IRMI Update—Issue #37
An E-mail Newsletter for Risk and
Insurance Professionals
ISSN: 1530-7948
March 19, 2002
In This Issue
Colleague,
A subscriber to IRMI's reference services recently faxed me an
interesting additional insured endorsement. It was the standard
ISO CG 20 10 endorsement for use on the polices of contractors,
but the insurer—a big name in the construction marketplace—had typed
in some extra clauses that substantially reduced the scope of coverage
provided to the additional insured. The endorsement had been attached
to a certificate of insurance as required by the construction contract.
On first blush, nothing about this very restrictive endorsement
looked out of the ordinary because it had all the trappings of the
standard CG 20 10. Only a diligent reviewer would notice the four
extra sentences. Our subscriber wanted to know if I thought this
was deceptive and possibly even fraudulent.
I do not think anyone at this company intended to be deceptive.
It is simply easier and faster to modify a standard endorsement
form than it is to start from scratch. This is a common industry
practice. However, while there was probably no intent to deceive,
the reality is that this probably would deceive many people and
could lead to many problems for the insured, the insurer, and the
agent/broker. This makes me think that insurers should adopt a practice
of somehow clearly indicating when a standard form has been modified
to alert the reader to be extra diligent.
So what do you think? Is issuing modified standard policy forms
and endorsements without including a warning on the form or endorsement
deceptive or even fraudulent? Have you encountered problems from
this practice? Should insurance best practices include adding a
warning to modified forms as standard procedure? [See
reader
comments.]
Have a great day!
Jack
Jack P. Gibson
President
IRMI
Maintain Control of Premium Audits.
I've encountered many instances where an insured calls or writes
stating their recent audit is incorrect. And in too many cases,
when I ask two key questions, I get negative answers. Those two
questions are:
- Were you present when the audit was conducted
so you could answer questions about your business
that the auditor may need to ask?
- Did you ask the auditor to leave you a copy
of his/her audit worksheet so that you would have
it at hand to refer too if questions arise?
No one would dare ask a CPA to do their books without being available
to answer questions, or give a CPA all their records to prepare
their tax return — and then not ask for a copy of the return! Yet
every day businesspeople allow insurance auditors to enter their
businesses, spend hours going over their books and records, and
never ask them to divulge and explain the results of their investigations.
They then allow them to leave the premises without providing copies
of their documentation.
Workers comp and general liability insurance premiums are major
expense components that can substantially affect businesses' bottom
lines. It's worth spending time working with the auditor to assure
his/her conclusions are correct. Ask questions, lots of them. And
demand a copy of the audit before he or she leaves.
By: Jerry Fulmer
Audit Manager
Cameron M Harris & Co.
Charlotte, NC
Email:
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 give you credit for
your contribution.
There are now 270 articles on IRMI.com, and many more are in
production. Below you'll find summaries of some recent additions
with links to the articles.
Captives and the Management of Risk.
Captives and other alternative risk transfer (ART) vehicles warrant
careful consideration in hardening insurance markets such as we
now face. Written by an ART veteran, IRMI's newest book, "Captives
and the Management of Risk," is designed to help captive newcomers
and seasoned pros alike understand when it does and does not make
sense to use captives and how to get the most from an existing captive.
Click here for more information and a table of contents.
A subscription to IRMI Update is absolutely free. Use the
e-mail registration form
to initiate or terminate your subscription.