In only a few more weeks, insurance producers who write construction accounts will have a new tool for satisfying demands for certificates of insurance. The form, New York Construction Certificate of Liability Insurance Addendum (ACORD 855 NY), will be available starting in June. IIABNY and a number of other insurance and construction trade groups worked together to create this form last year.
To put it in context, we worked on this form at the same time that the certificates of insurance bill was making its way through the New York State Legislature. That bill permitted the use of only standard ACORD and ISO certificates of insurance. The addendum form was supposed to meet that standard while providing all of the information that New York contractors are frequently asked to provide to third parties.
It all worked out as planned. The bill passed both chambers of the legislature. The ACORD membership approved the addendum form. Everything worked as planned, with one exception: The governor vetoed the bill. Consequently, ACORD and ISO forms are not the only game in town. Government agencies and municipalities are still free to insist on their own proprietary forms, many of which make statements that differ from the terms of the insurance policies listed on them. In my opinion, this significantly diminishes the usefulness of the new form.
Nevertheless, producers will be able to use it this summer should certificate holders demand it. As the title suggests, the addendum is a supplement to the familiar ACORD 25 Certificate of Liability Insurance; it is not a replacement. It attempts to answer these questions that certificate holders often ask:
- Is the insurer providing coverage admitted in New York, or is it an excess line insurer? If admitted, is the policy written in New York’s free trade zone?
- Is the commercial general liability policy the ISO form, a modification of that form, or some other proprietary form?
- What is the form number (ISO or other) of the additional insured endorsement on the policy?
- Does the CGL policy insure the additional insured on a primary and noncontributory basis? Does the excess or umbrella liability policy?
- Does it cover the additional insured for injuries to employees of the named insured or subcontractors?
- Does the CGL policy restrict or exclude coverage for:
- Certain specific operations?
- Contractual liability by altering the definition of “insured contract”?
- Earth movement; excavation; explosion; collapse; underground property damage?
- Suits by one insured against another?
- Property damage to work performed by subcontractors?
- Does it remove or modify the “insured contract” exception to the employer’s liability exclusion?
- Does the CGL policy guarantee advance notice to the certificate holder if the insurer cancels it?
This is pretty detailed information. If the agency personnel completing the form do not have a good knowledge of CGL insurance, they may answer the questions incorrectly. This in turn could expose the agency to errors and omissions lawsuits. Thorough training for account managers and customer service representatives on how to answer these questions will be essential.
I’ve had a few phone conversations with IIABNY members about the addendum, and reactions have varied. One member in Central New York told me he didn’t see it as much of a problem. Another member from the Lake George region told me he was glad that his retirement was imminent; he did not want to have to deal with the trouble he foresaw the form causing. What do you think? Drop your thoughts in the comments.
I got a call from a member last week who wanted to know how an apartment renter can cover improvements and betterments he makes to his apartment. For example, if he's way more enthusiastic about decorating than I am, and decides to paint every room, how can he insure the value of the paint job? Commercial tenants can insure improvements and betterments, but what about apartment dwellers?
Turns out the coverage is baked right into the standard renters insurance policy. It's in a provision I never had a reason to pay attention to before, and thus didn't know it existed. The Additional Coverages section of the ISO Homeowners 4 - Contents Broad Form (HO 00 04 05 11) contains a coverage titled Building Additions And Alterations. It expands the coverage for personal property to include building improvements or installations, made or acquired at the named insured's expense, to the part of the residence used exclusively by the named insured. (The "used exclusively" phrase becomes important in multi-family homes or boarding situations. It's less important in apartment complexes.) The most the insurance company will pay for this is 10 percent of the limit for personal property.
Therefore, if a renter installs a surround sound system through the walls and cannot take the cabling with him when he moves, and he has $10,000 coverage for personal property, his policy will cover the installation for up to $1,000. ISO also has an endorsement available to increase the limit in increments of $1,000. The Homeowners manual does not provide a maximum limit, so the maximum will be whatever the insurer wants to offer.
