Are you concerned when asked “does your daily work ticket provide the right contractual risk transfer language?” The answer is often “yes” because to answer the question will probably cost you billable hours with an attorney. NBIS has successfully defended its clients in claim situations using contract language, even upper tier contracts & MSA’s. During this session, Mr. Smith and Mr. Silva will present basic protocols on why contractual risk transfer is so important and how to position your operation properly. You will learn how IRMI spreads the ‘Top Down Risk Transfer’ message to large construction companies and ways to defend your operation in the event of a claim. Lean on the team of experts from NBIS to ensure your daily work ticket leverages the most defensible terms available. Speakers: Bill Smith, EVP Claims & Risk Management, NBIS (NationsBuilders Insurance Services, Inc.) Tyrone Silva, Risk Manager, NBIS (NationsBuilders Insurance Services, Inc.)

1. Bottom Up Risk Transfer
Bill Smith
EVP Claims And Risk Management
Tyrone Silva
Risk Manager/Contract Management

2. What are we talking about ?

3. Let’s start with Contract Risk Transfer
• Contractual Risk Transfer. Contractual risk
transfer is a non-insurance contract/agreement
between two parties whereby one agrees to
indemnify and hold another party harmless for
specified actions, inactions, injuries or damages.
• transfer of risk. A risk management technique
whereby risk of loss is transferred to another
party through a contract (e.g., a hold harmless
clause) or to a professional risk bearer (i.e., an
insurance company).

4. WHO IS IRMI ?
• International Risk Management Institute
• IRMI offers you Secure Expertise because our
staff of research analysts have over 150 years
of combined experience and education in
insurance and risk management. IRMI's
research team is comprised of attorneys,
former underwriters, risk managers, agents
and brokers, professors and other industry
professionals.

5. What does IRMI Say?
• Contractual Risk Transfer
• Summary
• Any contracting party needs this IRMI best-seller within arm's reach.
• Contractual Risk Transfer is a one-of-a-kind resource to help you draft rock solid
risk transfer and insurance clauses for construction contracts, leases, purchase
orders, rental agreements, oil and gas drilling and production contracts, and many
other contractual agreements.
• It empowers contract drafters with model clauses using up-to-date insurance
terminology rather than the ambiguous and archaic language so often seen in
agreements copied from work done many years ago. Discussions and summaries
of state statutes affecting contractual indemnity help you ensure that hold
harmless clauses will be enforceable.
• Contractual Risk Transfer also provides detailed discussions and advice with
respect to using or requiring an additional insured endorsement, waiver of
subrogation, contractual liability coverage, cross-liability coverage provision,
mortgagee or loss payee clause, owners and contractors protective liability
insurance, and other types of insurance to cover contractually assumed risks.

6. What do they teach?
• Upper tier contractors seek to avoid the financial costs
that can arise out of bodily injury or property damage
to a third party caused by a lower tier (subcontractor)
for which they (the upper tier) could be held
vicariously liable. Further, when allowed by statute,
and sometimes even when not allowed, upper tier
contractors attempt to avoid the financial
consequences arising out of injury or damage for which
they and the lower tier contractor are jointly liable. In
extreme cases upper tier contractors may even
contractually endeavor to relieve themselves of
financial responsibility for liability arising from their
sole negligence

7. What is meant by Liability?
• Vicarious Liability
• Vicarious liability is created when one person or entity is or can be held
legally liable for the results of another person’s or entity’s actions. Such
indirect liability (also called imputed negligence) can arise out of a
relationship (parent/child, employer/employee, etc.), position or contract.
To be held vicariously liable, a person or entity must have the right, ability
or duty to control the actions of the directly liable party. Without the
opportunity or responsibility to control another’s actions, there can be no
vicarious liability.
• Owners and general contractors (the upper tier) hold a position with a
certain amount of control over and responsibility for the actions of lower
tier contractors. This control leaves them vulnerable to being held
vicariously liable for the actions of lower-level entities. Every state allows
vicarious liability to be transferred back to the at-fault lower tier
contractor (known as limited transfer).

8. What is meant by Liability?
• Joint Liability
• Joint liability, as the name suggests, is injury or
damage caused by or attributable to both the
upper tier and lower tier contractor. The term
does not consider the “percentage” of fault
assignable to each party, only that the actions of
both parties resulted in the injury or damage.
Approximately 19 states allow the upper tier
contractor to contractually transfer joint
negligence back to the jointly-liable lower tier
contractor (known as intermediate transfer).

9. What is meant by Liability?
• Sole Negligence
• Sole negligence and liability exists when only the
upper tier is found to be negligent and legally
liable for the injury or damage. In sole negligence
situations, there is no assignable negligence or
legal liability to the lower tier contractor. Only 10
states allow the contractual transfer of sole
negligence from the upper tier to the lower tier
(known as broad transfer). However, there are
strict guidelines for such transfer in the states
that allow this level.

10. What are they asking for ?
• Accomplishing Financial Risk Transfer
• Upper tier contractors have access to and utilize several
“tools” to accomplish the financial risk transfer they desire.
Insurance professionals see these attempts and requests
daily; so much so that it is likely the intricacies of each tool
are not carefully considered. The four most commonly
requested financial risk transfer “tools” are:
• 1st leg- Contractual risk transfer (indemnity agreements);
• 2nd leg- Additional insured status for the upper tier;
• 3rd leg- Waiver of subrogation endorsement requests; and
• “Primary and noncontributory” requirements related to
additional insured status.

