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John Scott Insurance Agency

Product Liability and Completed Operations Coverage

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I want to share a story with you today about the importance of Product Liability and Completed Operations Coverage.  The reason I am sharing in this way is so that you really can relate to it and understand.  You don’t need me to throw a whole bunch of large insurance terms into an article, you need to know how this could affect you from a real life type of scenario.

Beautiful Decks by Doug has been installing high-quality residential decks for the past 10 years. Doug is a sole proprietor with no employees and has done all the work himself. For the past decade, he has purchased through his insurance agent an occurrence-based ISO CGL policy with no unusual endorsements. The policy has been in force continuously for the past 10 years.

Doug’s CGL policy always included coverage for the products-completed operations hazard.

Doug is now getting older and since he is financially secure, he has decided that it is time to retire. He sends his policy back to his insurance agent for cancellation on July 1 and the policy is terminated on that date as Dave has requested.

The Incident…

Unfortunately, Maggie, one of Doug’s customers, is seriously injured when the deck she is standing on collapses on August 31. It is later found that in May, when Doug built the deck, he forgot to properly fasten it to the wall. The collapse is the direct result of his failure to fasten the deck to the wall. Maggie’s injuries are found to have been caused by the deck’s collapse.

Maggie moves forward with suing Doug for her injuries. Doug submits the complaint to his insurer. Doug has always purchased coverage for the products-completed operations hazard!

Nevertheless, the harsh reality is that Doug’s CGL insurer has no obligation to defend or respond in any way to the suit—Doug has no insurance for this claim.

CGL Coverage Trigger

The CGL insuring agreement promises to pay only if bodily or property damage occurs during the policy period. While Doug did purchase products-completed operations coverage as part of his CGL policy, the injury to Maggie occurred about 2 months after his policy was terminated. Products-completed operations coverage of the CGL is subject to and does not override this trigger requirement—even if the bodily injury or property damage does arise from the named insured’s product or completed operation.

Products-completed operations coverage does not extend the policy period—the policy must be in effect when the bodily injury or property damage occurs.

Important Considerations

Now that you understand the workings of products-completed operations coverage, it is important to consider several other situations in which a better understanding of exactly what is included in the “products-completed operations hazard” (which is a defined term in the CGL policy) is necessary.

Policy Limits

One of the six CGL limits is the products-completed operations aggregate limit. Knowing the types of claims that fall within and, therefore, reduce or exhaust this aggregate limit is critical.

Only Products-Completed Operations Coverage Is Provided

For liability policies that are written specifically for a construction project, such as a consolidated insurance program (CIP) or “wrap-up,” it is common to provide full CGL coverage for the period of the construction and then to provide products-completed operations only coverage for some period after construction is complete.

For example, in an owner controlled insurance plan (OCIP) the full CGL policy may be provided for a period of 24 months—the anticipated life of the construction.

The coverage provided for products and completed operations in the standard CGL policy seems to get short shrift. Too little attention is paid to the basics of how the coverage works within the context of the entire policy, including the requirement that any bodily injury or property damage, even if caused by an insured’s product or completed work, must take place during the policy period for coverage to apply.

It is only after this deceptively simple concept is properly understood can the more specific issues that surround the “products-completed operations hazard” be appreciated—such as how policy exclusions and other coverage endorsements affect the products-completed operations hazard.

If you have questions about your liability policies please don’t hesitate to reach out to one of our licensed agents at Contractors Insurance Agency.  We are happy to help explain everything clearly so you fully understand your coverage.

The “No Surprise” Premium Audit

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If you own a business, you are aware that one of the tasks that often comes with such ownership is an annual audit.

Most business policies are auditable, particularly those covering contracting operations. No premium audit should ever be a surprise. It’s an annual occurrence.

Be sure to advise Contractors Insurance of changes in exposure, payroll and receipts, and in your day-to-day operations. Addressing increases in exposure during the policy term allows you time to pay for the increase, rather than facing a surprisingly large audit premium and increase in policy renewal premium.

Are you pursuing new and larger contracts? Are you looking to travel farther, or advancing into new product or service areas to grow? Keeping our agency in the loop on such ventures is important.

There are three contracting classification issues that can be
a surprise when businesses are audited:

  1. Executive supervisors exercise control through foremen who oversee the actual work. Without this distance from actual field operations, the executive supervisor classification is not applicable. In this situation, the principal would most likely be considered a carpenter.
  2. Paper contractors, which have few or no employees and subcontract most or all operations, are rated appropriately with one of the carpentry classifications.
  3. Materials provided to insured subcontractors must be accounted for and provided when a business is being audited. The cost of these materials will be included in the appropriate insured subcontractor classification. Material costs are a part of the definition of an adequately insured subcontractor per ISO (Insurance Services Office), which provides insurance companies with statistical services.

Our licensed agents at Contractors Insurance are always happy to guide and assist you with any classification or policy questions.

 

Measuring Success in Workers Compensation

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The old adage says, “What gets measured, gets managed.” What does that mean for workers compensation? What can we measure to truly improve outcomes for everyone in the workers compensation system?