I'm not sure how many people renting an apartment want to make permanent changes to it at their own expense, but if they do, they can get reimbursed should their work get damaged.
This fun fact has been brought to you by Tim's Toolbox of Indemnification Trivia. Feel free to use it as dinner table conversation, idle chat in the middle of a movie, or as a pickup line. You're welcome.
Which would auto insurance consumers prefer?
- Insurance companies charging them more or less, depending on whether they went to college and the type of job they have; or
- Insurance companies using a device installed in their cars to monitor their driving
The answer to that question goes to the heart of a new controversy regarding auto insurance premiums in the Empire State. The New York Public Interest Research Group (NYPIRG) two weeks ago issued a stinging report, accusing some insurers of charging higher premiums for those without college educations and those working in blue-collar occupations. The study examined sample pricing from four of the five companies with the largest market share in New York – GEICO, State Farm, Liberty Mutual and Progressive. (NYPIRG was unable to get quotes from Allstate, the number two carrier, without submitting to a credit score check.) The group found premium differentials based on education, occupation or both ranging from 19 to 41 percent.
NYPIRG sent a letter to the state Department of Financial Services urging it to conduct an immediate and thorough review of the rate-setting practices of auto insurers in New York. Decrying the use of education and occupation as rating factors, a NYPIRG spokesman said, “Auto insurance rates should be based on how you drive, not who you are.”
Interestingly, there is an alternative available that does look at how people drive and not who they are. It’s called telematics. This technology involves a small device plugged into a vehicle’s on-board data port. The device wirelessly transmits information on how the vehicle is used to the insurance company. To paraphrase a popular holiday song, it sees you when you’re speeding; it knows how hard you brake; it knows if you’ve been bad or good, so …
Telematics has become very popular in European countries and Canada, and it’s slowly gaining a foothold in the U.S. Progressive has been the most visible proponent of it, widely advertising its Snapshot® program, but a few other carriers have dipped their toes in the pool as well. To date, IIABNY has not heard of many independent agency companies testing it, at least in this market. It seems to be only a matter of time before that situation changes.
Telematics would seem to be the answer to NYPIRG’s complaints. Indeed, the Consumer Federation of America (which, to put it charitably, has on occasion differed with the insurance industry,) has said positive things about basing insurance premiums on miles driven. However, as a NAIC report noted, telematics raises concerns about individual privacy. Insurers could conceivably track, in addition to how much you drive and how fast, when and where you go. Did you drive to church or a synagogue? A Tea Party rally? A busy shopping mall in December? A, ahem, “gentlemen’s club”? “Tell me, Mr. Dodge, was there some special reason that you were driving at 3 a.m. on a Saturday morning? Seems like an odd time to drop in on your parents.” You get the idea.
My point is there are always trade-offs. You give up some privacy to get away from what you might perceive as unfair discrimination. Or you can say, “Back off, Big Bro Flo,” foreswear the tracking device and put up with a company charging you more because you install heating systems instead of network operating systems. Or, third option, you can sit down with an independent insurance agent who can check the alternatives for you and find the right coverage at a fair cost. That cost might include a rating factor based on whether you went to Student Loan U., or it might involve a telematics device.
However you slice it, auto insurance consumers always (or almost always) have choices. (The New York assigned risk plan for auto insurance is virtually depopulated.) That choice is something that NYPIRG seems to have forgotten, but it’s something that all consumers and insurance agents should remember.
IIABNY members who place business through wholesale brokers know the drill. Client writes check to retail broker; retail broker deposits check and writes a new check to wholesale broker; wholesale broker deposits check and writes a new one to insurance carrier; carrier deposits check and issues policy; everyone lives happily ever after.
Unless, of course, one of those checks gets lost. A New York broker found out last year that the cost of a check mailed to the wrong address can be steep.
