Continue reading »]]> Subcontractors’ insurers must provide a complete defense to the developer/general contractor, but can they force others to pitch in?

A recent California decision has subcontractors and their commercial general liability (CGL) insurers crying foul and heading back to the drawing board. In Presley Homes, Inc. v American States Ins. Co., 90 Cal App 4th 571, 108 Cal Rptr 2d 686 (Cal App June 11, 2001), the California Court of Appeal held that a subcontractor’s CGL insurer was obligated to pay all of its additional insured developer’s defense costs in a construction defect suit. This was despite the fact that the additional insured coverage was expressly limited to liability arising out of the named insured subcontractors’ work, but the construction defect suit alleged both liability arising out of those subcontractors’ work and liability not arising out of their work.

Although the subcontractors’ insurer did not have to pay any settlement or judgment on behalf of the additional insured developer, subcontractors having read this decision correctly recognize that the defense costs for a large, complicated construction defect suit can be enormous. Some raise the specter of the doorknob subcontractor’s insurer being forced to bear all of the developer or general contractor’s defense costs for a large, complicated construction defect suit seeking damages that are 99 percent unrelated to doorknobs.

The Presley Case

Presley was the developer for a residential construction project in southern California called Andora. American States insured two of Presley’s subcontractors: Darrell Link Construction and Sunrise Framers. Link was hired to do concrete work, such as foundations, driveways, walkways, and stoops. Sunrise did the framing.

Presley’s subcontracts with Link and Sunrise required each of them to add Presley as an additional insured to its CGL policy. Both policies were endorsed to make Presley an additional insured, and each endorsement provided that its coverage was primary and not diminished by the availability of other insurance.

Link’s policy contained a CG 20 09 endorsement, and Sunrise’s contained a CG 20 10. The difference was immaterial to the case, however, as American States did not deny that it owed a duty to defend Presley in the ensuing construction defect suit brought by a homeowner in Andora.

Each endorsement, of course, limited the coverage for Presley to its liability arising out of the named insured’s work (Link or Sunrise). Although American States admitted that the homeowner’s complaint alleged liability arising out of Link and Sunrise’s work, i.e., it alleged defects in the concrete and framing, American States contended that the complaint also alleged liability not arising out of Link and Sunrise’s work, i.e., not related to the concrete or framing, and therefore not covered by American States. Therefore, American States refused to provide a full funding of Presley’s defense, instead attempting to secure an agreement with Presley for a partial funding, reflecting only those portions of the homeowner’s complaint alleging defects in concrete or framing. When agreement proved elusive, Presley demanded a full defense from American States, which American States refused.

American States then settled the construction defect suit without any contribution from Presley. But Presley had incurred significant costs defending the suit, and filed a declaratory judgment action seeking reimbursement of those costs from American States. The trial judge ruled that American States did not have to fund the entire defense, but the California Court of Appeal reversed.

To read the entire article click here.

by Joseph P. Postel
Liberty Mutual Insurance Group

For more information about commercial  insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.

Continue reading »]]> According to the U.S. Equal Employment Opportunity Commission (EEOC), the number of workplace discrimination charges filed with the EEOC increased 15 percent in 2008, with the largest increases in retaliation and age-based claims. In fact, the EEOC is experiencing the highest level of charge filings since it opened its doors in 1965.

Growth of all discrimination charges seems to be the result of an aging workforce and increased reductions in force. In January 2009, 2,227 mass layoff actions (i.e., affecting over 50 companies) resulted in the separation of 237,902 workers, according to the Bureau of Labor Statistics. During the 14 months from December 2007 to January 2009, there were 25,712 mass layoff events. In February 2009, the number of unemployed workers increased by 851,000 to 12.5 million; unemployment reached 8.1 percent. Consequently, continued growth of workplace claims seems certain.

With discrimination charges on the increase, costly lawsuits are likely to follow. The 2008 Edition of Employment Practice Liability: Jury Award Trends and Statistics, analyzed trends in jury awards from 2001-2007. Among the statistics reported are the following.

