have a claim, but if you do, are you sure that you have the best possible insurance policy?

Insurance Coverages to Consider!

CONTRACTOR INSURANCE

Contractors, during the course of their work, encounter many risks. Whether a contractor is a sole proprietor or the owner of a larger company, mistakes, accidents, and other disasters can and do occur. These problems can be costly and instantly drain a contractor’s resources.

 Do you have ALL the insurance you need? Our job is to make sure you do!

GENERAL LIABILITY: EVERY contractor needs to have this insurance to cover bodily injury or property damage that can occur on the job. This insurance covers a contractor for claims and lawsuits arising during AND after the completion of the project. *Ask about the dangers of a lapsed policy.

WORKER’S COMP: If you have employees, California state law requires that you carry workers’ comp insurance. This covers an employer’s obligation to an employee who is injured on the job, and includes medical payments and loss of wages. The payments to employees are in exchange for relinquishment of the employee’s right to sue the employer and negligence is not an issue.

INLAND MARINE (TOOLS & EQUIPMENT): This covers your tools and equipment for theft and destruction by outside forces (i.e. fire or flood). The tools will covered wherever they are, whether on the job, in the truck, or at back at the shop. This is very important to have nowadays, due to the rise in crime. *Ask about how to insure rented or borrowed equipment.

COMMERCIAL AUTO: This insurance is used to cover physical damage to any owned, leased, hired, rented, or borrowed private passenger autos, trucks and trailers that are owned and used by in the business, and includes liability coverage for bodily injury and property damage caused by an accident for which the insured is responsible. Other coverage’s, such as towing and glass breakage, are also available. *Ask about non-owned auto coverage.

BUILDERS RISK: Builder's risk insurance is a special type of property insurance which insures against damage to buildings while they are under construction. Builder's risk insurance is coverage that protects a person's or organization's interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure.

EXCESS LIABILITY: Excess liability coverage is insurance coverage above the limits of the underlying policies, such as general liability, commercial auto, and as an option, the additional employer’s liability portion of the workers’ comp. After the basic policy limits have been exhausted by claims, this policy will pay the excess above that amount up to its own limits.

POLLUTION LIABILITY: Contractors Pollution Liability insurance helps protect contractors from both liability and financial loss that can result when a covered operation results in a pollution accident. This coverage applies to both the contractor and the subcontractors. Federal government standards now identify and list over 2,000 pollutants of which many are your job site.

RIGGER’S LIABILITY: This insurance covers a contractor's liability for damage to the property of others while in the his/her care, custody, or control and liability that can arise out of the moving of property and equipment belonging to others, such as with a crane.

BONDS: The State of California requires that every licensed contractor maintain a Contractor License Bond to keep his/her license active. In addition, other jobs require a performance bond or a Bid Bond. Wise Insurance offers every type of bond a contractor will need, regardless of his credit history.

PROFESSIONAL LIABILITY: Have you ever made structural recommendations, as built drawling, system requirements. You could have a professional exposure. What is say you are a HVAC contractor and you design the heating requiremts for a building. This is a non tangible loss if the systems fail. There is no person injured (physically) or no building damaged. General Liability would not cover such a loss.

MISC COVERAGES: Cyber liability, data breach, employment practice liability and crime coverage.

Properly Sub-Contracting and your Liability Policy

Sub-Contracting

All commercial General Liability Policies for contractors include some sort of sub contractor warranty. Basically what it means it that the carrier is requesting and you have agreed to establish the two pathways for your carrier to get to the subs insurance company. And this is why if you break down the actual cost of your policy the charge for subcontracting is a fraction of what is charged for you and your direct or leased payroll.

The pathways are:

An additional insured endorsement from the sub

And use a sub contractor agreement with hold harmless/indemnification language. Your sub will be holding you harmless and indemnifying you for his liability.


Now, having said this please look at the two sub warranties below and see which you’d rather have in your policy in case you goofed up establishing the proper sub relationship.

Sample 1

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

INDEPENDENT CONTRACTORS


The insured hereby represents and warrants that:

1. Commercial general liability insurance coverage for “bodily injury” and “property damage” will be required for all contractors and subcontractors performing work or operations on behalf of any insured; and the insured shall obtain certificates of insurance from all contractors and subcontractors performing work or operations on behalf of any insured. Such insurance will be in effect during the duration of the time work is being performed on behalf of any insured; and that

2. The insured will be named as an “additional insured” on the required coverage’s described in Item 1. above and that

3. The minimum limits and coverage’s thus required of all contractors and subcontractors performing work or operations on behalf of any insured shall be:
REQUIRED LIMIT COMMERCIAL GENERAL LIABILITY FORM
$1,000,000 General Aggregate
$1,000,000 Products/Completed Operations Aggregate
$1,000,000 Each Occurrence
4. Any coverage that might otherwise exist under this policy for claims against any insured based on work done for or on behalf of any insured by a contractor or subcontractor is expressly excess over, and will not contribute with, the insurance required under this endorsement. No duty to defend or indemnify any insured under this policy for any claims that are or should be covered under the policies required of contractors and sub-contractors under this endorsement will exist absent exhaustion of all such contractors’ and subcontractors’ policies.
The insured understand that this insurance policy has been issued upon these representations and warranties.


Named Insured: ________________________________________________________________
Policy Number:________________________________ Effective Date: ___________________
(The above information is required only when this form is added after the policy is issued)



Sample 2

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY

Independent Contractors Endorsement

This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

PRODUCTS/COMPLETED OPERATIONS LIABILITY COVERAGE FORM


The following condition is added to SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS section of the policy:

Prior to the commencement of any work performed on your behalf, you will obtain the following:

1. Written agreement with each independent contractor indemnifying and holding you harmless for “bodily injury” or “property damage” sustained by a third person, and

2. Written agreement with each independent contractor indemnifying and holding you harmless from liability arising from injuries to that independent contractor and/or the employees of any independent contractor, and

3. Certificates of insurance from each independent contractor evidencing the following coverages and minimum limits of liability

 Commercial General Liability coverage with an insurance carrier rated A- or better by A.M. Best

$1,000,000 Combined Single Limit each occurrence
$1,000,000 General Aggregate
$1,000,000 Products/Completed Operations Aggregate

 Worker’s Compensation coverage as required by the jurisdiction in which services are performed.

4. For the period in which services are performed on your behalf by each independent contractor, you must be named as an additional insured on each independent contractor’s Commercial General Liability Policy.
Failure to comply with the Special Condition does not alter the coverage provided by this Policy. However, should you fail to comply, a premium charge will be made. The premium charge will be computed by multiplying the “total cost” of all work sublet that fails to meet the above condition, by the rate per $1,000 payroll for the applicable classification of the work performed.

If the policy does not contain the applicable classification and rate, we will multiply our usual and customary rate per $1,000 of payroll for classification, by the net modification factor, if any, applied to the policy rates. “Total cost” means the cost of all labor, materials, and equipment furnished, used or delivered for use in the execution of the work, and all fees, bonuses or commissions paid.



I am going to guess you’d like sample 2.

Call me,

Mike Wise