An executive recruiting firm retained the broker to obtain errors and omissions coverage. The broker obtained coverage from Liberty Surplus Insurance Corp. via a wholesale broker that acted as Liberty’s program administrator. One week before the end of the first policy term, the broker sent the insured a renewal application. The insured completed the application and sent it back to the broker. Twelve days after the renewal date, the broker forwarded the application to the program administrator and requested a quote for the new term. The wholesaler immediately asked Liberty for a quote and permission to backdate coverage. Liberty issued a quote the same day and gave the administrator permission to issue the renewal upon receipt of the premium payment.
Four days later (16 days after the renewal date,) the insured received an invoice from the retail broker for the full annual premium plus broker fees and taxes. The insured sent a check for the full amount to the broker five days later, and the broker deposited the check in its premium account six days after that. Finally, two days later (nearly a month after the renewal date,) the broker’s bookkeeper mailed a check for the premium and taxes. She thought it was going to the administrator’s address. It wasn’t.
What the bookkeeper didn’t know was that the administrator had closed the office to which she mailed the check. Worse, the post office did not return the mailing to the broker. According to the court, “In fact, to date, no one knows what happened to the check.” No one ever cashed it. And, since the administrator did not receive the premium payment, and Liberty had instructed the administrator to issue the renewal only when it received payment, no renewal policy was issued.
In the mean time, the recruiting firm had signed multiple contracts to solicit job candidates for J.P. Morgan Chase Bank. Those contracts prohibited the firm from recruiting certain types of J.P. Morgan Chase employees to leave the company. In August 2008, J.P. Morgan Chase informed the search firm that it believed the firm had violated the contracts by inducing the bank’s employees to take positions with a competitor. Two months later, J.P. Morgan Chase sued the firm for $1 million (it later increased the demanded damages to $55 million.)
Liberty, somehow unaware that it had never issued a 2007-08 renewal policy, initially appointed and paid defense counsel for the recruiting firm. The insurer also notified the firm that it was reserving its rights to later deny coverage and recover its defense costs if it found that the insurance did not apply to the J.P. Morgan Chase claim. However, five days after the bank hiked its demand for damages to $55 million, Liberty denied coverage altogether because it had never received payment for the 2007-08 renewal policy. The bank and the firm subsequently negotiated a confidential out-of-court settlement. The firm then sued the retail broker, the administrator and Liberty. Five of the 12 complaints were against the retail broker for breach of contract; negligence; breach of fiduciary duty; fraud, constructive fraud, and negligent misrepresentation.
Though the insured filed the initial suit in December 2009 and amended it two months later, the trial court in Manhattan rendered its decision only last April. The decision was a mixed bag for the broker. First, it said that the broker’s failure to obtain a renewal policy for the recruiting firm was “clearly a breach of contract.” The court also ruled that the broker’s handling of the missing check affair was negligent:
“A reasonable broker would have taken one of myriad steps to ensure that coverage was in effect, including confirming receipt of the check with American, reviewing its bank records to see that the check was never deposited, and taking corrective measures in April 2008, approximately six months before the JPMorgan action was commenced, when (the insured) had serious concerns … that a 2007/2008 policy was never issued. Instead, (the broker) did nothing.”
The court said that the broker was liable to the extent that the Liberty policy would have covered the settlement and attorney’s fees. On the positive side for the broker, the court ruled that:
- A trial is necessary to resolve questions of whether or not coverage would have applied
- The purchase of an insurance policy from a broker does not create a fiduciary relationship
- Because there was no fiduciary relationship, the claims for negligent misrepresentation or constructive fraud were not valid
- The fraud claim was not valid because the broker never told the firm that a renewal policy was issued.
The takeaways for all insurance producers:
- Monitor the status of all new and renewal policies, from application to issuance. No news is not necessarily good news. When confirmation of coverage does not arrive, it is vital for someone to follow up. Even in the 21st century, checks get lost in the mail. The wrong time to find that out is when the insured receives a legal complaint.
- Documentation of all follow-ups is vital.
