Construction Insurance Bulletin

Any contractor who has been in business for a while is familiar with Additional Insured coverage. This coverage insures an outside organization, usually a project owner or general contractor, under the contractor’s own policy. It is often a requirement for construction projects, and it can be the source of insurance disputes if not handled correctly.

Owners and general contractors who hire subcontractors are also assuming responsibility for issues that arise during the project. If sparks from a welder hired by the general contractor start a fire that damages the building next door, the building’s owner will likely sue both the welder and the GC. The GC does not want liability for the welder’s actions since it cannot control them. In addition, the GC has the power in the relationship, since it makes the hiring decisions and controls the purse.

Therefore, most construction contracts require a subcontractor to assume the GC’s liability for losses that arise from the sub’s work on the job. The sub finances this additional liability through contractual liability coverage on its Commercial General Liability policy and by covering the GC as an additional insured on that policy.

Traditionally, insurance companies have covered an additional insured by attaching an endorsement to the policy. This endorsement lists the additional insured by name and insures it against liability arising from the named insured’s ongoing operations. This works well if the insured has relatively few requests for this coverage. However, it presents some risks of errors. The subcontractor might forget to tell its insurance agent that it needs the endorsement. The agency staff might fail to send the request to the insurance company. The insurance company might receive the agent’s request and never act on it. Any of these scenarios June cause the company to deny coverage to the GC when a loss occurs, forcing the GC to submit a claim to its own company. The GC June then sue the subcontractor for breach of contract. Because of the potential pitfalls, organizations that receive many requests to add additional insureds often want their insurance companies to provide a blanket additional insureds endorsement.

A blanket endorsement typically provides automatic coverage for any organization that the named insured has agreed to cover under the terms of a written agreement. This eliminates the need to send individual requests for each additional insured, saving time and effort and reducing the chance that an error will lead to an uncovered loss. However, these endorsements also have their disadvantages. The standard ISO endorsement provides coverage only if a written agreement requires the named insured to cover the additional insured. If there is no written contract, or that contract does not require additional insured coverage, the endorsement will not provide it. Also, it provides coverage only while the named insured’s operations for the additional insured are ongoing. When the sub’s work is finished, so is the GC’s additional insured coverage. That could be a problem if something in the sub’s work causes injuries or damages months or years later. Further, the endorsement’s wording could allow an insurance company to deny coverage for an accident that occurs while the sub’s work is ongoing but that is not reported until after the sub’s work is finished.

One of our insurance agents experienced in writing coverage for contractors can be a good source of advice and information about blanket additional insured endorsements. Many insurance companies have their own endorsements that differ from the standard. For example, some guarantee advance notice to the additional insured if the policy is cancelled. It is well worth it for a contractor to spend some time investigating the different coverage options. Call us today!

Despite common belief, the majority of workplace injuries are not caused by unsafe conditions, but rather employee behavior. These “misbehaving” workers often overestimate their physical limits and make unsafe choices — such as lifting a 300-pound piece of equipment without assistance.

When DuPont conducted a study of all its workplace accidents over a 10-year period, they discovered that 96% of the incidents resulted from employees working beyond their limits. A 2006 Liberty Mutual Workplace Safety Study showed that more than 50% of all workplace injuries were a result of overexertion, falls, twisting the wrong way and other such “behavioral” accidents. These injuries led to an estimated $46 billion in annual worker’s compensation costs.

The OSHA factor

Considering these eye-opening statistics, it’s obvious that workers need an on-the-job attitude adjustment. Some believe the industry should turn to The Occupational Safety & Health Administration (OSHA) to reverse this disturbing trend. Unfortunately, OSHA might not be the solution. Although the organization has acted as the watchdog for workplace safety for the past 30 years, OSHA generally focuses on making the workplace safer as opposed to changing employee behavior. After all, it’s a lot easier to modify a facility or repair a piece of machinery than it is to change the way a worker thinks and acts. Plus, many employers are wary of opening their doors to OSHA in fear that the organization will become overly involved in their every day affairs.

