“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:

1. Does the company follow industry standards and best practices for handling specific types of data?
2. Does the company have data breach insurance coverage?
3. Does the company have a designated person in charge of IT security?   Does it have written data security policies and procedures in place?
4. Doest the company have a data back-up plan?
5. Does the company have an incident response plan?”

 Source: Risk & Insurance and the Hartford, December 2011

Some states exempt homeowners building their own home from the requirement to carry Workers Compensation by statute, case law, or regulatory ruling. You may want to visit www.workerscompensation.com for a summary of such laws.

If your state does have an exemption, you may be able to rely on your Homeowners Liability to some extent. If Workers Compensation is not in play, the remedy for the injured worker is a direct lawsuits against the homeowner under negligence theory. Most Homeowners Liability forms will respond to negligence lawsuits from injured workers if there is no Work Comp in force or “if not required by law to be provided”. However, many carry minimum limits such as $100,000 which certainly won’t be enough for serious injuries such as falls off of roof. At a minimum, $300,000 should be carried and a $1,000,000 Personal Umbrella policy should be carried in addition.

It is certainly safer to carry Workers’ Compensation. However, the premiums can be very expensive unless a certificate of insurance evidencing Workers’ Compensation is collected from all subs. Or better yet, just hire a qualified General Contractor to build the home and carry the Workers’ Compensation.

This blog does not address the equally serious issue of whether General Liability insurance should be carried by the homeowner building his/her own home. This topic has been addressed in other blog postings.

Source: Building Your Own Home…Insurance Implications, Independent Insurance Agents & Brokers Association

However, the new Crossmann decision expands the scope of its prior decision by overturning Century Indemnity to delve into the sharing of liability between successive insurance carriers in progressive property damage situations. First, the court upheld the “modified continuous trigger theory” under Joe Hardin where the period of damage was defined as the term in which the actual injuries occurred. Next, the court turned its attention to Century Indemnity.

Under Century Indemnity, liability among successive general liability insurers in progressive property damage situations was determined by a “joint and several” approach where each carrier was responsible for full indemnity for all damages.  Crossmann reasoned that the “joint and several” approach under  Century Indemnity allowed policyholders to take advantage of the system by choosing a single carrier with the broadest coverage form and by allowing coverage for periods of policy lapse. On the other hand, the approach adopted by Crossmann, the pro rata allocation method, corrects these abuses by assigning each triggered insurer a pro rata portion of the loss based on that insurer’s time on the risk.

Furthermore, Crossmann provides a basic formula for estimating time on the risk with a numerator that represents the number of years that an insurer provided coverage and a denominator that represents the total number of years during which the damage progressed. This fraction is multiplied by the total policyholder liability to the injured party in a progressive property damage situation to determine the liability of any carrier. This formula results in the fair allocation between the respective insurance carriers based on their proportionate time on the risk.

Overall, the new Crossmann decision is a victory for builders due to the defeat of the “no occurrence claim denial strategy”. However, even the court now points out in the footnotes that carriers have the right to use various exclusions (ex: CG 2294) to escape responsibility for covering construction defect claims. The overturning of Century Indemnity does represent a minor defeat for builders, since they are now out of pocket during periods where a carrier has an exclusion that applies or where there has been a lapse of coverage. But, this decision at least is consistent with the intent of the drafters of the General Liability policy form.

Source: John Sadler

See Crossmann Decision

An excellent training video and checklist was recently released by Builders Mutual Insurance Company on the new OSHA fall protection directive. This is information worth knowing and implementing since falls are the largest single source of contractors Workers Compensation payouts.

“Section 38-61-70 (1)(b) mandates the 1986 CGL policy, to the extent that it applies to ‘construction professionals’ is ‘deemed’ to contain a definition of ‘occurrence’ that includes: (1) an accident, including continuous or repeated exposure to substantially the same general harmful conditions; and (2) property damage or bodily injury resulting from faulty workmanship, exclusive of the workmanship itself.”

