About the Builders Risk Plan underwritten by Zurich
For over 30 years, the Zurich Builders Risk insurance plan has been the product of choice for agents and residential and commercial builders. Previously only offered to agents appointed with Zurich's small business group, the same quality and comprehensive policy is now offered to any licensed property and casualty independent agent in the United States on a brokerage basis. Registered agents can access buildersrisk.com anytime, anywhere to rate, quote and issue the best builders risk insurance plan in the business.
The Zurich Builders Risk insurance plan is the industry leader in providing course of construction insurance solutions. We offer broad, flexible coverage options specifically designed to meet the unique builders risk insurance needs of even the largest residential or commercial construction project. Our competitive coverage includes an extremely broad policy, including:
Protection for materials in-transit and at temporary locations
Coverage for materials that are installed or uninstalled
Coverage for losses due to ordinance or laws
Zurich Builders Risk Basic Eligibility
The Builders Risk Coverage Form (40471) provides coverage for residential and commercial structures with values up to $10 million. We also offer a Large Commercial coverage form for higher valued structures, including high valued frame risks. Our builders risk insurance plan is flexible and trained underwriters are available to assist with coverage for even the most complex structures. All policies are subject to certain underwriting guidelines and restrictions.
Catastrophic limit is $5 million per policy.
Policy can be issued in the name of the homeowner/mortgagee if the builder qualifies.
About Builders Risk Product
With broad coverages and flexible policy options, the Builders Risk Plan is the nation's leading inland marine property insurance solution for construction professionals. The Builders Risk Plan has been designed to meet the specific needs of most residential and commercial contractors and can be customized for even the largest construction projects. The Builders Risk Plan is underwritten by the companies of Zurich North America. Zurich is a highly rated insurer. For the latest ratings information, click here.
Risks up to $10 million & All Residential - All residential structures regardless of value and commercial structures with total estimated completed values up to $10 million
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Risks over $10 million - Commercial structures with total estimated completed values greater than $10 million or for projects requiring optional coverages.
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Risks for Remodeling Projects - Coverage for remodeling, renovation and restructuring projects, including existing structure coverage
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Basic Eligibility
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The Builders Risk Coverage Form (40471) provides coverage for all residential projects and commercial structures with values up to $10 million, subject to certain underwriting guidelines and restrictions. The Builders Risk Plan is flexible -- Service Representatives and Underwriters are available to assist with coverage for structures that fall outside of these general guidelines. Call 866-279-8253 for assistance.
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Remodeling, renovation and restructuring coverage available. Click here for details and guidelines.
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Builders must have two years experience unless otherwise qualified. Three years experience may be required on larger commercial accounts.
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Catastrophic limit is up to $5 million per policy. Higher limits are available with underwriting approval.
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Policy can be issued in the name of the homeowner if the builder qualifies.
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Underwriting Guidelines Overview
Listed below are some of the underwriting guidelines. All guidelines are incorporated in the online policy issuance process.
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Structures with total estimated completed values greater than $1,500,000 located in protection classes 9 and 10 and all structures with values over $10 million require prior approval. Fax increased Limits Questionnaire or Commercial Builders Risk Application to 904-398-7982. Call 866-279-8253 for assistance.
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Construction cannot be more than 30% complete at time of the policy's effective date. Special coverage is available for structures that are more than 30% complete.
Call 866-279-8253 for assistance. |
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Consult the underwriting guidelines section on the remodelers page for details concerning remodeling and renovation risks, inclusing structural changes.
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Property located on barrier islands may be referred for coverage if wind and hail is placed in a wind pool. The states that provide wind and hail pools are Florida, Georgia, Mississippi, North Carolina and South Carolina.
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Coverage on property located within 1,000 feet of tidal water or on a barrier island cannot be written unless eligible for a wind pool.
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Coverage will be limited to the original start period and may also be renewed for up to two additional years. Rating and underwriting guidelines apply.
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Other Important Information
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The policy is issued by your agency and you have binding authority of up to five days, within underwriting guidelines.
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Policy is issued on a "one shot" or single structure basis. Rating and underwriting guidelines apply.
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$1,000 deductible is standard on all policies. In most states, there is a $350 minimum premium on all policies. Rating and underwriting guidelines apply.