Taking charge

Because OSHA doesn’t seem to be the answer, it looks like employers are on their own when it comes to changing employee behavior. That means business owners must take the initiative to educate employees and cut down on preventable workplace injuries. Here are a few steps employers can take to cut back on “behavioral” accidents:

• Appraise the situation: Take a closer look at past employee injuries that have occurred in your workplace. If you notice any patterns or trends, it’s time to make significant changes in that area. For example, if most injuries occurred when employees were attempting to carry heavy boxes, focus on teaching workers to safely move boxes with the assistance of another worker or a forklift.
• Get supervisors on board: Ensure that your front line supervisors make injury prevention a top priority. Not only should they constantly enforce safety guidelines, but they also need to raise awareness throughout the ranks.
• Work as a team: Workplace injury prevention requires plenty of teamwork. Make sure that all your employees understand the importance of working together and keeping an eye out for their fellow workers.
• Create incentive programs: Consider offering your workers special rewards for sustaining a safe workplace. For example, let workers know that if there are no injuries within a 6- or 12-month period, they’ll be rewarded with a party, gift certificates or even an extra vacation day. This will give them greater incentive to make safe choices on a daily basis.
• Hire the right people: Try to employ safety-conscious, reliable workers who are genuinely concerned with injury prevention.
• Train your workers: Without the proper education and training, workers cannot be expected to perform their jobs safely. Ensure that all your employees are well-trained in safety guidelines and offer refresher courses each year.

Changing human behavior is no easy task. It will take loads of time and hard work to change your employees’ ways, but it will be well worth the effort in the long run. If you can successfully adjust your workers’ attitudes, you’ll enjoy lower insurance premiums, more productive workers and fewer injury-related absences. You might even be eligible for inclusion in OSHA’s Safety and Health Achievement Recognition Program (SHARP). This program recognizes small businesses with an exemplary safety and health management system. If you receive this prominent recognition, your worksite will be exempt from programmed inspections as long as your SHARP certification is valid.

Workers Compensation is often one of the largest items in a business’ insurance budget. Relatively small claims for injuries like cuts or abrasions can impact the coverage’s cost, but more influential are the larger claims for more serious injuries. This type of loss requires the insurance company to set up a reserve, or estimate of a claim’s ultimate cost. The accuracy of a reserve has important implications for both the employer and insurer.

Businesses might feel that insurers set reserves too high, and that can happen. Over-reserving unnecessarily inflates the insurer’s liabilities and reduces its surplus (net worth.) This in turn reduces the amount of insurance the company can provide without raising fears about its financial stability. Although the experience modification formula penalizes a firm more for frequent claims than for severe ones, over-reserving does make the firm’s modification greater than it should be, resulting in higher premiums. Finally, over-reserving distorts a firm’s loss ratio, which makes the firm’s business less attractive to underwriters.

Under-reserving presents the greater threat to insurers. If the company sets the reserve too low, the claim can develop more rapidly than expected. The company might eventually find itself with a large obligation for which it is not prepared to play. Also, company managers tend to focus their attention on large claims and delegate handling of smaller ones. This means that an under-reserved claim will not receive proper management attention; the company will not apply claim control measures until it is too late for them to make a difference. Inadequate reserves can also affect a company’s financial stability ratings. Rating agencies such as A.M. Best might decide to lower a company’s rating if it finds significant under-reserving. This might cause customers to move their business to companies with higher ratings.

Certain types of claims are more likely than others to develop into high-dollar ones. Back injuries tend to be very expensive. Aging factory or warehouse laborers who have endured years of stress might need long-term treatment and, in some cases, surgery. Depending on the worker’s age, he might not return to work. Older employees who suffer injuries to their feet and legs might also have expensive claims. These employees might have pre-existing conditions, such as diabetes or hypertension, which worsen the consequences of an injury, resulting in amputations or heart attacks. Other injuries might aggravate conditions such as obesity or spinal problems, making the worker’s diagnosis more severe and increasing the disability period.