What happened to the retail broker here could happen to any insurance agency in business today. Agencies that take E&O loss prevention seriously will minimize the chances that it will happen to them.
i asked Jim Keidel of the law firm of Keidel, Weldon & Cunningham, LLP to review this case and provide his thoughts on it. The following is a brief transcript of the discussion.
Dodge: How often do you see E&O actions taken against insurance agencies for this type of situation?
Keidel: Fortunately, we do not see agencies that are involved in this situation very often.
Dodge: If an agency faces allegations like this, what does your experience tell you about their chances of successfully defending the suit?
Keidel: Based upon my experience I believe that an agency or brokerage that faces allegations similar to the facts of this case would have a difficult time defending the lawsuit.
Dodge: Would it have made any difference if this suit had occurred in a different part of New York State, or would the outcome have been the same regardless?
Keidel: I do not believe that it would make a difference where in NY state this suit was brought. The outcome would probably have been the same regardless of which county the lawsuit was commenced in.
Dodge: What specific steps would you recommend for agencies to prevent breakdowns like the one that happened in the IDW Group case?
Keidel: To help protect against matters like this occurring agencies and brokerages should make certain that they (1) promptly turn around matters, especially those that are time sensitive (2) always diary matters for follow-up (3) carefully check where premium funds are to be sent especially if it is carrier that they do not regularly deal with.
Photo by Tim Pearce, Los Gatos. Used under a
Creative Commons Attribution 2.0 license.
This issue of IIABNY Insider is hitting your inbox just a couple of days before St. Patrick’s Day. Tradition has it that many people will honor the good saint’s memory by sipping a few adult beverages. At least, that’s what we at IIABNY headquarters have heard. A survey of the staff reveals that, when we were in college, we were always in bed on St. Patrick’s Day by 9 p.m., shortly after reading picture books to the children in the orphans’ home.
Nevertheless, it seems to be a common practice for some among us to imbibe on that day, and some may imbibe past the point where they should switch to Diet Coke. Unfortunately, some of them may ignore New York State laws and basic human morality by attempting to drive their cars afterward. Many of these individuals may have car accidents. Because they were operating their vehicles illegally, questions may arise as to how their insurance coverage will apply. Here are the facts about the intersection of the Insurance Services Office Personal Auto Policy (PP 00 01 01 05) and alcohol:
1. Liability coverage applies to a drunk driver. The Liability section of the policy states that the insurer will pay damages for bodily injury (including damages for care and loss of services) or property damage for which any insured becomes legally responsible because of an auto accident. As is the case with every insurance policy, exclusions narrow this broad promise of coverage. However, the policy does not contain an exclusion that would eliminate coverage solely because the driver was intoxicated. Unless a specific policy exclusion applies, the driver has liability coverage. He might not be offered a renewal when his policy expires, but he has coverage for the loss.
2. Physical Damage coverage may apply to a drunk driver. Ditto for Coverage For Damage To Your Auto. If the insured bought Comprehensive and/or Collision coverage on the vehicle involved in the accident, coverage will apply. There is no exclusion of coverage for situations where the driver was intoxicated.
3. No-Fault coverage applies, but it might be a loan. Until recently, the New York Personal Injury Protection Coverage endorsement (PP 05 87 01 14) excluded coverage for a person injured as a result of operating a vehicle while intoxicated or while impaired by the use of drugs. Unfortunately, this resulted in a lot of emergency health care providers never getting paid for services rendered to these drivers. The New York State Legislature amended the no-fault law almost four years ago so that insurers must reimburse providers for necessary emergency health services, including ambulance services and related medical screenings. Should a court later convict the individual of driving while intoxicated or impaired, the insurer has the right to subrogate against him.
