We recently launched the online version of our 22,000-page risk management and insurance reference library, and I can't help but brag a bit about it. The culmination of more than 2 years hard work by our IT and production staff, IRMI Online gives subscribers instant access to the IRMI library from any computer with Internet access. It features a user-friendly table of contents and a very powerful search engine. We think it represents the future of our business, and I invite you to check it out sometime. You can view the table of contents, search the library, and peruse the "How To Use" section without being a subscriber.

While you can't view the contents of our subscription products without subscribing, there is one publication in IRMI Online that is free to anyone, the Contractor's Guide to Owner Controlled Insurance Programs in the Construction Risk Management section of IRMI Online. Prepared by the OCIP Task Force of the AGC of America, it gives guidance on 39 issues contractors should consider when accepting coverage through a wrap-up or controlled insurance program.

You can visit IRMI Online anytime.

Have a great day!

Jack

Jack P. Gibson
President
IRMI

Also from IRMI

If you like IRMI Update, consider subscribing to our other complimentary e-zines. D&O Compass will help you deal with the tight directors and officers liability insurance market, and The Electronic Owl will help you get your money's worth from our subscription publications. To learn more or to register, see IRMI Update.

Risk Tip

Rescission: Can It Be Prevented?— An insurer may rescind its policy in the event of material misrepresentation or concealment of facts by the insured. The policy may be rescinded even after a loss that would otherwise be covered by the policy. Misrepresentation is false statement of a fact by the insured. Concealment is the neglect to reveal a fact that the insured knows and ought to communicate to the insurer. Misrepresentation or concealment is material if it affects the underwriting decision of the insurer. For example, the premium would have been higher had the insurer been aware of the true and complete facts.

In most cases, rescission is based on materially misrepresented facts in the policy application or underwriting information provided by the insured or its broker. Materiality is determined within the context of probable and reasonable influence on the insurer by the false fact. Consequently, if the insurer's underwriting decision is not affected, then the falsity cannot be deemed material. Furthermore, the insurer cannot reasonably rely on a fact received from the insured alone if it is aware of a conflicting fact. Also, there must be clear evidence to demonstrate that the insurer did rely on materially false facts when making its underwriting decision.

State insurance codes and legal precedents also have an impact on the insurer's decision-making process concerning rescission. For example, the California insurance code allows policy rescission even in cases of unintentional misrepresentation or unintentional concealment, and it provides that materiality is to be determined solely by the probable and reasonable influence of the facts on the insurer. Also, case law precedent prevents insurers from relying solely on representations contained in the policy application or underwriting information if an inspection of the insured’s property is conducted.

Rescission could be avoided if the insured and its broker take thorough measures to ensure the accuracy and completeness of the underwriting information. Also, insurers should clarify any conflicting or ambiguous underwriting information before coverage is bound.

By: Akos Swierkiewicz, CPCU
President, IRCOS
E-mail:
www.jurispro.com/

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.

New Expert Commentary

There are now 340 articles on IRMI.com, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

The Environmental Risks of Residential Construction—Has the emergence of mold as an insurance issue caused risk managers to lose sight of "other" environmental exposures associated with residential work? Jeff Slivka provides a list of other risk management concerns.
Can Workers Agree To Waive WC Rights in Arbitration and Waiver Agreements?—Jim Pocius provides his response to the question: Would the Federal Arbitration Act supersede any workers compensation state law and allow these cases to be arbitrated?
Should Insurance Policies Have "No Hair?"—In insurance disputes, courts must determine the parties' intent in entering into the contract. Here, Kenneth Wollner discusses why some courts ignore extrinsic evidence when interpreting insurance policies.
The Singapore Insurance Market—Jorn Kristensen and Ang Yew Lee examine Singapore's political, legal, monetary, banking, tax, economic, and regulatory structures, and discuss the future for life and non-life insurance there.

New IRMI Insights

The IRMI Hard Market Survival Guide 2002—IRMI Research Analysts provide 20 tips on how to survive the current hard property and casualty insurance market.

Construction Risk Conference

Be Sure To Beat the October 18 Conference Fee Increase—On October 18 the registration fee for the 22nd IRMI Construction Risk Conference will be raised. Take advantage of the best price by registering today. Four all-day seminars and 20 sessions and workshops will be held at the Conference in San Diego November 11-14. Register online.

For details about all the sessions and the presenters, see the agenda. To register, just complete the online registration form or call (800) 827-4242.