Other claims might develop into large losses because of the worker’s circumstances. Suppose a two-earner household has been paying for childcare for years, and the youngest child reaches the age where such care is no longer necessary. The parents are accustomed to a standard of living where they live on the after-childcare income. Workers Compensation benefits with no childcare expense might be similar to a parent’s wages after paying for childcare. This gives the worker less of an incentive to return to work. Workers who are nearing retirement also have a reduced incentive to return to the job after experiencing a period of disability, as they might be mentally prepared to stop working. Conversely, seasonal employees who need income to carry them through the off-season have incentives to prolong their disability periods. So do workers whose companies are laying off employees or whose plants are closing.

Employers should work closely with our insurance agents and companies to monitor Workers Compensation claim activity. Claims that fit into any of the types described above need special attention. The art of claim reserving is one of making educated estimates based on evidence and experience. Employers should verify that their insurers’ claim reserves are both fair and realistic.

Before employees in high-risk jobs like construction will act on the safety information their employers provide, they have to be convinced that it is both reliable and useful. This is the finding of a study appearing in Communication Currents, an online publication of the National Communication Association. Another significant outcome of this research is the discovery that workers who feel confident about the quality of the safety information they are receiving are more likely to perceive that they are working safely.

The author of the study, Kevin Real, Ph.D., from the University of Kentucky, used surveys to examine employee perceptions of how available safety information was at their job site, how likely they were to seek out available information, and how their personal safety behaviors were influenced by risk and the usefulness of the information they were given. The list below outlines some of his other pertinent findings:

• Workers’ perceptions of how much risk is posed by a particular situation are influenced by how much confidence they have in their ability to stay safe. Workers who feel capable of dealing with risks might view them as challenges to be overcome. However, workers who feel they don’t have the ability to stay safe might see themselves as vulnerable to injury. Accordingly, workers with a high level of confidence will respond differently to a hazard than workers who feel vulnerable. This response manifests itself in how well workers follow safety regulations. For example, employees who believe that wearing proper safety protection, such as hard hats, safety glasses, and earplugs, will keep them safe typically have a greater sense of their own capability to maintain their safety.
• Developing worker confidence begins with using first-line supervisors to provide safety information, both in word and by example. Workers surveyed indicated that having interaction about safety with the same individual in charge of productivity show how important safety is to the organization. Supervisors should make safety information available to workers who show they are proactive about safety as a way of helping them meet their personal safety goals.
• Safety messages must be simple. Messages that contain too much information about too many procedures and that do not prioritize the more important activities will likely be ignored. That’s because too many details leave employees confused about how to improve their own safety on the job. Real believes that while simplicity is best for safety discussions with the general work population, employers should always make more information available to workers who are proactive about safety. He believes that these workers are more likely to want more information and will seek it out when they know it is available. Making safety information available can also overcome suspicion that the organization isn’t doing enough to protect workers.
• Organizations should emphasize positive behaviors as opposed to trying to stop negative ones. Explaining that earplugs prevent hearing loss shows a positive way to avoid a hazard. However, telling workers to stop fooling around on the job provides them with no positive behavior to substitute for the negative one. The employee doesn’t learn what is considered “fooling around,” why it should be avoided, and what are acceptable expressions of social interaction in the workplace.

Safety messages need to be reinforced by being delivering the same message through more than one medium. Asking workers to watch, hear, and read safety messages acknowledges and accommodates the different ways in which people learn and makes it more likely safety messages will be integrated.

When a construction firm wins a job or a retail store leases space in a mall, the person or company on the other end of the transaction typically imposes certain requirements. Chief among these is that the contractor, borrower, or tenant provides evidence that they has appropriate insurance. One way to do that is to deliver copies of the insurance policies. However, a bank that has thousands of outstanding loans might not want copies of its borrowers’ policies, for space reasons alone. A customary substitute for policies is a certificate of insurance. These documents are easy to complete and store. However, many insurance buyers and the firms with which they do business do not understand them.