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Coverage for remodelers, purchasers under contract, model homes, model home contents and trade in/unsold dwellings is available. Call 866-279-8253 for more information. Rating and underwriting guidelines apply.
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Business Income coverage, Wavier of Coinsurance and manuscript endorsements are available for commercial structures. Call 866-279-8253 approval and rates.
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For assistance with special eligibility and coverage, underwriting, rates and policy processing, consult state rate pages, found on the "rates" section of this web site, or call 866-279-8253.
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Stacking up
The Builders Risk Plan
www.buildersrisk.com
1
Our Builders Risk Plan offers world-class
coverages, flexibility and service to agents and
brokers and builders nationwide. For more than
30 years, the Builders Risk Plan has protected the
property interests of builders and mortgagees
on some of the most complex residential and
commercial construction projects.
While we’ve been a market leader with our
residential Builders Risk Plan, we also provide
competitive and more comprehensive programs
for projects involving remodeling jobs, including
those with structural changes, as well as for your
commercial construction projects of any size and
value. For superior commercial construction risks,
we can meet virtually all requested coverage
limits for builders risk.
In many states, agents and brokers have binding
authority for structures up to $3 million,* and
our Builders Risk team is available to assist you
with higher value structures. Recent policies
include a $32.6 million church, $24 million
school, $12.4 million condo renovation and a
$5 million auto showroom.
*Please consult the current state rate page
on our Website for binding authority and
underwriting guidelines.
The right choice for you
With our focus on ease of doing business, we
make it more cost effective and efficient for you
to do business with us:
• Capacity for products of any value
• Frame construction: values up to $50 million
($25 million amount subject) eligible with
underwriting approval
• Ability to cover remodeling projects, including
those with structure changes. Existing
structure coverage is also available.
• Ability to rate, quote, issue and manage many
Builders Risk policies over the Internet in just a
few minutes
• Dedicated Builders
Risk underwriting
professionals available
to serve you
• Innovative coverage
options designed with
the needs of residential and
commercial contractors in mind
• Broad market reach that increases your
customer pool and profit potential
• Policy and billing options that work for you
Value Added Services
• Dedicated construction risk engineers with
extensive industry expertise
• Claim service, dedicated to Builders Risk, that
gets your customers back in business
• Services, planning, consultation and
evaluations aimed at enabling our
customers to more effectively and
proactively manage risks
• Disaster Management Vendor System
– offering disaster recovery assistance from a
qualified vendor anywhere in the country at
Zurich’s negotiated rates
• Reward Program – helps protect construction
sites from criminal activities and aids in
maintaining low insurance premiums
The Builders Risk Plan is underwritten by Zurich,
one of the stronger, more reliable companies
in the insurance industry. Zurich has earned
an A/stable rating by A.M. Best, * a confirmation
of its financial strength.
*Ratings as of June 31, 2010
The information contained in this booklet
highlights the many features of our quality
Builders Risk Plan product. For more detailed
information or to issue a policy, log in to
www.buildersrisk.com, or call 866-279-8253,
to speak with a service representative.
A Quality Builders Risk Plan
Policy options designed
around builders’ needs
Single structure (“one shot”) details
• Available for new or remodeling of
residential single-family homes and
commercial structures.
• Ideal for builders who build or remodel.
• Policy can be written in the owner’s name if
the builder qualifies for coverage.
• Agent issues a separate policy for each
structure to be covered.
• One renewal policy can be issued at the
same rate. Unsold Dwelling coverage may be
purchased on a separate policy for projects
previously covered under a Zurich Builders
Risk policy for new construction.
• An annual rate will apply. In most states, a
minimum premium (currently $375) applies.
• Payment for the policy, less commission
earned, can be paid online at the time of
policy issuance or mailed to us and received
within seven days.
Remodeling
• Program eligibility categories: basic
remodeling, minor structural changes and
major structural/restructuring changes.
• Term policies available for six, nine and 12
month options.
• Remodeling project by itself or combined
with existing structure is considered a
remodeling policy.
• ACV existing structure valuation.
• Available on a one shot policy.
• Improvements or renovation must
represent at least 20 percent of the
existing structure value
• Structures older than 75 years
(non coastal) and 30 years (coastal)
require underwriting approval
• If 60 consecutive days pass with no work
done to the structure, coverage can be
denied or limited
• Coinsurance applies to the policy
Other policy options
Several options are available to enhance our
standard Builders Risk Plan policy. These
options may be written in addition to Builders
Risk coverage and most are not available on a
monoline basis.
