1. When Crap Rolls Up Hill!
Presented by:
Michelle Lounsbery J.D., MBA, CRIS

2. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
INTRODUCTION
•Grew up on a custom harvesting crew
•http://www.youtube.com/watch?v=_lqR-KpNUx4
•Daughter of
•Sales Executive/Business Compliance for
Howalt+McDowell Insurance
2January 13, 2016

3. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
• “Except in the middle of a battlefield, nowhere must
men coordinate the movement of other men and
materials in the midst of such chaos and with such
limited certainty of present facts and future
occurrences as a huge construction project. …Even
the most painstaking planning frequently turns out to
be mere conjecture and accommodation to changes
that must necessarily be of the rough, quick and ad
hoc sort, analogous to ever-changing commands on
the battlefield.”
– Blake Construction vs. Coakley
• https://www.youtube.com/watch?v=Pk7yqlTMvp8
3January 13, 2016

4. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC 4January 13, 2016
OBJECTIVES:
•What is risk
•Ways you transfer risk
•Contracts
•Insurance
•Insurance certificates
•Managing insurance certificates
•Crappy Advice

5. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
What is risk?
• Risk is the foundation for this discussion and why we are here
today!
• A situation involving exposure to danger
• Questions to ask in regards to risk?
– Which party has the risk?
– Which party has the ability to manage the risk?
– How do we want to handle the risk?
5January 13, 2016

6. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Ways you transfer risk
• By Contract provisions
– Allocate, limit and exclude certain risks
– Indemnification, Limitation of liability, Wavier of Consequential damages,
waiver of jury trial
– Best way to transfer risk
• Insurance
– Assure the financial viability of a party, fund the recovery of damages
suffered by the negligence of a party, and insure the risk assumed by a
party in the indemnify provisions
• Both can and should be used
6January 13, 2016

7. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Contracts
1) Can completely eliminate risk
- How do you do this?
2) Can be verbal or written
•Best in Writing
•Email can serve as writing
3) Contract triggers insurance coverage
7

8. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Insurance
•For You
•For Your Subs
• What should you request?
• Can you request more than that is asked of
you?
•How do you know what your Subcontractors
have for insurance?
8January 13, 2016

9. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Insurance Certificates
• Contrary to what appears to be a common belief, a certificate
of insurance has no bearing on the insurance coverages being
represented in the certificate
• ACORD PROVIDES:
– A Certificate of Insurance is NOT an insurance policy, and
does not serve to provide, endorse, amend, extend or alter
in any way the terms of an insurance policy. Only an
endorsement, rider or amendment to the policy can effect
changes in coverage. Reference to a contract between the
client and a third party on a certificate does not provide
coverage.
9January 13, 2016

10. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Managing Insurance Certificates and
Requirements
How do you do this now?
What do you consider managing?
Do you ask to be an additional
insured?
10January 13, 2016

11. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
You may not have, what you think you
have!
11January 13, 2016

12. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Test Case
• American Risk Management Resources Network LLC
(IRMI July 2015)
• Conducted an Audit of Insurance Requirements vs.
Insurance certificates received and Actual Insurance
Policies
• Simple insurance requirements
• Material defect rate was 9 out of 10
• 90% of required insurance coverages were not met
by vendors/subcontractors/suppliers
12January 13, 2016

13. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC 13January 13, 2016
WHAT!!!!!!!!!

14. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
WHAT? Did you say 90% failed…YES!
• In the review, there were two phases:
• 1) First reviewed requirements to insurance certificates received.
­ Found all certificates to have compliant coverages
­ If the certificates came back with non­compliant coverages they would
not have been allowed to work for the organization.
­ Does your organization review certificates?
• 2) During the 2nd
phase of the audit, a comparison was done between the
insurance actually provided in the generally liability policies purchased by
the contractors against the insurance requirements in the contract. This
part revealed that more than 90 % of the contractors had insurance in
place that failed to meet the insurance requirements in the contract in a
material way!
14January 13, 2016

15. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
What Areas?
•Two major issues:
1)Additional Insureds
2)Environmental Insurance
Coverages
15January 13, 2016

16. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
It's a standard, run-of-the mill, you've seen one
you've seen them all recommendation—make
sure you get listed on someone else's
commercial general liability (CGL) policy as an
additional insured. Maybe more importantly, you
have just agreed to list someone on your CGL
policy. What did you give? What did you get?
16January 13, 2016

17. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
IRMI DEFINITION of Additional Insured
A person or organization not automatically included as an insured under an insurance
policy who is included or added as an insured under the policy at the request of the
named insured. A named insured's impetus for providing additional insured status to
others may be a desire to protect the other party because of a close relationship with
that party or to comply with a contractual agreement requiring the named insured to
do so (e.g., project owners, customers, or owners of property leased by the named
insured). In liability insurance, additional insured status is commonly used in
conjunction with an indemnity agreement between the named insured (the indemnitor)
and the party requesting additional insured status (the indemnitee). Having the
rights of an insured under its indemnitor's commercial general liability
(CGL) policy is viewed by most indemnitees as a way of backing up the
promise of indemnification. If the indemnity agreement proves
unenforceable for some reason, the indemnitee may still be able to
obtain coverage for its liability by making a claim directly as an
additional insured under the indemnitor's CGL policy.
See also Additional insured endorsement; Additional named insured; Contractual risk transfer;
Loss payee; Named insured.
17January 13, 2016

18. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Backing up the promise of indemnification
• Having the rights of an insured under its indemnitor's commercial general
liability (CGL) policy is viewed by most indemnitees as a way of backing up
the promise of indemnification.
• Backing up the promise of indemnification
• Insurance pays…..
18January 13, 2016

19. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
IF
• If, the Subcontractor has the correct additional insured
endorsements and you have a written contract (Contract
triggers the additional insured status)
• How many of you have written contracts with every
subcontractor on every job?
– Service only?
– Material only?
– Vendors?
– Suppliers?
– How many of you have verified the additional insured
endorsements for every subcontractor? What about just
auditing 10 or 20 every year?
19January 13, 2016

20. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
When Crap Rolls Up Hill
• Only in construction will the crap roll up hill….
• Meaning if you have Subcontractors that are not properly securing
insurance coverage, it will eventually become your issue….your crap.
20January 13, 2016

21. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
How to prevent Crap From Rolling Up Hill
• 1) Make sure that you have sufficient insurance requirements
for your subcontractor
• 2) Implement a way to track certificates of insurance and verify
actual insurance coverage by asking for endorsements
– Implement a risk management tool –
– Generate a spreadsheet
• 3) What happens if they do not meet the insurance
requirements?
– Put on your big kid pants and make a business decision?
– If they have lower limits, not proper endorsements are you
willing to take the crap that rolls up hill?
21January 13, 2016

22. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Crappy Advice #1
• 1) Make sure that you have sufficient insurance requirements for your
subcontractor
– You can ask for higher limits than what you are being required to under
a contract
– When would you do this?
– Ask for enough time to cover statute of limitations and statute of repose
22January 13, 2016

23. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
Crappy Advice #2
• Implement a way to track certificates of insurance and verify actual
insurance coverage by asking for endorsements
– Implement a risk management tool –
­ Howalt McDowell Risk Management Center
­ Tracks, sends letters, etc.
– Generate a spreadsheet and manually generate letters of non­
compliance
23January 13, 2016

24. ACQUISITION COMPANY NAME • MARSH & McLENNAN AGENCY, LLC
The Final Crap
• What happens if they do not meet the insurance
requirements?
– Put on your big kid pants and make a business decision?
– If they have lower limits, not proper endorsements are you
willing to take that shit?
24January 13, 2016

25. Legal/regional regulatory statement to be added here if required.
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as
such. Howalt+McDowell Insurance, a Marsh & McLennan Agency LLC Company shall have no obligation to update this
document and shall have no liability to you or any other party arising out of this document or any matter contained herein.
Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and
are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional
advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially
affected if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.