An organization called the Association for Cooperative Operations Research and Development (ACORD) created the most commonly used certificate forms. ACORD’s instructions state that certificates are for informational purposes only. Many businesses that receive certificates incorrectly believe that they are contracts between them, the policyholder, the named insurer, and the writing agent. In fact, the certificate is nothing more than a snapshot of the insurance coverages in place at the moment the agent issued it. While it represents the policies in force, it does not provide the insurance coverage. Only the policies, which are contracts between the insurance companies and the policyholder, can do that.

For example, standard ACORD certificates state that the insurance companies will endeavor to provide advance notice to the certificate holder if they cancel the listed policies. Many certificate holders rely on this wording, but it does not legally bind the companies. Only specific provisions in the policies can obligate the companies to provide advance notice.

Businesses often require that certificates contain certain words, phrases or terms. It is important to know that insurance agents have legal boundaries that they must observe when they consider these requests. An agent may legally insert wording into a certificate only if the policies it lists contain that wording. For example, a general contractor might want a certificate it receives from a subcontractor to show that the sub’s general liability insurance policy covers the GC as an additional insured. The ACORD Certificate of Liability Insurance has check boxes that an agent can use to designate the certificate holder as an additional insured. If the policy contains an endorsement that provides this coverage, the agent can check the box without violating his contracts or state insurance law.

However, most states forbid agents from issuing certificates that imply coverage the policies do not provide. For example, some certificate holders might want certificates to state that the policyholder’s coverage applies on a “primary and noncontributory” basis. If the actual policies do not contain this language, the agent cannot properly add it to the certificates. Only endorsements issued by insurers can change insurance policies; certificates cannot. An agent who issues a certificate implying a false change in coverage might be breaking state insurance law and probably violating his contract with the insurer.

Before a business owner signs a contract for a construction job or a lease, it is important that she check with her insurance agent to make sure she has the coverage the contract requires. The agent can advise her about the availability and cost of any missing coverages. Only after the coverages are in place may the agent issue a certificate reflecting them.

When used appropriately, certificates of insurance are convenient business tools, but they can cause major problems otherwise. Remember, certificates are evidence of insurance coverage — not the source of it.

Virtually every type of business has some exposure to losses caused by pollutants. The classic example is a factory dumping waste in a river, but health care facilities have medical waste, schools have fleets of busses and fuel storage facilities, print shops have inks and solvents, and offices have toners and other substances used in office equipment. Standard Commercial General Liability insurance does not cover many types of pollution incidents that could result in lawsuits. However, many specialized policies are available.

Every contractor has some exposure to pollution-related losses. Heavy equipment can leak fluids. Paints and solvents can spill at a job site. Fuel storage tanks at the contractor’s building can leak. A truck hauling hazardous debris from a job site can overturn. To protect themselves against these types of losses, contractors can purchase Contractor’s Pollution Liability insurance. These policies protect the contractor against claims from third parties for bodily injury, property damage and cleanup costs, and will pay the costs of defending lawsuits. The claim must result from a “pollution incident” (as the policy defines the term) for coverage to apply.

Firms outside the construction industry might also need Pollution Legal Liability insurance. Insurers have designed these policies to address the environmental risks associated with owning property, operating a facility, or running a worksite. Manufacturers, hospitals, schools, power plants, repair shops, and fuel distributors are just a few businesses that need this protection. Like the contractors’ form, it covers injuries, property damage, cleanup and defense costs. However, this policy applies only to specifically identified locations. It can cover multiple exposures, such as new and existing pollution conditions, pollution caused by products the firm sells, liability from the existence of mold, and liability from transporting pollutants.

Many organizations have fuel storage tanks above or below ground. If they leak, the resulting cleanup costs can be very expensive. A Tank Pollution Liability policy will pay for injuries and damage to others and government-mandated cleanup costs.

Lenders run the risk that their debtors will default on loans because of a pollution incident. Lender Liability Pollution policies can address this risk by covering financial loss resulting from the default of a loan on an identified location due to a pollution incident. The policies typically pay the amount of the outstanding loan balance or the cost of remediation, whichever is less.