4. The host of a private party is not liable for the acts of an intoxicated adult guest. New York General Obligations Law Section 11-101 holds vendors (bars, restaurants, etc.) legally liable for injuries or damages caused by an intoxicated person to whom the vendor sold or gave alcohol. However, the law places no such burden on people who host a party. If you host a St. Patrick’s Day party in your home or at an establishment, and one of your adult guests ties one on and hurts someone, you cannot be held liable. However…
5. The host IS liable for the acts of intoxicated minors. General Obligations Law Sect. 11-100 permits anyone who suffers injury or damage at the hands of an intoxicated person under age 21 to sue someone who knowingly contributed to the intoxication by giving the underage person alcohol. Parents should not host beer parties for their children’s underage friends. And if they do…
6. The Homeowners policy will not cover them. The ISO Homeowners 3 Special Form policy (HO 00 01 05 11) excludes liability coverage for almost all incidents involving a motor vehicle.
Despite the selfishness and stupidity of driving while intoxicated, many insurance coverages do apply to the act. Regardless, it’s better to hand over the keys to someone who hasn’t been drinking. Insurance pays for medical bills and other expenses; it doesn’t kill pain or restore lives needlessly lost. So, drink up and call a cab so the only person hurting on Tuesday is you.
And have a happy St. Patrick’s Day.
Photo by Seabamirum. Used under a Creative Commons Attribution 2.0 license.
Critics and supporters both point to one important feature of the law as applied by the courts: An owner or contractor fighting a lawsuit under it cannot cite the worker’s contributory negligence as a defense. “Contributory negligence” is just that – the worker contributed to his injury through action or inaction. It is true that, if an injured worker can prove that the scaffold law was violated, the owner and contractor cannot use contributory negligence as a defense. To win a scaffold law case, an injured worker must prove two things:
1. The law was violated (that is, the owner and contractor failed to provide a safety device named in the law or provided one that was defective or inadequate); and
2. That failure to provide proper equipment caused the injury.
If the worker can prove those two things, it’s game over. The only question left is how the settlement payments will be structured.
If you read the text of Section 240(1), it doesn’t say anything about contributory negligence. So why are defendants unable to mention it? The reason is embodied in one name. If you are an insurance producer, the next time you have to deliver a general liability renewal policy with an obscene premium …
The next time you have to scour the surplus lines market for a carrier willing to provide even minimal amounts of coverage for a contractor …
The next time a carrier points to your lousy loss ratio and blames it on your construction accounts …
Remember one name:
One day in the winter of 1941, Isidore Koenig stepped onto a ladder and tumbled off it, right into liability insurance history.
On that day, as the country was dragging itself out of the last stages of the Great Depression and jobs were not to be taken for granted, Mr. Koenig, an independent contractor who cleaned windows, had a gig. Patrick Construction Corp. was doing construction work on a school, and it hired Mr. Koenig to work on the windows. On February 7, 1941, Patrick Construction employees told him to scrape and remove paint from a large window in the school’s auditorium. On hand was a wood extension ladder that lacked both safety shoes to keep it from slipping on a surface and even notches to which the shoes could be fitted.
Mr. Koenig testified that he argued that the ladder wasn’t the right device for the task, but the Patrick Construction employees told him to use it anyway. He did as he was told. He ascended 16 or 17 feet above the floor (roughly one and a half stories.) At some point while he was working, the ladder slipped. Mr. Koenig fell, face-first, onto the auditorium floor with nothing between him and it other than the ladder. The New York State Court of Appeals decision does not describe his injuries, but it’s not hard for me to imagine how bad they were.
Mr. Koenig, who apparently survived the fall, sued Patrick Construction, alleging that it had violated Labor Law Section 240(1). The trial court judge told the jury that it could rule in Koenig’s favor only if he could prove that he had not contributed any negligence to the accident himself. The jury, apparently noting that he got on the ladder voluntarily, ruled against him, and he appealed.
