IRMI Update—Issue #115
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
June 21, 2005
In This Issue
Colleague,
Do a lot of contract drafters still wear tie dyed clothes, style their hair
long and straight, and think it's cool to take mind altering drugs and wander
through cemeteries? Why is it that so many contracts still require insurance
policies and endorsements from the 1970s? The 1986 commercial general liability
policy included the contractual liability endorsement, the broad form property
damage endorsement, and "x,c,u coverage" within its standard terms and no longer
provides for a "combined single limit" for the coverage, yet you still see all
of this required in contracts. This is probably my biggest pet peeve, and it
presents a huge potential problem for contracting organizations.
Requiring out-of-date insurance coverages results in an immediate breech
of contract on the one hand since it is impossible to strictly comply with it.
On the other hand, the fact that is impossible to satisfy may give the party
responsible for procuring insurance the ability to weasel out of providing the
coverage they otherwise would have.
If your organization (or your clients) is still requiring obsolete insurance
coverages in your contracts, it's time to move into the 21st Century. Spend
some time drafting clear, reasonable, and concise contract insurance clauses
that use modern insurance terminology. It will be time well spent. As an aside,
if you subscribe to our
Contractual Risk Transfer reference manual, you can find lists of out-of-date terminology to avoid in
Section 14, "Insurance Requirements."
Do you agree that outdated insurance requirements in contracts are a problem?
How often do you run into this? Why do you think such old terminology is still
being used? Do you have any practical suggestions for our readers on avoiding
this problem? [See reader responses.]
In a few weeks we'll be mailing brochures for the 25th IRMI Construction
Risk Conference in Las Vegas. In the meantime, remember to reserve the dates
on your calendar (November 7-10).
Thank you for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Mobile Equipment Nonconcurrency Can Create Coverage
Gap—Nonconcurrency refers to a lack of coordination between two or more
policies that creates a coverage gap. Common examples involve two or more policies
that cover the same loss exposure but have different expiration dates, or an
uncoordinated mixture of claims-made and occurrence coverage triggers. The 2004
changes to ISO's CGL policy can also create a coverage gap if the mobile equipment
coverage of a general liability policy and the auto liability coverage of the
insured's business auto policy are not coordinated.
Revised definitions in the latest version of the ISO CGL preclude coverage
under that form for vehicles subject to a compulsory insurance law, a financial
responsibility law, or another motor vehicle responsibility law that applies
in the state where the vehicle is licensed or principally garaged. A corresponding
endorsement to the ISO business auto policy picks up these coverages. As long
as both policies are changed at the same time, they meet the intent of shifting
some mobile equipment coverage from the CGL to the auto policy.
Nonconcurrency may create a coverage gap if an insured's CGL reflects the
new ISO provisions and the auto policy does not. Several scenarios might cause
this to happen. For example, the policies might have different expiration dates.
If two insurers are involved, the insurer providing the CGL might have adopted
the new ISO forms while the auto insurer still uses the old forms. Nonstandard
or surplus lines forms may also be nonconcurrent.
Overlapping coverage, another possibility, could occur if an insured's auto
policy is updated before the CGL. From a coverage standpoint, double coverage
is better than no coverage. However, the insured might then end up with a substantial
auto premium—possibly a surprise audit premium—to cover vehicles that are also
covered under the CGL.
In today's world, it is important to compare the exclusions and the definitions
of both "auto" and "mobile equipment," in both auto and GL policies, to determine
whether coverage gaps or overlaps exist.
By: Eric Wiening, CPCU, ARM, AU, AAI, API
Insurance & Risk Management Educator - Author - Consultant
West Chester, PA
Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks,
buying insurance, managing claims, or filling gaps in insurance coverages. Submit your tips. We'll
acknowledge your contribution as we did for Eric.
There are now 674 risk management and insurance articles on IRMI.com. Below
you'll find summaries of some recent additions with links to the articles.
-
The Changing Definition
of Protected Concerted Activity—In his 25th article for IRMI.com,
Paul Siegel discusses a recent Labor Board case allowing employer rules
that prohibit abusive language and harassment, language previously found
to be unlawful on its face.
-
Personal Risk versus
Personal Success—Does an employee have the right to knowingly
take significant personal risks on the job to achieve significant job or
personal success? Dr. George Head examines the ethical dilemma.
-
Excess Insurer Entitled
to Equitable Subrogation—Not Equitable Contribution—In his Insurance
Law column, Joe Postel looks at the 2004 decision in Home Ins. v Cincinnati Ins. and discusses
its possible effect on additional insured claims in the future.
-
Probing the Gaps in
GAP Insurance—Dr. Tim Ryles discusses Guaranteed Auto Protection
(GAP) insurance: what it covers, common exclusions, how it is regulated,
and certain sales/marketing methods to watch out for.
-
The "Bargained-for"
Result: Torts, Contracts, and Statutes of Limitation—Limitations
for contract and tort actions may differ. The applicable statute of limitation
"is properly related to the remedy, rather than to the theory of liability."
Kenneth Slavens explains.
-
Personal Risk
Management: Making A World of Difference at Claim Time—Jack Hunglemann
relates how agents/brokers can prove their worth by helping determine coverage,
smoothing the process, and becoming a strong advocate if a claim is unfairly
underpaid or denied.
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Coverage Disputes
Give Rise to "Independent" Counsel—Brent Cooper explains how
the Texas Davolos case sets out how the Independent Counsel Rule should
be applied and a test as to what coverage questions give rise to independent
counsel.
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"Flying Machines"
and Early Airline Insurance—As America became a world leader
in aviation, the industry’s size and importance made it a crucial line of
business for many agents, brokers, and insurers. Jack Bogardus and Robert
Moore explain.
The IRMI Construction Risk Conference is the premier forum for sharing ideas
and techniques for improving the ways we manage and insure construction risks.
A record 1,300 attendees are expected this November 7-10 in Las Vegas to celebrate
25 Years of Innovation. This year's keynote speakers—Hugh Rice, Chairman of
FMI Corporation, and Pat Ryan, Executive Chairman of Aon Corporation—will present
"Forecasts and Challenges for the Construction and Insurance Industries." The
best way to reserve your preferred workshops is to register online. Set a reminder
for July 1, when early-bird registration begins. See the Agenda.
Professional Liability Insurance gives
- Producers the power to write more coverage
- Underwriters the tools to respond to top producers' needs
- Risk managers the means to protect corporate officers
See the Top 11 ways you can design the broadest coverage.
Over 2,300 pages—starting at just $209.95 per year. Subscribe today!
Expert Commentator Paul Siegel's 25th article for IRMI.com is now on the
home page and listed under "New Expert Commentary" above. An employment law
and litigation partner of Jackson Lewis LLP, he has written the employment law
column since March 2000. He has contributed articles dealing with all aspects
of employment law, including discrimination, drug testing, military leave rights,
OSHA ergonomics standards, and the Americans With Disabilities and the Sarbanes-Oxley
Acts. For more information on Mr. Siegel and his firm, see his full biography and a list of his
articles.
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