Your View—Providing Employees with WC Information

In IRMI Update 49, we asked readers whether they thought workers are provided with appropriate workers compensation information from their employers. Also, are we doing enough as an industry to explain the coverage. Below are some of the responses we received.

I thought your information about the lack of knowledge regarding workers compensation benefits was interesting. I also agree with the Hartford recommendations for bringing employees up to speed on the benefits available and having a positive proactive return to work policy. I would recommend that employees be educated about the benefits they are eligible for as well. This can be done prior to or at the time of an injury depending on an employer's preference:

Explain the benefit payment schedule and structure. Although benefits vary somewhat by state, the benefits may be less than the employee's pre-injury wage. If this is the case, and there is no tax withheld, injured workers should be educated so they don't feel penalized. It is also important to let them know that this is not the employer's decision; it is established by the Division of Insurance. This may prevent an employee from retaining an attorney.

If the benefit payment schedule differs from the employee's current pay schedule, let them know. In the construction industry, many workers are paid on a weekly basis. Workers comp benefits may arrive every 2 weeks. In many cases, a claims adjuster will educate injured workers about benefits, but it doesn't hurt for the employer to relay this message as well. It is critical that the message be consistent to avoid confusion!

—Trish Ennis, CSP, ARM, Assistant Vice President,
Loss Control & Safety, HRH/Linden
Very interesting about work comp. I agree we as an industry have done a very poor job getting out information. One of the very simple risk management techniques we have done is to put together a simple claims procedure for our clients. In the claims procedure we have told our clients to contact an injured employee within 24 hours if they do not return to work. It is not rocket science stuff, but I truly believe that if an employee is injured, they are afraid. A simple phone call from the employer can keep them away from attorneys and improve the moral of the injured worker. Thank you for reminding us.

—No name provided
Actually my experience is the reverse of the survey. I find construction workers acutely aware of WC coverage and benefits, and many knowledgeable of how to "work the system." I did want to relate one point of concern: Return to work policies are fine, and can be a useful tool. However, twice recently I have encountered cases where a worker was returned to work, restricted to light duty, only to have a foreman convince him that he could do "regular" duty for a short period of time. Each of these cases caused additional injury and complicated the claim. It seems some lower level supervisors need to be made aware that light duty means only light duty.

—Robert R. Miles, Senior Vice President,
Acordia, New York
The industry has not just failed to get the word out on workers compensation. The industry has woefully failed to explain to the public what insurance is, how insurance policies are written, what insurance policies cover ("you're covered for everything" or "you have the best insurance available"), how claims are handled, and what to expect if you are involved in a casualty. It has totally failed to advise the public of the expense incurred by each worker as a result of insurance fraud.

In addition, the insurance industry has failed to advise the people that work for it the true meaning of the covenant of good faith and fair dealing and that it is the obligation of the claims department to pay every claim that is owed under the contract and none of the claims that are not owed.

—Barry Zalma, Esq., CFE,
Barry Zalma, Inc., Culver City, California
When it comes to educating the public, the insurance industry gets an "F" as in Fail. The industry should be forced to go to summer school to make up for its failing grade!

The truth is if the public were insurance educated, we would all be paying less for our insurance! I'm not sure our industry carrier leaders would be happy about that. For one thing, insurance fraud would be drastically reduced and all the excess premium we (personal insureds and commercial/corporate insureds) are paying for fraud would be monumentally reduced. I find it amusing when I read how many billions of dollars are paid for "fraud" in insurance. If the figure used is $20 billion, then you know the real number is probably $50 billion. If the figure used is $50 billion, then the real number is probably $100 billion.

If the public were insurance educated, they would be able to intelligently "shop" their insurance and get the best value for their insurance dollar. If the selling arms of the insurance industry truly educated their clients (I use the term client, 90 percent of the sellers call clients customers—there is a difference), they—the sellers—would have to be smarter, more educated. It's a sad commentary how poorly educated the public is when it comes to insurance. Of course in this way the insurance buyer is totally at the mercy of the seller and sadly, the great majority of sellers are more interested in their commissions to be received than they are in bringing the best value to their victims, I mean customers. Thanks for listening.

—David J. Skolsky, CPCU, Insurance Analysts & Consultants, Avondale Estates, Georgia
I fail to get the point. Workers know of workers compensation and exploit it to the hilt. Your information must be from the dark ages.

—Doug Bicknell

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.

IRMI Update—Issue #50

In This Issue

Print Preview Unavailable