Many products are either hazardous themselves (such as fertilizers, fuels, paints and cleaning chemicals) or are designed to contain or store hazardous products (such as drums, hoses, tanks, and pumps). Manufacturers, distributors and sellers of these products are vulnerable to liability for harm they cause. Products Pollution Liability policies cover injuries, damages, and remediation costs resulting from the failure of a product or caused by the product itself.

Property owners and remediation firms that implement pollution cleanup projects sometimes get nasty surprises in the form of cost overruns. To give these firms some certainty for projects costing $2 million or more, Remediation Cost Cap policies are available. These programs cover losses resulting when contamination is greater than expected, new contaminated areas at the site are discovered, regulatory requirements change during the project, or when regulators re-open projects that were thought to be complete.

The terms and conditions of all these policies will vary from one insurer to another, so it is important to review them carefully. It is also advisable to consult with one of our insurance agents with expertise in Environmental insurance. An uninsured pollution loss can devastate an organization. Environmental Liability insurance, chosen carefully, can help ensure your organization’s survival.

Workers Compensation costs are always a concern for employers — but in today’s tough economy, employers should be more watchful than ever. As financially stressed employees grow increasingly worried about their money problems, many are preoccupied and less attentive on the job. This can greatly increase the risk of an injury. Plus, when employees become anxious about potential layoffs, Workers Compensation claims could increase as workers look for a way to maintain their income. This is precisely why employers need to take every possible measure to rein in Workers Comp costs right now. Here are a few steps you can take to make sure employees stay happy and claims don’t mushroom out of control:

Open the lines of communication

Everywhere they turn, employees are hearing bad news about the economy. Consequently, workers are growing increasingly anxious about their job security and financial well-being. Now more than ever, it is absolutely critical for employers to keep the lines of communication open with their worried employees. Although it’s important to give workers the morale boost they need, it’s also important to be truthful. Don’t sugar-coat a bad situation. Studies show that employees who work for employers who are truthful, fair, and supportive have lower levels of stress, anxiety, and depression.

Research also shows that workers trust their immediate boss more than the company’s senior leaders. Therefore, direct supervisors should offer their employees plenty of support right now and address any widespread anxiety or rumors immediately.

Keep a close watch on claims

Although employers should always monitor claims meticulously, this becomes even more vital in a rough economy. That’s because workers might attempt to abuse the system when they are feeling financially stressed.

As you scrutinize the amount and type of claims being filed by your employees, keep an eye out for suspicious trends or patterns. This could help you to identify potential abuse. If you suspect any type of exploitation, report it immediately.

Give employees the right title

If your company has recently gone through lay offs or experienced a reduction in workforce, some workers might have changed positions or taken on additional responsibilities. If this is the case, ensure that your employees’ job classifications are up-to-date.

Encourage good health

Companies with wellness programs, fitness opportunities, nutritious food choices and other health-related perks have healthier, more productive employees. Healthy employees are less likely to suffer from illness or injury — which means they are less likely to miss work.

This is why it’s so important to adopt some sort of wellness program for your employees and establish a relationship with a qualified occupational medical provider. Find physicians who follow ACOEM (American College of Occupational and Environmental Medicine). Although they might be more expensive, it’s well worth the cost. These experts will take time to understand your company’s needs and ensure your workers stay healthy, productive and on the job — which will save you untold amounts of money in the long run.

Educate your employees about finances

In our current economic downturn, many of your employees are likely struggling to manage their finances. They don’t know where to turn for financial advice and expertise.

To relieve some of their stress, consider sponsoring office workshops and classes about financial matters like reducing credit card debt, investing wisely, securing a home loan and saving for college. This will give your employees the financial guidance they need while ensuring that they stay happy and productive on the job.

In any economy, whether it’s up or down, one thing is always clear: every day a worker is off the job, the employer loses money. Although you might be focused on other company problems right now, such as a reduced workforce, dwindling budgets and a decrease in sales, it’s important to maintain your focus on Workers Compensation issues.

Try to cut back on illnesses and injuries with a wellness program and other health perks. If an employee is injured, do everything possible to return that worker safely to the job as quickly as possible. After all, the longer an employee is out of work, the more difficult it is to get him back to work — and the higher the price tag for the employer.