Installation Floaters:
• Provides coverage for property of the insured
and property of others that are being installed
or awaiting installation
• Designed to protect the subcontractor and
service provider from the exposures faced
during installation
• Can be written on a one-time basis (one-shot)
• Covers the material or equipment in
the insureds care, custody or control,
and is designed to become part of
the covered project
• Covers labor and profit
• Coverage extended while in transit
• Coverage for temporary storage locations
• Can be written for term of the project
Model home contents
• Designed for contents located in a
model home.
• Includes items in storage and in transit.
• Coverage is on a blanket basis when written
as a one shot policy.
Trade-in
• Coverage for vacant and unoccupied
completed dwelling property of the firstnamed
insured taken in trade or purchased to
remodel and sell.
Unsold dwelling
• Coverage for vacant and unoccupied
completed dwelling property of the firstnamed
insured previously covered under a
Zurich Builders Risk policy.
• Flood and earthquake coverages are available
on unsold dwellings if coverages were
previously included under the standard
Builders Risk policy.
• Available for up to two years
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Contractors Equipment
• Monoline product – Contractors Equipment
policies can be sold on a stand-alone basis
or in conjunction with the Builders Risk Plan.
• Coverage options for machinery, equipment
and tools of a mobile nature used in
contracting, installation, erection, repair or
moving operations or projects.
• Contractors Equipment policies can be written
for contractors involved in carpentry, drywall,
electrical, HVAC, excavating, landscaping,
paving as well as municipalities and other
businesses operating contractors equipment.
Covered equipment may be owned, rented,
leased or borrowed from others.
• Special coverage package automatically
includes basic limits for additional debris
removal expenses, expediting expenses, fire
department service charges, inventory and
appraisal, recharge of fire extinguishing
equipment, and reward for recovery of
stolen equipment.
Option to purchase
higher limits available.
• Valuation:Replacement Cost and Actual
Cash Valuation are provided on the same
policy. Equipment five years and under will
be covered at Replacement Cost. Equipment
older than five years (as of policy expiration
date) will be covered at Actual Cash Value.
• Scheduled and blanket coverage options.
• Scheduled values up to $10 million/up to
$500,000 per item eligible (agent’s authority
up to $1 million per schedule/$250,000
per item; higher values require
underwriting approval)
Purchaser under contract
• Coverage enables the home purchaser to
occupy a dwelling for up to 90 days pending
closing while builder collects rent.
• Dwelling must have been previously insured
under a Zurich’s Builders Risk policy.
• List purchaser as Additional Named Insured.
• Values over $250,000 must be submitted for
approval and rating.
Standard Additional Coverages
The following coverages are standard on our
Builders Risk policy at no additional charge.
Insureds have the option to purchase increased
limits, where appropriate and depending on the
project type. Please note: The option to increase
base limits is not available on remodeling and
reporting form policies.
• Back-up or overflow of sewer, drains or sumps
• Debris removal
• Fire department service charge
• Ordinance or law
• Pollution clean up and removal
• Reward
• Scaffolding, construction forms and
temporary structures
• Scaffolding re-erection
• Property at a temporary storage location
• Property in transit
• Valuable papers and records
• Permission to occupy with five or more
sold units
Optional Additional Coverages
The following coverages are optional and may
be added to the policy for an additional rate.
• “Better Green” endorsement
• Flood – state availability expanded
• Expediting expense
• Change order endorsement
• Earthquake – state availability expanded
• Testing of building systems
• Soft costs (includes advertising and promotion
expenses; interest on construction loan;
architect, engineer and consultant fees;
real estate and property tax assessments;
commissions or fees for renegotiation of
leases; insurance premiums; legal and
accounting fees; and fees for licenses
or permits)
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Better Green Endorsement
• Offers special coverage for “green” or LEED
construction projects
• Available for new construction and
remodeling projects
• Coverage extensions can include payment of
expenses associated with
– Air quality management
– Building commissioning services with a
qualified engineer as required by the LEED
Green Building Rating System
– Debris recycling
• Zurich has several LEED accredited engineers
on staff to help make the claims process
smother for customers
Contract Change Order
• Protects residential and small commercial
projects from being underinsured due to
unreported changes during construction.