In 1948, the Court of Appeals overruled the lower court’s decision, ordered a new trial, and in the process affected the New York insurance market in ways we still feel 66 years later. Judge Stanley H. Fuld wrote, “…(I)t is our judgment that both sound reason and persuasive decisions, involving statutes whose content and purpose are similar to those of section 240, require the conclusion that that statute does not permit the worker's contributory negligence to be asserted as a defense.” He explained:
Workmen such as the present plaintiff, who ply their livelihoods on ladders and scaffolds, are scarcely in a position to protect themselves from accident. They usually have no choice but to work with the equipment at hand, though danger looms large. The legislature recognized this and to guard against the known hazards of the occupation required the employer to safeguard the workers from injury caused by faulty or inadequate equipment. If the employer could avoid this duty by pointing to the concurrent negligence of the injured worker in using the equipment, the beneficial purpose of the statute might well be frustrated and nullified. That possibility we long ago perceived and provided for, declaring that ‘this statute is one for the protection of workmen from injury, and undoubtedly is to be construed as liberally as may be for the accomplishment of the purpose for which it was thus framed’. … Such an interpretation manifestly rules out contributory negligence as a defense to an action predicated upon violation of the statute to the injury of one in the protected class.
From that day to this, injured workers have won scaffold law suits if they can prove a violation of the law that caused the injury. The only circumstance under which an injured worker’s conduct matters is when the defendant can prove that the worker’s conduct was the sole proximate cause of the injury. It does happen, but it’s not easy to do.
IIABNY’s Legislative (L) Day is coming up on March 25, and scaffold law reform is the top priority for the day. If you think the Koenig decision is unfair in today’s business climate, then I encourage you to make the trip to Albany that day. Isidore Koenig and Judge Stanley Fuld are long gone, but they’re still exerting a powerful influence on your business today. Will they still have that kind of influence tomorrow?
New York's highest court, the Court of Appeals, has issued some interesting insurance-related decisions in the past several days.
If an employer hires undocumented workers; the workers suffer work-related injuries; and the employer's Workers' Compensation insurer pays benefits to the injured workers; does the employer still have immunity under the Workers' Compensation Law from being sued by the third parties (unless the workers suffered "grave injuries")? The court ruled last Thursday that yes, it does. The employer does not lose immunity under the exclusive remedy doctrine simply because it broke the law by hiring undocumented workers.
Most property insurance policies that provide coverage on a replacement cost basis state that the insurer will pay the actual cash value initially but is not obligated to pay the cost of repair or replacement until the repair or replacement is actually completed. Policies tend to have a deadline for completing repairs, such as two years from the date of the loss. What if the insured makes a good faith effort but runs into problems finishing the repairs during that time frame? Is the insurer off the hook for paying for replacement cost? Nope. The court said that, where it is not reasonably possible to complete the repairs within two years, it's only fair for the insurer to allow more time.
Last year, the court ruled that, if an insurer breaches its duty to defend an insured against a liability claim, it also loses the ability to later deny the claim by citing a policy exclusion. In other words, the court said that an insurer that refuses to defend a claim that it should have defended will have to cover the claim even if the policy excludes coverage. Today, the court reversed that decision.
Score one for an employer, one for an insured, and one for an insurer. It's pretty unusual for the high court to hand down this many insurance-related decisions so close together. Can a decision in the pending insured-broker "special relationship" case be far behind?
What do you think of these decisions? Agree? Disagree? Somewhere in between? Log in and sound off in the comments.
Chris Burand writes over on Big I Virtual University about the ongoing pain in the tuckus that is certificates of insurance, but he puts a spin on it that I had not previously considered:
The changes to certificates have caused widespread carnage, frustration, anger, and virtually every other negative emotion imaginable. One item that is not being discussed much publicly is the difference between agencies following the rules versus agencies that are not following the rules. In particular, the question is whether to issue certificates that violate contracts, copyrights, and regulations. There is no question some agencies are doing so knowingly or, if ignorant, they are living in a deep, dark hole.
Neither companies nor associations nor many regulators (the Wisconsin Department of Insurance is a notable exception and there may be others of which I am not aware) have done much to correct the abusers. The result is that sometimes the agency willing to violate the rules, contracts, and copyrights make sales they would not otherwise make. By being silent on this issue, companies, associations, and some regulators are assisting the irresponsible—and the responsible are paying the price.