Spotting the red flags that indicate possible Workers Compensation fraud by employees is the best way to prevent fraud from occurring. Knowing how to spot the red flags is a proactive way to nip a potentially costly but false Workers Compensation claim before it begins.

Most instances of Workers Compensation fraud occur when the claimant:

• Deliberately falsifies information about how an injury occurred, such as claiming the injury was work-related when it was not.
• Deliberately amplifies the seriousness of an injury to falsely prolong the claim.
• Deliberately continues to collect entitlements while working on the sly for their own purposes or with another employer.

Common Signs of Workers Compensation Fraud

• Lack of witnesses – The majority of people claiming false work-related injuries usually do not have witnesses to support their claim. Vigilance is especially necessary when the employee normally works with other co-workers who should have witnessed the injury but did not.
• Contradictory accounts of how the injury occurred – This can be particularly blatant when any of the doctor’s, employer’s, or witnesses’ reports contradict the employee’s report of the incident. Another red flag should be raised when the employee is deliberately vague about how the injury occurred.
• Dissatisfied employees – Unhappy employees can be motivated to make a false Workers Compensation claim, especially if a recent incident such as a reprimand, changed responsibilities, or a possible demotion has occurred.
• Time occurrence of the injury – Many false Workers Compensation claims are submitted before a potential strike, project conclusion, strike, or possible layoff. Many false claims also happen to be submitted on either a Friday or a Monday.
• Inconsistent injury – The nature and extent of the injury is not consistent with their duties or type of job performed.
• Inconsistent reporting procedures – Occurs when there is an inexplicable gap between when the injury occurred and when the employee reported the injury. Be alert if crucial injury data is absent, such as no definite time reported when the injury happened or if other vital dates are absent.
• Lack of contact – The employee cannot be contacted easily by the claims rep or employer. Continuous lack of contact could indicate that the employee is working elsewhere while receiving ongoing entitlements. Another red flag should be raised when the employee immediately moves to another state or foreign destination after going on Workers Compensation.
• Lack of cooperation – The employee deliberately delays or avoids medical treatment or medical diagnostics needed to clarify the medical condition of the employee’s alleged injury.
• Physical signs – The employee exhibits physical signs of working such as dirt or grease on their hands or fingernails, work clothes that exhibit traces of work, or scrapes or bruises.
• Newer employee – From a statistics vantage, new employees are more likely to commit Workers Compensation fraud than senior employees. The most proactive means to counter this is to screen carefully all new employees in the hiring process beforehand.

Although red flags can help minimize potential Workers Compensation losses from fraud, your best strategies to counter these problems should include:

• Implement a Zero Tolerance policy for Workers Compensation fraud and be sure your employees know about it.
• Take a hands-on approach with all Workers Compensation claims and become especially vigilant when red flags appear.
• Keep in regular communication with your injured employee.
• Have a consistent new employee screening process. Offer new employees a thorough orientation and communicate a comprehensive explanation of the Workers Compensation process together with the employee’s rights and responsibilities.

Fraudulent Workers Compensation claims are a severe drag on the costs of any business. By being aware of how to spot potential problems and being proactive at the outset can help you reduce Workers Compensation fraud in the workplace. Call one of our Comp specialists today for more information.

Construction contracts usually include many provisions aimed toward transferring legal liability from one party to another. In an agreement between a general contractor and a subcontractor, the sub assumes the general’s liability. The contract does this by inserting an indemnity agreement (also known as a hold harmless agreement) into the contract’s terms. The contract may also require the sub to have the general named as an additional insured on its General Liability insurance policy. Though not all contracts do this, it is a mistake for either contractor to assume that the insurance company will provide the same protection to the general without an additional insured endorsement to the policy

The standard Insurance Services Office Commercial General Liability Coverage Form specifically excludes coverage for liability that the insured assumes is in a contract. However, it adds coverage back if the contract is an “insured contract,” as the policy defines the term. The policy’s definition includes hold harmless agreements where the insured assumes another’s tort liability. That would appear to take care of the sub’s obligations under the contract, but it is not the whole story. The coverage may still contain a potentially large gap for the general.

