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.
-
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.
-
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.
-
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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