• Endorsement may be added at policy
inception or mid-term in increments of 10,
20 or 30 percent of total insured value.
• Available on one-shot policies issued for new
construction or remodeling projects with
values up to $10 million
• Helps agents and brokers avoid errors
and omissions.
Eligibility
All residential and commercial structures are
eligible, subject to underwriting guidelines
and restrictions.
Most policies valued at less than $10 million
can be issued online. Policies valued at
$10 million and above will be individually
underwritten and issued manually.
• Builders /Remodelers/General Contractors
must have two years’ experience unless
otherwise qualified. Three years’ experience is
required when requesting coverage for some
commercial structures.
• Catastrophic limit is up to $10 million per
policy on the Builders Risk Coverage Form.
• Policy may be issued in the name of the
owner if the builder qualifies.
Underwriting guidelines
• Structures with total estimated completed
values greater than $1 million (greater than
$500,000 for Florida, California and Texas)
that are located in protection classes 9 and 10
and all structures with values over $3 million
require prior approval. Some counties may
have additional guidelines. Consult the state
rate pages on our Website for further details.
• Structures more than 30 percent complete at
the time of the policy’s effective date require
prior underwriter approval.
• Existing structures over 75 years old,
excluding historical, greater than $1.5 million
in value or undergoing structural changes
require prior underwriter approval.
• Coverage will be limited to the original
start period and may be renewed for one
year. (Extensions of Remodeler policies with
existing structure coverage are subject to
underwriter approval.)
• Property located on barrier islands or within
1,000 feet of tidal water may be referred for
coverage if wind and hail are placed in a wind
pool. The states that provide wind pools are
Florida, Georgia, Mississippi, North Carolina,
South Carolina and Texas.
• Any fire site with total limits at risk exceeding
$3 million requires prior underwriter approval
for all structures within that fire site. A fire
site includes all covered buildings under
construction that are located within 100 feet
of each other.
When coverage begins
Coverage begins once any materials are
delivered to the construction site. Materials are
defined as the supplies and resources that will be
part of the completed structure and include the
foundation and footings.
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When coverage ends
The following conditions will
terminate coverage:
• Once the insured’s interest in the
property ceases.
• Ninety days after occupancy of a singleoccupancy
structure, unless building is being
used as a model home or is being used as a
model home leaseback and the appropriate
policy is issued.
• If the building is leased or rented to others.
• For multiple family dwellings, when more
than 50 percent is leased to or rented to
others. For commercial structures, when
more than 75 percent is leased to or rented
to others.
• If the reported project is abandoned.
• If permanent property insurance is in force or
when the property is accepted by the owner
or buyer.
Rates
Guidelines
• Rates are per $100 of completed value. In
most states, all premiums are fully earned.
• Total estimated completed value includes
labor, overhead and cost of material. Profit
may be covered if included in the total
estimated completed value of the new
construction project. If sale price is known,
calculate the estimated completed value by
subtracting the cost of the land from the
sale price.
• A fourth year of coverage may be extended
under a new unsold dwelling policy.
• A $1,000 all other peril deductible is standard
on most policies. Other options are available
with appropriate discounts applicable.
Consult state rate pages.
• In most states, there is a fully-earned
minimum premium (currently $375) on “one
shot” policies, and an annual rate is used.
• Modular/prefabricated homes are written
on an annual rate only. Prior underwriter
approval is required.
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Ease of doing business
With the ability to issue and manage many
Builders Risk Plan policies over the Internet,
you can conduct business on your own terms:
anytime, anywhere.
One of the reasons our program is so popular
is that we provide an ease of doing business
unparalleled in the industry. In a few simple
steps and a matter of minutes, agents/brokers
can issue a Builders Risk policy on our Website,
www.buildersrisk.com.
To issue a Builders Risk Policy over the Internet,
log in to www.buildersrisk.com, and choose the
“Builders Risk Policy Issuance” icon from the left
column of the screen.
• For current, detailed, state-specific rate
pages, choose the “Rates” tab once you
have logged in.
• For assistance with issuing a policy over the
Internet or specific policy questions, please
call 866-279-8253, to speak with a service
representative.