There is certainly no shortage of data, but what we do with it, how we measure it, and, most importantly, how we apply it are key components to improving the system for everyone.

The most important element of any program is treating injured workers well and getting them back to health and work as quickly as possible.

Three-point contact, adjuster caseloads, and the speed of communicating with the injured worker are all metrics to be extensively measured. But are these still relevant? Does success for these measurements lead to better outcomes, or should they evolve?

There is no definitive answer except that measurements are important if they ultimately lead to better outcomes.

Allowing metrics to evolve with advancing technology is important. The first communication with the injured worker is very different than just a short time ago. Some employers are now able to view employer video footage within hours of a claim being reported. Now, the first conversation with the injured worker can focus on them, not discovery.

The most important metrics to measure are those that focus on three core factors.

  • The speed with which the claim goes through the system
  • The quality of the medical care
  • Efforts around return to work

Keeping a balance on the metrics measured is key.

If you are making significant changes to your program, be sure to discuss these with the actuaries so they can adjust their modeling accordingly. Employers should meet with actuaries frequently to monitor trends that are impacting their program. It is important to show actuaries how all the metrics work together to see the whole story, rather than looking at any one metric in isolation.

Going forward, the industry will need to learn to trust the metrics more. It is time for stakeholders to rely on the technology, rather than what their guts are telling them should be right.

At the same time, it is crucial to make sure the customer is happy, regardless of what the measurements show. Measurements do not matter if the injured worker has a bad experience. There is no single measure that will guarantee success. The metrics can lead to positive outcomes when they are viewed as one factor in the overall injury management program. Organizations need to be willing to evolve and change with technology and the experiences of injured workers.

At the end of the day, it is how well we care for injured workers that is the most important thing.

If you have any questions about your workers compensation coverage please don’t hesitate to reach out to one of our licensed agents at Contractors Insurance Agency.

 

Let Safety Drive Business Success!

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Workplace safety is not just a list of rules. It’s a process. It takes commitment, effort, and is ultimately  something most businesses have opportunity to improve.

Keep the following in mind as you review your current processes to let safety drive your business success:

  • Keep it simple and take one step at a time.
  • Lead your business with safety, placing a focus on preventing injuries and losses.
  • If you do not react to an injury or loss, that is a missed opportunity for the future.
  • Workplace safety should be done because it is the right thing to do.

Here are seven best practices to focus on as you design your safety and health program, or enhance what is already in place as you evaluate your current process:

  1. Establish safety and health as a core value: Communicate to all workers your No. 1 goal is to keep your employees safe.
  2. Lead by example: Demonstrate safe behavior in everything you do and make it a priority in your daily interactions with workers.
  3. Implement a reporting system: Establish a system for workers to report all injuries, illnesses, near misses and safety concerns.
  4. Provide training: Train workers on the safe methods for performing their job, as well as how to identify and report unsafe conditions.
  5. Conduct inspections: Inspect the workplace on a regular basis – using a checklist to guide workers through the process – and assure that unsafe conditions and behavior are corrected.
  6. Address emergencies: Plan for identified emergency situations, including communicating the instructions to all workers, and periodically conduct a drill to test the plan.
  7. Make improvements: Take time to discuss safety and health issues with your workers. Seek input on workplace changes and implement hazard controls to improve overall safety.

Below is a link to some of OSHA’s helpful resources to improve your safety process: https://www.osha.gov/shpguidelines/download-recommendedpractices.html.

Benefits of Product Liability Insurance

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Your customers expect you to have safe and reliable products, and failing to meet these expectations can lead to huge financial losses. If one of your products harms a customer in any way, they can sue your business, leading to costly legal fees and settlements. These costs can easily reach six figures.

While you may do everything in your power to ensure your products are safe, mishaps can still occur without warning. That’s why, to protect against claims and ensure the longevity of your business, you need product liability insurance.

Product Liability Insurance includes:

Coverage for manufacturing or production flaws – One of the key features of product liability insurance is its coverage for manufacturing or production flaws that cause unsafe defects in the product.

Protection against design defects – Even after product testing and trial runs, potentially dangerous defects can still appear long after production. Product liability insurance can provide coverage for design errors that make goods unsafe for use by the public.

Response for packaging and warning issues – In the event that you fail to provide adequate defect warnings or instructions for using the product, your company can be sued. These claims arise when products are not properly labeled or have warning s that are not explanatory enough to reduce consumer risks while using the product Product liability insurance helps organization prepare for and litigate these types of claims.

Supplemental commercial general liability (CGL) coverage – Generally, there is limited product liability protection under a CGL policy, yet it may not be enough coverage to adequately protect your business.  Product liability policies work alongside CGL coverage, providing protection against losses caused by malfunctions or defects in your products.

Product liability is a complex exposure, and managing your risk can be a major undertaking – even if you have access to all the right resources.

To supplement your risk management strategies and address specific exposures, speak with one of our agents at Contractors Insurance Agency today.

 

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