It is important to keep in mind that in any Liability insurance claim scenario, the parties fall into three categories: Insurance company; insured; and claimant. A claim may involve multiple insureds, multiple claimants, and even multiple insurance companies, but all parties will fall into one of the three categories. If a party is not an insurance company and is not an insured by virtue of an additional insured endorsement, then it must be a claimant. Therefore, a general contractor in this situation becomes a claimant, together with all other claimants seeking damages.

Although the general could receive the same recovery for damages that it might have received as an additional insured, it might not fare as well regarding the cost of its legal defense. The CGL policy pays for defense costs incurred by anyone who is an insured under the policy, and coverage for those costs is in addition to the policy limits. If the policy has a limit of $1 million per occurrence and an insured is found liable for $1 million and runs up $500,000 in defense costs, the policy pays for both in full. As a claimant, however, the general can recover defense costs only if the hold harmless agreement with the sub required the sub to indemnify it for defense costs.

Also, it is likely that coverage for those costs will not be in addition to the policy limits. The ISO CGL policy provides defense in addition to the limits for the general only if all of the following conditions are met:

• The sub assumed the general’s liability in an insured contract.
• The policy covers the loss.
• The sub assumed the general’s defense costs in the contract.
• There is no conflict of interest between the general and the sub.
• Both parties ask the company to control and conduct the defense and both agree to the same counsel for defense.
• The general agrees in writing to cooperate with the insurance company in the settlement of the claim.

If any one of these conditions is not met, the company will pay the general’s defense costs only until the claim exhausts the insurance limits.

Coverage for defense costs is one of the most important benefits of being named as an additional insured on another entity’s liability insurance. An entity that needs this coverage should require the other contractor to provide the additional insured endorsement. Relying on the contractor’s contractual liability coverage is a major financial gamble. Call us today to sort through your specific liability requirements.

If an accident occurs while an employee or volunteer is operating their personal vehicle for company business, your company could be held liable. Even when an employee is just running an errand, such as making a bank deposit, dropping off a proposal, or picking up a part, if an accident occurs your company could suffer as a result.

Although you cannot insure a non-owned vehicle, there are other steps you can take to protect your company before a loss occurs. If your employees or volunteers use personal vehicles for company business, even if just occasionally, the following guidelines can help reduce your risk:

• Determine a minimum level of Auto Liability insurance your employees and/or volunteers must carry. Also consider what documentation should be provided to your company to demonstrate that proper insurance coverage is in effect. For example, you might require that employees or volunteers submit a certificate of insurance each year that verifies coverage limits.
• Driving records should be checked prior to an employee’s hiring. Validate driving credentials and check for accidents and moving violations during the past five years. All recruiters, managers and human resource people should be aware of this policy.
• Avoid having youthful drivers, those with little driving experience, or drivers with more than one moving violation or accident use their vehicle for business-related purposes.
• Periodically check driving records for new offenses and moving violations. Introduce a procedure for how discovery of new offenses will be handled.
• Develop a written policy on business use of personal vehicles and communicate to all employees. Managers, human resource personnel and recruiters should share this information with any potential new hires.
• Be sure you remain in compliance with local, state and federal statutes while obtaining private information about your employees.

Insurance can play a role in helping to protect your business from this exposure. Non-Owned Auto Liability insurance may be obtained on a stand-alone basis or in conjunction with your General Liability coverage. Coverage for hired vehicles might also be available, if needed.

Insurance premiums for Non-Owned Automobile Liability depend on the frequency of personal vehicle use and how employees use their vehicles for your business. Premiums for this line of coverage are generally fairly reasonable.

Another way to reduce risk is to eliminate the exposure. If employees or volunteers are prohibited from using their personal vehicles for business-related purposes, it eliminates the possibility of an accident that will affect your company.

In the meantime, while you are mapping out your risk reduction strategy, maybe you should consider making that bank deposit yourself.