Ran across an excellent article by Advisen Ltd (https://www.advisen.com/) about the current pressures on General Liability and Workers Compensation due to the economy.
-- http://www.irmi.com/expert/articles/2009/advisen07-insurance-industry-market.aspx -
General liability and workers compensation policies both posted average decreases in renewal premiums. Directors and officers liability (D&O) policies renewed at higher premiums on average, but the increase was due to financial sector companies, a segment that has been bloodied by the subprime mortgage meltdown and credit crisis. Property policies renewed at essentially no change.
Workers compensation recorded a 2.8 percent average decrease in renewal premiums, as compared to a 1.7 percent drop in the second quarter of 2008, and general liability posted a 1.1 percent drop as compared to nearly a 5 percent decline a year ago. D&O increased 2.9 percent, a reversal of the 6.4 percent average decrease in the second quarter of 2008. However, excluding financial services companies, D&O policies renewed with a 4.1 percent average decrease. Property premiums fell less than 1 percent, which compares to a 6.1 percent drop in the second quarter of 2008.
Click here for Average Change in Renewal Premium: 2nd Quarter 2009 versus 2008.
Rates continue to drift downward despite the loss of $81 billion in policyholders’ surplus in 2008 and the first quarter of 2009, according to the Insurance Information Institute. Deteriorating investment markets was the principal cause of falling surplus. Policyholders’ surplus is a measure of insurance capacity, meaning that, as surplus falls, the "supply" of insurance also decreases.
"Insurance capacity is disappearing at a startling rate, but the market nonetheless remains competitive," says Dave Bradford, executive vice president of Advisen Ltd. and editor-in-chief of RIMS Benchmark Survey™. "As a result of the recession, the demand for insurance capacity also has decreased, which has kept pressure on rates. Companies are downsizing, which means that there is simply less to insure."
Falling demand has prolonged the soft market, but leading indicators tracked by Advisen Ltd.—most specifically the ratio of policyholders’ surplus to U.S. Gross Domestic Product, which measures the supply of insurance capacity relative to the demand for that capacity—suggest that the market is close to its bottom.
"If the gloom of the global recession has a silver lining for risk managers, it is the competitive insurance market," says Daniel H. Kugler, ARM, CEBS, CPCU, AIC, ACI, member of RIMS board of directors and assistant treasurer, risk management, at Snap-on, Inc. "The soft market appears to be winding down, but except for increases already taking place in some financial segments, there are no strong signals that rates will rebound sharply in the near future."
Friday, August 14, 2009
Monday, August 3, 2009
CGL Endorsements to Avoid
Found an excellent article in one of my insurance journals on endorsements any contractor should avoid. I'll post all three over the next few days.
----------------- article by Chris Boggs at http://www.mynewmarkets.com/article_view.php?id=102583
Contractual Liability Limitation
Insureds regularly enter into contractual relationships to accomplish specific business purposes. However, the unendorsed commercial general liability policy specifically excludes liability assumed by contract ("2. Exclusions: b. Contractual Liability"); but the policy gives back coverage through exceptions to the exclusion.
Only one of the two exceptions to the contractual liability exclusion spells out the parameters by which contractually accepted liability is covered in the CGL. Exception "(2)" states that protection is provided when:
The liability is assumed by an "insured contract;"
The bodily injury or property damage occurs AFTER the execution of the contract;
Defense and other fees are assumed in the contract (indemnify and hold harmless wording required); and
A suit alleges injury or damage covered by the policy.(See "Contractual Risk Transfer Coverage Extended from the Unendorsed CGL" for greater detail.)
The key to the breadth of the exception is the definition of "insured contract." Attachment of the Contractual Liability Limitation (CG 21 39) exclusion alters the definition of "insured contract" by removing the "all other business-related contracts" provision provided by definition "f."
CG 21 39 should be avoided if at all possible. All protection normally available for and extended to many contractually-created indemnitees is deleted by attachment of this exclusion. The list of contracts under which the insured can accept contractually-transferred liability is limited to a short schedule which includes: lease agreements; sidetrack agreements; easement or license agreements; obligations to indemnify a municipality; and an elevator maintenance agreement. NO OTHER CONTRACTS are covered as "insured contracts" when the Contractual Liability Limitation (CG 21 39) is attached.
Altering the definition of "insured contract" by attachment of the CG 21 39 requires the insured to make adjustments to the policy anytime it enters into a contract or agreement not contemplated in the remaining short list of acceptable contracts - provided the insured is aware of the need. The exclusion may lead to the requirement to attach additional insured endorsements, even though not requested, to meet specific contractual provisions and avoid a breach of contract or worse, an uncovered claim.
