IRMI Update—Issue #1

An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
July 12, 2000

In This Issue

• Message from the Editor
• Risk Tip: Contract Insurance Requirements
• New Expert Commentary
• Construction Risk Conference Update
• IRMI Products & Services
• How To Subscribe or Unsubscribe

Message from the Editor

Colleague,

Welcome to the inaugural issue of IRMI Update, our free e-mail newsletter!

Since you may have registered for the newsletter some time ago, please let me refresh your memory. You may have signed up at the 19th Annual Construction Insurance Conference, filled out a form on our Web site (IRMI.com), or visited our exhibit booth at the annual RIMS Conference and asked us to include you on the list. You'll receive IRMI Update every month, and it will give you concise summaries of the articles we've recently added to IRMI.com, risk tips, updates on trends and events in the insurance marketplace, information on the IRMI Construction Risk Conference, and announcements about new products and services.

If you decide you don't want to receive IRMI Update, it is easy to unsubscribe—just follow the instructions at the bottom of this newsletter. But, of course, we hope you enjoy this issue and many more to come. We also promise to respect your privacy; we will not sell your e-mail address or give it to anyone else.

We're glad you've chosen to be part of the IRMI family, and we pledge to continue bringing you the most practical and reliable risk and insurance information available anywhere.

Have a great day!

Jack

Jack P. Gibson
President
IRMI

Risk Tip

Contract Insurance Requirements. Most business contracts have clauses requiring one party to carry certain insurance coverages. Contract drafters often specify minimum financial ratings for the insurers, such as a Best Rating of B+ or higher. These clauses can be problematic; particularly in an economic environment such as we have now or in a hard insurance market. For example, a breach of contract occurs when the rating agency reduces an insurer's rating below the specified value. Albeit, the insured should carefully consider the situation and determine a course of action, but a contract with another party should not dictate a mid-term cancellation. Further, in a hard market, certain specialty lines of coverage may be available only through less secure insurers.

Rather than a provision specifying a minimum financial rating, consider using one that simply gives the other party the right to reject an insurer that it deems unacceptable because of poor financial condition or because it is not operating legally. This provides an element of control while preserving flexibility. If the other party insists on specifying a minimum rating, a fallback position is to have the clause state that the insurer must meet the criterion only on the inception date of the applicable policy. At least this avoids being forced into a mid-term cancellation following a downgrade.

Suggest a Risk Tip. Future issues of IRMI Update will include risk tips from our readers. Next month, I'd like to provide practical tips to risk managers and insurance buyers on preparing for their next renewal in the changing insurance marketplace. I'll select one or more to publish, and the authors will be acknowledged for their contributions.

New Expert Commentary

We add new Expert Commentary to IRMI.com every week. There are now 50 articles in the archives, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

• Enterprise Risk Management: What's Beyond the Talk?—The first article in our ERM series provides an overview of enterprise risk management and outlines some of the benefits of this approach.
• Corporate Risk Finance and the "Internal Economy" of a Company—Despite the theoretical view that corporations should retain more risk, the reality is that they try to avoid unexpected expenses that result in significant loss of profit in a given accounting period. This article examines the internal economies that affect this reality and how insurance and risk transfer vehicles fit into the picture.
• Change ... Are You Ready for More?—Take a look at factors driving change in the insurance industry and consider how this will affect your relationships with your various business partners.
• 1999 D&O Survey Reports Rising Costs of Claims from Shareholders and Employees—Get a summary of trends in D&O claims based on the latest Tillinghast-Towers Perrin survey.
• Are Punitive Damage Awards Recoverable under Reinsurance Agreements?—When an insured's bad faith claim against its insurer is successful and the court awards punitive damages, does the reinsurer have to reimburse the insurer for the punitive damages judgment? The answer to this question depends on the reinsurance contract provisions and whether punitive damages are reinsurable under the public policy of the relevant jurisdiction.
• Breach of Policy Conditions and the "Severability of Interests" Doctrine—In the event of a breach of one or more property insurance policy conditions involving one insured corporation or insured location, is the policy void as to the coverage provided for the other insureds at other insured locations?
• First-Party E-Commerce Risks—Examine the gaps in traditional insurance policies with respect to first-party e-commerce risks and learn some ways to close those gaps in the second article of our Cyber Insurance series.

IRMI Construction Risk Conference Update

Formerly called the "Construction Insurance Conference," this year's symposium will be held November 13-16 in Atlanta. The IRMI Construction Risk Conference is designed for contractors and project owners as well as the risk and insurance professionals who serve them.

It begins with four optional one-day seminars on Monday, November 13: "Building a Better Wrap-Up," "Commercial General Liability Insurance Coverage Issues and Developments," "Contractual Risk Transfer," and "Managing Contractor Default Risk."

The 16 concurrent workshops on Tuesday through Thursday will cover such topics as "Contractual Risk Transfer Tactics," "Contractors as Designer-Builders," "What To Expect from a Wrap-Up Service Provider," "Putting a Value on a Builders Risk Loss," and "Marketing Your Insurance Program."

For a complete agenda, descriptions of the sessions, and speaker list, visit the conference section of IRMI.com.

IRMI Products & Services

How To Draft and Interpret Insurance Policies. This book by Ken Wollner recently received an award from the Michigan Bar Association for advocating the use of clear language in insurance policies. It gives practical advice for drafting policy wording and interpreting coverage under property and casualty insurance policies. For a more in-depth description of this book or to order your copy, visit the Products and Services section of IRMI.com.

Insurance for Defective Construction: Beyond Broad Form Property Damage Coverage. Unraveling coverage for construction defect claims under liability policies remains a challenge for risk managers, adjusters, and attorneys. Pat Wielinski has analyzed the latest legal theories, trends, and approaches for you in this new book from IRMI. For a more in-depth description of this book or to order your copy, visit the Products and Services section of IRMI.com.

How To Subscribe or Unsubscribe

A subscription to IRMI Update is absolutely free. Use the e-mail registration form to initiate or terminate your subscription.