“Do your organizations’ policies require vendors and associates to meet the same network security and data protections standards that your own organization follows? They should, said Michael Dandini, senior vice president of The Hartford’s management and professional liability underwriting unit. Because if there is a breach, consumers and the public may hold your organization responsible, even if a vendor actually caused the breach.”
“Key Questions For Risk Managers:
- Does the company follow industry standards and best practices for handling specific types of data?
- Does the company have data breach insurance coverage?
- Does the company have a designated person in charge of IT security? Does it have written data security policies and procedures in place?
- Doest the company have a data back-up plan?
- Does the company have an incident response plan?”
Source: Risk & Insurance and the Hartford, December 2011
Upper tier contractors such as general contractors commonly attempt to contractually transfer the risk of loss to lower tiered contractors such as subcontractors.
The most common contractual risk transfer tools are indemnification / hold harmless clauses, request of additional insured status, and request of waiver of subrogation.
These concepts can be difficult to understand and are further complicated by the fact that upper tier contractors frequently over reach and impose protections that are onerous and are not achievable by most lower tier subs in the current insurance market place.
I found an excellent article (see link below) that exposes the strong handed techniques by upper tier contractors. Presentation of this article to a general contractor can be persuasive in negotiations to lower some of these requirements.
I am all for contractual risk transfer to protect the legitimate needs of the general contractor; however, the contractual provisions must be fair and readily achievable in the insurance market place. If not, they result in a great deal of wasted administrative time on the part of both parties and they force the subcontractor into a breach of contract position.
Source: Insurance Journal, “Contractual Risk Transfer And Endorsements To The CGL”, June, 2009
Our agency conducts annual insurance checkups for our contractor clients, and I am often asked “Why is this necessary or recommended since updated information has already been provided in the renewal applications and over numerous phone conversations that occur throughout the year?”
The purpose of the contractor annual insurance checkup is to review your current coverages; to determine if your coverages and limits are adequate (example: have you signed a contract that requires higher limits?); to determine if your key employee structure has changed, and to find out if anything new is going on with your business.
Your insurance agent is not necessarily the first contact you think about when you change your operations or buy something new (unless you need proof of insurance). The time to discover you forgot to let us know is NOT after you’ve had a loss.
During the annual insurance checkup, we will review your Workers Compensation, General Liability, Business Auto, Contractors Equipment, Bonds, Umbrella and Builders Risk (if applicable) and make risk management recommendations using our custom checklist tool. We can also provide you with quotes for Life Insurance, Key Man Life Insurance and Group Health Insurance.
As your business grows, or you downsize your operation, your insurance needs change. Also, the education that you receive will likely result in maximum premium savings.
In addition to meeting with your agent to discuss your business changes and needs, it’s also a good idea to do an annual checkup with the agent who handles your personal insurance.
Working together, we can help you protect your valuable assets by providing the right coverage at the lowest possible cost.