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In a few simple steps and a matter of minutes, a
Builders Risk Plan policy is ready to be issued:
Review information and choose a payment
option: electronic funds transfer or payment
by mail.
Print all policy forms to complete the process.
Helpful Hint:
Agents and brokers should retain all documentation
or notes pertaining to policy issuance or endorsements
in the insured’s file held at the agency or brokerage.
This may help reduce E&O exposure and assist during
regulatory examinations.
Builders Risk Plan checklist
Zurich provides comprehensive course of construction coverage for new commercial and residential structures and remodeling
and installation projects of any size and value. With our industry knowledge, quality coverage and ongoing presence in the
construction field, Zurich is prepared to help you get your next construction project off the ground. Talk to your agent or broker
about how you can obtain the coverage highlighted in the below checklist for your next project.
Some coverages or extensions are specific to the type of project (i.e. residential or commercial; new construction or remodeling)
and underwriting guidelines and may be optionally available at an additional rate.
a
Yes aNo Do you have coverage for a completed structure that is not yet sold?
a
l yr How long can you keep an unsold home on your policy?
a
2 yrs (Coverage is available for up to 48 months. One shot polices can be renewed for one year and up to two
a
3 yrs years of unsold dwelling coverage may be purchased under a separate policy.)
a
4 yrs
a
Yes aNo Do you have coverage for the interests of your subcontractors in the event their materials are damaged at
or stolen from your job site?
a
Yes aNo Are you able to protect your profit by including it in the value of your new construction project?
a
Yes aNo Is there coverage for theft of building materials that are not yet installed at the job site?
a
Yes aNo If the buyer provides the builders risk insurance, are coverage limits appropriate to properly protect
your property?
a
Yes aNo Do you have property coverage for the buyer to occupy the home if it is completed prior to closing?
a
Yes aNo Can you secure property coverage for a trade-in home? unsold dwelling? model home? model home
contents? purchaser under contract?
a
Yes aNo Does your current policy provide Ordinance or Law coverage for new construction? (Zurich’s policy offers a
standard limit of $1 million at no additional charge and the option to purchase higher limits.)
a
Yes aNo Are you able to cover both an existing structure and improvements to that structure on a single policy?
Does your policy include standard default limits for the following coverages with the option to purchase
higher limits?
a
Yes aNo Property while in transit (Default limit of $25,000 or 5 percent of total completed value)
a
Yes aNo Property at temporary locations (Default limit of $10,000 or 2.5 percent of total completed value)
a
Yes aNo Construction forms and scaffolding ($10,000 default limit)
a
Yes aNo Valuable papers and records ($20,000 default limit)
a
Yes aNo Debris removal ($20,000 default limit)
a
Yes aNo Pollutant cleanup and removal ($15,000 default limit)
a
Yes aNo Fire department service charge ($10,000 default limit)
If you have Builders Risk coverage from Zurich, you can check “Yes” to all of these!
Does your policy offer these optional coverages based on the type of project?
Does your current policy offer you the following value-added services?
a
Builders Risk Loss Control Program aA-rated carrier
a
Builders Risk Reward Program aVolume pricing for large builders
a
Flexible billing options a24-hour claim reporting
a
Program stability aOnline claim monitoring tools
a
Builder’s safety newsletter
a
Yes aNo Ability to insure not only materials, labor and overhead, but also reasonable profit
a
Yes aNo Coverage for “green” or LEED new construction or remodeling projects
a
Yes aNo Ability to increase coverage at 10, 20 or 30 percent of the total insured value
a
Yes aNo Soft costs coverage (interest on construction loans, insurance premiums, advertising and promotional
expenses, architect, engineer and consultant fees, legal and accounting fees, fees for licenses and permits,
and real estate and property tax assessments)
a
Yes aNo Business income protection (pays actual loss of business income, including rental income)
a
Yes aNo Flood coverage
a
Yes aNo Earthquake coverage
a
Yes aNo Permission to occupy coverage (with five or more sold units)
a
Yes aNo Testing of Building Systems coverage
Zurich
This is intended as a general description of certain types of insurance and services available to qualified
customers through the companies of Zurich in North America. Your policy is the contract that specifically and
fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and
does not revise or amend the policy.
Insurance coverages underwritten by member companies of Zurich in North America, including Zurich
American Insurance Company. Certain coverages not available in all states. Some coverages may be written on
a nonadmitted basis through surplus lines brokers.