However, the last word has not been spoken due to the following new developments:

1) The SC Supreme Court reheard arguments on the Crossmann case on May 23, 2011 as a result of complaints from the construction industry.

2) Harleysville Insurance Company filed a lawsuit on May 23, 2011 with the SC Supreme Ct arguing that 38-61-70 is unconstitutional and should be overturned. 

Expect a decision on both of the above within the next several months. Stay tuned.

The newly enacted SC Code 38-61-70 is a positive development that corrects a serious case of faulty logic and misunderstanding by the SC Supreme Ct as evidenced by Crossman v. Harleysville. However, it’s unfortunate that the legislature had to become involved.

Source: Construction Industry Scores Big Win With Anti-Crossmann Act, Ned Nicholson, McNair Law Firm, South Carolina Builder Journal, Volume 4, Issue 3, 2011

Here is the list of the top 50: http://www.pmpcertificationtraining.org/risk-management

Sadler points out that even if the proposed legislation passes, insurance carriers can still use Endorsement CG 2294 to deny construction defect claims under builder General Liability insurance policies.

Read full text of article: Leaky Legislation

We recently had the chance to analyze one of the leading Contractors Pollution Liability forms in the market. Here are some of the highlights of their special policy form that was designed for remodelers:

Basic Underwriting And Policy Information

* Carrier Financial Rating (Best’s Rated A IX)

* Eligible risks: remodeling, renovations, trade contractors that are impacted by EPA RRP regulation.

* Required: Lead Safe Work Practices Training Certificate for firm and individual renovators

* Ineligible risks: demo only contractors and pure abatement contractors (separate policy form is available for these contractors that includes higher rates and narrower coverages).

* Limits available: $1,000,000 to $10,000,000

* Occurrence policy form (superior to claims made policy form).

* Deductible: standard deductible is $5,000 per claim

Special Endorsements Adding Enhanced Coverages

* Lead Abatement: always make sure that all CPL policies include coverage for lead paint abatement as many don’t.

* Fines / Penalties: a reduced sublimit is available on a claims made for to cover certain EPA fines and violations.

* Lead Testing / Sampling: covers errors made in incidental lead testing and sampling per the EPA regulations. Coverage is on a claim made form.

* Transportation Including Loading and Unloading; covers exposure incidents resulting from auto accidents and loading and unloading if lead dust is released.

* Non Owned Disposal Site: covers remodeler if shot gunned into lawsuit due to use of non owned dump.

* Additional Insureds can be added

* Waiver Of Subrogation can be added

* Mold Coverage

Contractor Pollution Liability Sample Pricing (based on test ratings of remodelers in SC)

* Minimum premiums: around $2500 for $1,000,000 limit of coverage

* Rates based on per $1,000 of total revenues for both lead and non lead jobs.

* Sample $1,000,000 limit rates per $1,000,000 of revenue

   – Less than $1M in revenue: $2.55

   – $1M to $2M in revenue: $1.20

   – $3M plus in revenue: $1.11

Are Many Remodelers Currently Purchasing CPL policies?

Not yet, but demand is expected to increase as word spreads about high profile lawsuits with large settlements or jury awards. The EPA RRP regulation which will create liability for failure to comply with standards is approximately one year old and it takes time for claims to work their way through the legal system. In addition, attorneys specializing in lead paint will begin to educate the public and advertise for clients.

If you are interested in a quote, please contact Sadler & Company, Inc. via the contact information on our home page which can be found on this blog.

Source: John Sadler

The answer as to whether or not a contractor’s General Liability policy will respond to claims under this act or to lead paint exposure claims in general requires a disciplined analysis of the policy form. However, in the vast majority of cases, General Liability policies won’t respond to these claims.

The most likely types of lead based claims or lawsuits are as follows:

* Allegations of bodily injury or property damage arising out of a lead paint dust contamination incident where a remodeler fails to follow safe workplace practices.

* The costs to clean up after an exposure incident.

* EPA fines resulting from an incident or failure to comply with the regulation.

