IRMI Update—Issue #14
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
April 3, 2001
In This Issue
Colleague,
Wow! We had many responses to my last message asking for suggestions on the
people who have most influenced the insurance industry and the risk management
profession. Some suggestions for inclusion in the insurance industry list are
Dr. William Hold, the president of the National Alliance (e.g., Society of CIC),
Pat V. Saxton, long-time Secretary General of the Chartered Insurance Institute
(CII) in London, and Ed Noha, Chairman of CNA Financial's Board.
Suggestions of people who have influenced the risk management profession
include, among others, Dr. E.J. Leverett Jr. and Dr. Emmett Vaughn, two professors
who pioneered university level risk management teaching, and Howard Weber, former
risk manager at 3M and first winner of Business Insurance's risk manager of
the year award.
I would like to expand the list of people who have influenced the risk management
profession (as opposed to the insurance industry).
On another note, several of us will be attending the RIMS Conference in Atlanta
at the end of April. If you are there, please stop by booth 1420 to say "Hello."
Have a great day.
Jack
Jack P. Gibson
President
IRMI
Use Blanket Subcontract Agreements To Avoid Work Done
without a Contract. One of the challenges most of us face in managing
risk is that often the risk transfer mechanisms we work so hard to develop are
thwarted by failure to follow the procedures that have been developed. A common
example of this is work being performed onsite by subcontractors without a signed
written subcontract in place before the work started and/or without receipt
of proof of insurance. Many construction companies do not effectively follow
their internal control procedures to prevent this from happening.
Our firm is not perfect in preventing this risk, but we have reduced it substantially
by use of a blanket subcontract. We found that our exposure to losses occurred
when an accident happened on jobs where a relatively small amount of work needed
to be done by a sub. Too often, the project manager or superintendent had either
lined up the sub without writing a subcontract or simply allowed the sub on
the job before the paperwork was processed.
The blanket subcontract we use is a basically our standard agreement modified
to state that the agreement is in place for all work performed by the subcontractor
for our firm EXCEPT when a separate subcontract has been issued for work done
on a specific job. We issue the blanket subcontract to all subcontractors we
use on a repetitive basis. We also obtain a blanket insurance certificate at
the time the blanket subcontract is issued.
We established a guideline for our project managers on the use of the blanket
subcontracts: (1) A job-specific subcontract is required for any subcontract
either exceeding $50,000 or if the contract duration is more than 3 months.
(2) If more than one billing is anticipated for a job, and the blanket subcontract
is used, a 1-page "Notice To Proceed" is issued, providing a subcontract number
to allow our accounting system to track total billing for the sub on a job.
While no system is perfect, a far greater amount of our work is being performed
with the protections provided by the written subcontract agreement than was
the case before we implemented this program.
By: Robert DeSmidt, CPA
Chief Financial Officer Klinger Companies, Inc.
Sioux City, IA
E-mail:
Suggest a Risk Tip. Future issues of IRMI Update will include more risk tips from our readers. Send
us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. We'll
acknowledge your contribution as we did for Bob.
We add new Expert Commentary to IRMI.com every week. There are now 124 articles
on IRMI.com, and many more are in production. Below you'll find summaries of
some recent additions with links to the articles.
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Bigfoot and the Cybersquatters—Although
the anti-cybersquatting provisions of the trademark laws are powerful weapons,
prying your rightful domain name from the fingers of a greedy cybersquatter
remains a messy and expensive undertaking. This article explains what you
can do to protect your firm and yourself.
-
Chipping Away at
the Design Professional's Protection under the Economic Loss Doctrine—The
merits and failings of the economic loss doctrine as applied to the design
professions have been continually debated. Learn how relatively recent court
opinions have signaled further erosion of the protection that the doctrine
provides.
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Legal Trends: Workers
Compensation and Course of Employment—All workers compensation
laws require an injured employee to be within the course of employment in
order to qualify for benefits. But what does this mean? Learn how courts
have interpreted and expanded the definition, and what employers can do
to manage this risk.
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Commodity Price Insurance
and FAS 133—One risk category that continually comes up in the
area of enterprise risk management is commodity price risk (CPR). Learn
how the new Financial Accounting Standard (FAS 133) affects the accounting
treatment between derivatives and insurance when the risk is a CPR and how
new alternative risk financing products may develop as a result.
New Employment
Practices Liability CE Course Available Online!—The new "IRMI on
Employment Practices Liability" continuing education course is now available
through IRMI.com. This advanced-level class is approved for property-casualty
CE credit in 34 states. For under $50, you can get the CE credit you need, quickly!
Just click on the Training and CE link, insert the state(s) where you need CE credit, specify property-casualty,
review the course catalog, and set up your CE account today.
Personal Risk Management
and Insurance Now Available—In the past, IRMI always focused
on commercial lines policy interpretation and risk management. After receiving
many customer requests, we decided to apply the same meticulous approach to
personal lines insurance, and we are proud to introduce a new reference manual
devoted to this topic. The initial release focuses on the latest homeowners
and personal auto policy forms. It provides annotated policies and explanations
of all the countrywide endorsements. The supplement service will soon add information
on other coverage lines and personal risk management.
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