11. Why am I Waiving ?

12. When I Waive what am I Waiving ?
• Contractual waiver of subrogation is the third
“leg” of the contractual risk transfer stool.
Construction contracts nearly always require the
lower tier to waive its right of recovery against
the upper tier contractor. An insurance carrier’s
subrogation rights flow from the right of the
harmed party to be made whole by the party
responsible for the injury or damage. If the right
of the lower tier contractor to recover from the
upper tier contractor has been contractually
waived, then the insurance carrier has no right to
recover from the upper tier contractor.

13. When I agree to Additional Insured?
• Additional Insured Status
• Beyond the contractual risk transfer provisions found in
construction contracts, the lower-tier subcontractor is
nearly always required to endorse the upper tier contractor
onto its CGL as an “additional insured.”
• Because the upper tier is an additional insured protected as
an additional insured by the named insured’s (lower tier
contractor’s) insurance coverage for any claim “arising out
of” by the named insured, the insurance carrier cannot
seek recovery from the upper tier. As an insured, the upper
tier’s policy will not be asked to contribute to the loss or
even respond in subrogation.

14. CG 20 10 10 01, 07 04, 04 13
• The 2007, “in whole or in part” wording protects
the additional insured against its vicarious liability
for the actions of the named insured, plus joint
liability when both the named insured and
additional insured are legally liable for the injury
or damage. However, the 2013 version of the
construction-related additional insured
endorsements limits the breadth of protection
extended to the additional insured to the level
allowed by the subject state’s anti-
indemnification statutes.

15. CG 20 10 04 13

16. We know it’s difficult to change a
contract or you lose the work ?
• Just know what you give away when you didn’t do
anything wrong
• Subrogation rights flow from the injured party’s right to
recover from the at-fault party. If the contract requires
the waiver of subrogation rights the insurance carrier
cannot subrogate against the upper tier anyway.
• By attaching the waiver of subrogation endorsement in
favor of the upper tier, the insurance carrier, for the
third time (because of additional insured status), is
blocked from seeking recovery from the upper tier
contractor for its actions in causing injury or damage.

17. What is Primary and Noncontributory
• “Primary and noncontributory” is an “inclusive” contractual
requirement that can be met only if the protection
extended to the upper tier contractor is provided on both a
primary basis and a noncontributory basis. Analyzed in the
context of a construction contract, the supposed goal of the
“primary and noncontributory” requirement is the
protection of the upper tier contractor’s financial resources
from the effects of the lower tier’s individual or joint
negligence in causing injury or damage to a third party.
• Theoretically, the “primary and noncontributory”
requirement applies to only the protection extended to the
upper tier as an additional insured

18. WHY did we just go over all that?
• You all are not subcontractors but are treated like you are,
therefore you have to sign contracts with all this legal binding
language.
• Question and challenge the wording…
• When you give it your best shot and you miss, it's not seen
as a failure. Instead, it's just another opportunity to step up
to the plate and do it even better next time.
• Educate them on the fact that you are not a sub leaving work
product behind. YOU ARE A SERVICE COMPANY and you leave
nothing behind and your only exposure is on-going operations
not completed operations

19. WHY did we just go over all that?
• With a Bottom Up Industry Collective Push collectively you all can
make a difference.
• They need cranes to build the project
• Work towards:
– Indemnity that is fair to all
– AI only when required and change the CG 20 10 to the most current
version 20 10 04 13
– Push back on Waivers
– Push back on Primary Non-contributory
Or go back to this

20. Bottom Up Approach
• With a Bottom Up Industry Collective Push the same protections
and principles can apply.
• If you are getting something signed for the work you perform:
GET THE RIGHT THING SIGNED!!!!
• DON’T GO THROUGH THE PAIN OF HAVING IT SIGNED AND HAVE
NO PROTECTIONS IN A CLAIM (explain Florida claim)
• You need the same T’s and C’s as they pushing south only you now
push them north.

21. Bottom Up Approach
• You need a partner that understands your
work environment and also understands the
claim process and the tools to effectively play
the game of CLAIM CHESS!
• Many lawyers that draft job tickets still miss
important clauses based on your business
• One of them is the B30 (explain)

22. What should be There?
• Indemnity per state statute (don’t lose it)
• AI to trigger a blanket if one exist with broad
20 10 (explain south to north)
• Operations of Equipment, Borrowed Servant,
B30 newest version
• Duration of Project not just day signed
• Authorized Signature attestation
• Signed before work commences

23. Where am I and My Company?
• This country is litigation driven (The new Lottery)
• You need a partner that understands your business and how to
protect it as well as you having the tools and knowledge
• Most Insurance companies hand off the claim to a TPA that doesn’t
have your best interest at heart and is there to settle fast and more
importantly, does not understand B30 and contracted risk transfer
or your business practices
• NBIS works hard for the Association and it’s members to provide
education and insurance coverage, claims handling with all the tools
you give us (bullets) and additional risk services such as Contract
management, Driver Training, Safety and Health training, Risk Kit,
Driver behavior monitoring with ELD support, Driver alert warnings
and a dash camera program
• Make sure you have the right partner to protect your business and
every now and then sh@# can flow uphill

24. In the USA we are not under this kind
of pressure to sign a contract ?
Why do we just sign away?

25. Most people in this industry will sing
anything …Don’t be like most people?

26. Bottom Up Risk Transfer
Bill Smith
EVP Claims And Risk Management
Tyrone Silva
Risk Manager/Contract Management
Questions ?
Thank You !