The Standard General Liability Policy Form And Absolute Pollution Exclusion

Exclusion F. (2004 CG 0001) is commonly known as the “absolute pollution exclusion” and the highlights are summarized as follows:

No coverage for “bodily injury” or “property damage” arising out of … the discharge, dispersal, seepage, migration, release, or escape of “pollutants”… at or from the premises of the insured … or at or from any site on which the insured or contractors are performing operations if the pollutants are brought onto site in connection with operations….

The phrase “if the pollutants are brought onto site in connection with operations” excepts remodelers from the absolute pollution exclusion since they don’t bring the lead paint dust to the worksite.

Exclusion F. also addresses that coverage does not apply to operations to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize pollutants. In addition, there is no coverage for demands by government for testing or clean up.

Based on the above, it is possible for remodelers to have coverage for “bodily injury” and “property damage claims” under the standard General Liability policy form.  However, endorsements to the General Liability policy must be analyzed as well.

Total Pollution Exclusion Endorsement

This endorsement is found on most contractor General Liability policies. It removes all exceptions to the “absolute pollution exclusion” including when pollutants are not brought to the jobsite by the remodeler. 

If this endorsement is present on the policy, remodelers can no longer depend on the exception under the standard policy form.

But Wait, About Half Of State Courts Rule That Lead Paint Is Not A “Pollutant”

“Pollutants” are defined as any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, soot, vapor, fumes, acids, alkalis, chemicals, and waste.

Some courts have a broad interpretation of the definition of “pollutants” and rule that lead paint falls under the definition since it is a contaminant.

Other courts have a narrow interpretation of the definition of “pollutants” and rule that it does not specifically list lead paint and that the reasonable expectations of the policyholder is that “pollutants” only apply to traditional environmental or industrial pollution and not to other contaminants such as those found inside a house.

The narrow interpretation which is prevalent in states with large metropolitan populations such as NY and CA can have the effect of defeating both the “absolute pollution exclusion” and the “Total Pollution Endorsement” and thus paving the way for coverage for a lead paint incident.

Absolute Lead Exclusion Endorsement

As would be expected, the insurance industry created a specific endorsement to address those courts that rule that lead paint dust is not a “pollutant”. The Absolute Lead Exclusion Endorsement and similar endorsements remove all questions that the General Liability policy does not respond to lead paint claims.

The majority of all contractor General Liability policies have included this endorsement for many years.

If you have this endorsement, don’t expect to have coverage under your General Liability policy; however, you should always turn a claim in and let the claims adjusters decide on the issue of coverage.

Summary

If the General Liability policy does not cover lead paint claims, what policy can be purchased to provide this coverage? Stay tuned for a future blog on Contractors Pollution Liability (CPL).

Source: John Sadler

Here is a summary of key elements but be sure to check out the full details in the links provided below:

Targeted Housing Impacted By Regulation

* Housing constructed prior to 1978 with the exception of housing for elderly persons with disabilities (unless children age 6 or under reside or are expected to reside).

* Child Occupied Facility where child age 6 or under regularly visits a building or portion of building constructed prior to 1978 on at least two different days within any week for at least 3 hours a day and combined weekly visits that last at least 6 hours, and combined annual visits that last at least 60 hours. See regulation for exceptions.

Exempt Activities

* Abatement activities are governed by rules applying to abatement contractors.

* Minor Repair or Maintenance that disturb less than the following square foot area over a period of 30 days:

  – 6 sq ft per room for interior activities

  – 20 sq ft for exterior

  – This exemption does not apply to window replacements, demolition of painted surface areas, and certain open flame burning/torching, high speed paint removal machines without HEPA, or operating heat gun at temperatures above 1100 degrees.

* No Lead Based Paint Will Be Disturbed per written verification by certified lead inspector or proper use of EPA recognized test kit by certified renovator.

* Do It Yourself work performed by owner on own residence.

The next question to be raised is if claims arising under this regulation are covered by a contractor’s General Liability policy. This issue will be addressed in a future blog.

For full details: epa.gov or  nchh.org

Source: National Center For Healthy Housing, April 22, 2008