As an employee of an association (and one who has blogged about the certificate problem, served on an ACORD working group that deals with certificates, and has taught a continuing education course about them), I must admit that I have never considered my responsbility in all of this. Does IIABNY or IIABA or any state producer association have an ethical obligation to speak out against producers who are contributing to the problem?
And what about producers themselves? Do they have an obligation to speak out against their peers who are ignoring the rules?
I don't have good answers to these questions, but I know I'll be giving them some serious thought. Almost on a daily basis, I hear complaints about certificates of insurance, usually pertaining to some ridiculous demand from a government agency throwing its weight around. The caller complains, I commiserate, and we all hang up feeling morally superior without actually done anything about the problem.
IIABNY strongly supported a bill in 2013 to deal with this problem, but we were unable to get the governor on board. Our efforts in Albany are still in full swing -- we're talking to the Department of Financial Services about regulations, while Sen. James Seward's new certificates bill was approved by the Senate Insurance Committee today. Is that enough? Should IIABNY denounce those who take shortcuts in order to save accounts? Should their peer agents and brokers?
I'm curious to hear what you think. The comments are open.
Graphic by Guudmorning! Used under a Creative Commons Attribution 2.0 license.
This excellent article by Glenn Fencl supplies the answer:
Insurance policies written with deductibles provide that the insurer will pay the defense and indemnity costs in connection with a covered claim, and then charge or bill back the deductible amount to the insured. In other words, the “deductible” is a sum that is subtracted from the insurer’s indemnity and/or defense obligation under the policy. Importantly, the responsibility for the defense and settlement of each claim rests solely with the insurer, and the insurer maintains control over the entire claim process.
Policies written with large self-insured retentions, in contrast, may place responsibility for claims handling, including the investigation, settlement and payment of claims, in the hands of the insured. Under a policy with an SIR, the insured is typically required to pay the defense and other allocated expense costs as well as indemnity payments until the amount of the retention has been exhausted. Once the SIR has been exhausted, the insurer responds to the loss and assumes control of the claim.
Self-insured retentions are distinct from deductibles in at least one important respect: The insured whose coverage is subject to a self-insured retention generally is obligated to retain its own defense counsel. Indeed, in a self-insurance arrangement the claims-handling generally is controlled by the insured, an independent adjusting company, or a primary insurer’s claim department retained by the insured to assist it in claim management. In essence, a self-insured is the primary insurer. Not surprisingly, many insureds that employ self-insurance are major companies or commercial entities, sophisticated in matters of insurance, risk management, and loss control.
Another difference between a deductible and an SIR is that the SIR does not reduce available policy limits, whereas a deductible may reduce policy limits. ...
I learned a lot from reading this article, and I encourage you to read the whole thing on PropertyCasualty360.com.
IIABNY members often call the Research Department with this question. Here are the rules:
In general, an excess line broker may not place a risk with a non-admitted carrier unless she has obtained three declinations from admitted carriers. These carriers must be licensed to write the kind of insurance in question. In addition, she must have reason to believe those carriers might consider writing the type of coverage or class of insurance involved. New York Insurance Regulation 41 lists five criteria on which the broker can base her reason to believe that these carriers were markets. For example, recently writing that type of coverage or class of insurance; advertising; articles in the media; and conversations with other insurance producers are all valid reasons.
New York law allows the Department of Financial Services to waive the declination requirement for certain coverages and classes. The list of these coverages and classes is called the “export list.” A broker is not required to get any declinations prior to placing a risk involving these coverages and classes with a non-admitted carrier. Examples include:
- Vacant commercial property
- Liability coverage for construction contractors
- Liability coverage for horseback riding establishments
It is important to keep in mind an advisory legal opinion the DFS issued in 2003. In the department’s opinion, where an admitted carrier and a non-admitted carrier offer the same coverage but the admitted carrier’s premium is higher, the excess line broker must obtain coverage from the admitted carrier.
More information, including links to relevant New York laws and regulations and the current export list, is available on the Excess & Surplus Lines page in the Member Answer Center of the IIABNY Web site.