• 21 percent of verdicts obtained by prevailing plaintiffs were between $100,000 and $250,000; 18 percent of the verdicts were between $250,000; and $499,999. Approximately 45 percent of the verdicts were over $250,000, while about 32 percent of the verdicts were over $500,000.
• Between 2001 and 2007, the median jury award in discrimination cases rose from $147,950 to $250,000.
• 22 percent of awards in age discrimination claims were between $100,000 and $249,000; 52 percent of awards in age discrimination claims were over $250,000 with 18 percent over $1 million.
• In 2007, the probability of a plaintiff’s verdict in age discrimination claims reached 62 percent, its highest since 2002. That rate is slightly higher than the overall adverse verdict rate. Between 2001 and 2007, plaintiffs won about 61 percent of employment cases tried before juries.
• Retaliation claims present the greatest exposure, as employers have tended to fare poorly (i.e., 19 percent of retaliation verdicts between 2001 and 2007 were between $100,000 and $250,000; 20 percent of the verdicts were between $250,000 and $499,999; and approximately 28 percent were over $500,000). The median verdict was $200,000. The Supreme Court’s Burlington Northern and Santa Fe Railroad Co. v. White, 548 U.S. 53 (2006) decision, holding that actions with no immediate monetary impact could be “retaliatory,” will continue to encourage retaliation claims.
• The median verdict in discrimination cases heard by state court juries between 2001 and 2007 was $250,000, significantly higher than federal court verdicts (median of $175,000).
• Although recent reports suggest litigation claims are decreasing, given the number of recent layoffs and terminations and the struggling economy, we expect there to be more cases filed during the next year.
• Among settlements reported to the Jury Verdict Reporter, 23 percent resulted in payments of $100,000 to $250,000; about 18 percent were over $250,000. These award and settlement amounts are exclusive of legal fees—both claimants and defense fees. Cumulative legal fees sometimes exceed the cost of liability.

It is noteworthy that these awards and settlements do not include the fastest growing and costliest kind of claim—unpaid wage and overtime claims—which typically are prosecuted as collective or class actions. When discharged workers seek post-separation legal advice, they are likely to be asked by counsel about possible entitlement to overtime pay. Consequently, Fair Labor Standards Act (FLSA) of 1938 and state wage claims also are likely to increase.

To read the entire article, click here.

by Paul J. Siegel, Esq. and Ana C. Shields, Esq., Jackson Lewis LLP

For more information about employment practices liability and commercial  insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.

Continue reading »]]> Construction contracts require additional insured status that will respond to completed operations claims. Contractors faced with such obligations often attempt to have additional insured endorsements drafted with older language in the belief that this provides the required coverage. This article discusses a recent court decision that should provide reassurance that contractors who do so are complying with the insurance requirements of their contracts.

It has long been a standard practice in construction projects for parties who are additional insureds under other parties’ liability policies to require that the additional insured status extend to completed operations. A project owner, for example, faces loss exposures both on account of its contractors’ operations in the course of construction (damage to adjacent premises, for example, or injury to a visitor at the job site); and due to claims arising out of the completed project (a dangerous condition in a finished building).

In 1993 Insurance Services Office, Inc. (ISO), revised several of its standard additional insured endorsements, including the endorsement most commonly used in connection with construction projects (endorsement CG 20 10), specifically to rule out the additional insured’s protection against completed operations claims. Coverage under the revised endorsements applies only to liability arising out of the named insured contractor’s or subcontractor’s “ongoing operations” for the additional insured. In explaining its revision of the standard forms, ISO commented that it was never the intention of the insurance industry to provide additional insureds with completed operations coverage.

Encouraged by the 1993 change in standard additional insured language, or by ISO’s explanatory comment about the insurance industry’s attitude toward completed operations coverage for additional insureds—or quite possibly by both—a number of insurers began reexamining their positions with respect to the coverage that was available under pre-1993 versions of endorsement CG 20 10. If there was never any intent to give additional insureds completed operations coverage (the insurers’ reasoning went), then perhaps there is nothing specific in the 1986 or 1988 editions of the additional insured endorsements that would afford such coverage either. The language of those earlier editions, which were always widely assumed to provide completed operations coverage, reads as follows.

WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of “your work” for that insured by or for you.

The difference between this language and that of the 1993 “no-completed-operations” revised version is in the use of the phrase “your work” in the older version and “your ongoing operations” in the newer. “Your ongoing operations” clearly does not include completed operations. But does “your work”?

To read the full article, click here.

by Jeff Woodward
IRMI

For more information about additional insured endorsements and commercial  insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.

Continue reading »]]> (NAPS)—Finding a good deal on commercial auto insurance is about more than finding the lowest rate—it’s about finding the best all-around coverage to suit your company’s needs. Understanding what coverages and service options are available is the first step toward making better, more informed decisions so that you and your business are properly protected.

Here are some tips from the experts at Progressive to help you find the right coverage, service and price:

Know the company you’re dealing with—and its reputation for handling claims. Under-stand that you may pay more for “cheaper” coverage in the long run if the company lacks experience handling commercial auto claims. In business, vehicles need to be on the road—or you lose money. Insurance companies that don’t specialize in commercial auto coverage often don’t have their own claims representatives handling the process, so it may take longer to get vehicles back in service.

Look for discounts. Before initiating a quote for a policy, gather your company’s loss and financial records. This information could help you save a lot of money. You may qualify for discounts if you’ve carried increased liability limits in the past, if your employee base consists of experienced drivers or if your company’s credit rating is good.

Don’t let your coverage lapse. Proof of prior insurance is important, so never let your insurance policy lapse. If you do, you will most certainly pay more for your next policy.

Ask for referrals. Find out where colleagues in your business have found the best coverage and the best service. They may be able to refer you to an agent or com-any that really understands your business.

Check driving records before hiring. If they’ll be driving a company vehicle, be sure to screen the Motor Vehicle Report (MVR) for every potential hire.

Update the value of your equipment. If you’ve added, upgraded or phased out equipment, you’ll want your policy to reflect the true value of your fleet. This ensures you have adequate coverage where you need it and that you’re not paying for cover-age you no longer need.

Check the options for managing your policy. See if you can handle routine tasks online and over the phone instead of having to visit an agency or mail in forms. It saves time—and in business, time is money.

For more information about commercial auto insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.

Continue reading »]]> (NAPS)—If, like many Americans, your family car is also used for purposes that could be considered commercial use, you may want to steer yourself into a chair and look over your insurance policy.

You’ll need to consider buying a commercial policy or making sure that your existing personal auto policy covers the vehicle for business use. Whether or not you need a commercial policy depends on how you use your vehicle and what company you have it insured with. Every company has different guidelines and may surcharge for business-use coverage on a personal auto policy.

If you’re not sure whether business use is covered on your personal policy, it’s important to call your insurance company or agent. The Progressive Group of Insurance Companies has put together these four questions you may want to ask:

• How do companies determine commercial use? One definition could include “engaging in transporting goods for compensation or a fee,” which includes pizza or newspaper delivery, catering, door-to-door consulting services, landscaping or snowplowing services, logging business, day care/church van services or farm-to-market delivery. People who do these kinds of work should consider purchasing a commercial vehicle policy.
• Do you need more liability coverage than a personal auto policy provides? Generally, a commercial auto policy offers higher limits of liability, but less or no coverage in areas that are typically not associated with commercial auto risks.
• Do you need special coverage for situations encountered while conducting business? Commercial auto policies usually offer these coverages, and they’re normally not available with personal auto policies. These include hired and nonowned auto coverage and coverage for towing a trailer for business use.
• Do you need to list any employees as drivers? Commercial auto policies allow you to list anyone that you employ. You don’t have that option with a personal auto policy. In general, you’ll need commercial auto coverage if the vehicle you use is owned by a corporate partnership or driven by employees, or if it’s used to haul tools or equipment weighing more than 500 pounds, make deliveries or heavy enough to require state or federal filings.

For more information about commercial auto insurance, call Brown & Brown Insurance of Nevada at 702-597-5110.