One reason among several an underwriter may choose to use this drastic exclusion is the breadth of coverage extended to the indemnitee under the contractual liability exception. The sole negligence of the indemnitee (transferor) can be picked up under the unaltered wording ("Contractual Risk Transfer Coverage Extended from the Unendorsed CGL"), making the coverage granted by the unendorsed policy broader than coverage granted by most additional insured endorsements.
Agents can recommend an alternative endorsement to the underwriter wanting to avoid the unknown breadth of protection being accepted in business contracts (normally covered under "f."). The Amendment of Insured Contract (CG 24 26) endorsement redefines the meaning of "insured contract" to match the coverage granted by most additional insured endorsements. The CG 24 26 adds "…provided the 'bodily injury' or 'property damage' is caused, in whole or in part, by you or by those acting on your behalf" to the all other business contract wording provided in "f."; thus requiring the insured be at least partially responsible for causing the injury or damage before coverage extends to the contractual indemnitee.
Avoid the Contractual Liability Limitation (CG 21 39) when possible. Its presence as part of the policy requires other endorsements (additional insured in particular) be attached to meet contractual guidelines. If the underwriter wants some control, offer the Amendment of Insured Contract (CG 24 26) as an alternative.
----------------- article by Chris Boggs at http://www.mynewmarkets.com/article_view.php?id=102583
Contractual Liability Limitation
Insureds regularly enter into contractual relationships to accomplish specific business purposes. However, the unendorsed commercial general liability policy specifically excludes liability assumed by contract ("2. Exclusions: b. Contractual Liability"); but the policy gives back coverage through exceptions to the exclusion.
Only one of the two exceptions to the contractual liability exclusion spells out the parameters by which contractually accepted liability is covered in the CGL. Exception "(2)" states that protection is provided when:
The liability is assumed by an "insured contract;"
The bodily injury or property damage occurs AFTER the execution of the contract;
Defense and other fees are assumed in the contract (indemnify and hold harmless wording required); and
A suit alleges injury or damage covered by the policy.(See "Contractual Risk Transfer Coverage Extended from the Unendorsed CGL" for greater detail.)
The key to the breadth of the exception is the definition of "insured contract." Attachment of the Contractual Liability Limitation (CG 21 39) exclusion alters the definition of "insured contract" by removing the "all other business-related contracts" provision provided by definition "f."
CG 21 39 should be avoided if at all possible. All protection normally available for and extended to many contractually-created indemnitees is deleted by attachment of this exclusion. The list of contracts under which the insured can accept contractually-transferred liability is limited to a short schedule which includes: lease agreements; sidetrack agreements; easement or license agreements; obligations to indemnify a municipality; and an elevator maintenance agreement. NO OTHER CONTRACTS are covered as "insured contracts" when the Contractual Liability Limitation (CG 21 39) is attached.
Altering the definition of "insured contract" by attachment of the CG 21 39 requires the insured to make adjustments to the policy anytime it enters into a contract or agreement not contemplated in the remaining short list of acceptable contracts - provided the insured is aware of the need. The exclusion may lead to the requirement to attach additional insured endorsements, even though not requested, to meet specific contractual provisions and avoid a breach of contract or worse, an uncovered claim.
One reason among several an underwriter may choose to use this drastic exclusion is the breadth of coverage extended to the indemnitee under the contractual liability exception. The sole negligence of the indemnitee (transferor) can be picked up under the unaltered wording ("Contractual Risk Transfer Coverage Extended from the Unendorsed CGL"), making the coverage granted by the unendorsed policy broader than coverage granted by most additional insured endorsements.
Agents can recommend an alternative endorsement to the underwriter wanting to avoid the unknown breadth of protection being accepted in business contracts (normally covered under "f."). The Amendment of Insured Contract (CG 24 26) endorsement redefines the meaning of "insured contract" to match the coverage granted by most additional insured endorsements. The CG 24 26 adds "…provided the 'bodily injury' or 'property damage' is caused, in whole or in part, by you or by those acting on your behalf" to the all other business contract wording provided in "f."; thus requiring the insured be at least partially responsible for causing the injury or damage before coverage extends to the contractual indemnitee.
Avoid the Contractual Liability Limitation (CG 21 39) when possible. Its presence as part of the policy requires other endorsements (additional insured in particular) be attached to meet contractual guidelines. If the underwriter wants some control, offer the Amendment of Insured Contract (CG 24 26) as an alternative.
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