©2010 Zurich American Insurance Company
9
Notes
10
Notes
A1-17204-B (09/10) 10-2286
P.O. Box 10610, Jacksonville, Florida 32247-0610
866 279 8253 www.buildersrisk.com
Zurich Insurance Services, Inc. is an independent, third-party administrator managing policy processing
for certain builders risk policies issued by Zurich and its affiliated companies.
This is intended as a general description of certain types of insurance and services available to
qualified customers through the companies of Zurich in North America. Your policy is the contract that
specifically and fully describes your coverage. The description of the policy provisions gives a broad
overview of coverages and does not revise or amend the policy.
Insurance coverages underwritten by member companies of Zurich in North America, including Zurich
American Insurance Company. Certain coverages not available in all states. Some coverages may be
written on a nonadmitted basis through surplus lines brokers.
©2010 Zurich American Insurance Company
Job Site News
Winter 2012
Assessing the Percentage Complete
Why providing an accurate assessment of the construction project’s value matters
Features
Reduce Financial Liability in Contract Disputes...............................2
Risk and Productivity Management on the Go..................................3
Risk Consultation Services Available..............Back Cover
It is not uncommon for builders to pick up incomplete projects midway through construction. While many would agree this to be an entrepreneurial effort, there are challenges to insuring the already constructed and remaining stages of the project. Regardless, insurance coverage throughout each stage of construction is crucial. Providing your agent or broker with the most accurate assessment of the project’s completed value at the start of construction is just as important and should not be taken lightly given the financial consequences involved should a claim arise.
For those builders purchasing a policy from Zurich for a single project, your agent or broker will share details of the job with Zurich during the underwriting process to ensure the proper policy is selected for adequate protection. If the information is inaccurate and a claim should occur, your insurance coverage could be limited or even denied due to inaccurate information of the project’s true completed value at the time coverage was purchased.
Sample Case Study:
A construction project was reported to the insurance provider at 25 percent complete on the builders risk policy application. The insurer accepts the risk with the understanding that the project is one fourth complete and issues a builders risk insurance policy. Sixty days after policy issuance an arsonist sets the project on fire. The insurer’s claims department is called to analyze the damage. After investigation, it is revealed the project was much further along in the construction stage than originally reported at the time insurance was purchased. The project was actually 50 percent complete. Because the project was misrepresented at the time insurance was purchased, the insurer may deny the claim entirely on the part that was constructed prior to the policy or require the builder to pay the 25 percent difference in the project value. In this case, the difference in percentage complete could total a large sum of money considering the project had another 60 build days from the time it was insured to the time of the arson. If the project had been represented accurately at the time the insurance was purchased, the builders risk insurance would likely have protected the risk and the builder may not face financial consequences.
Zurich’s Builders Risk policy can provide insurance coverage for eligible construction projects that builders pick up midway through construction. As the below case study demonstrates, it is crucial as the builder to provide an accurate assessment of the construction project so that it is properly protected and you do not run the risk of taking on unintended financial responsibility for damage should a claim arise. One of the most common ways to determine the completion percentage of a project is to compare the current value with the estimated completed value of the project. Our single structure (or one-shot) policy allows for the coverage of project’s existing prior to our policy’s effective date up to 30 percent complete. If the project is more than 30 percent complete, additional underwriting and existing inventory coverage is required on the project. Your agent or broker will work on your behalf to ensure proper coverage is obtained.
When you are ready to purchase builders risk insurance for your next construction project, remember to discuss
(continued on page 2)
the details of the project with your insurance agent or broker. If a portion of the project was already started, share your assessment of the percentage completed to date so you can receive the best protection. You should also review your information on the policy application for accuracy before submitting to your agent, broker, or insurer.
Starting a new construction project is exciting and encouraging given the decline the industry has experienced over the last few years. Zurich understands your motivation to begin construction as quickly as possible, adhere to the project timeline, and generate revenue for your construction business. As you are focusing on the project and the stages involved in its completion, don’t forget to make purchasing insurance one of the first steps you take.
For Reporting Form Insureds…
Our Builders Risk Reporting Form gives insureds up to five days from the policy’s effective date to report any pre-existing inventory. Existing inventory not reported within the five day reporting period must be covered under a separate one-shot policy and may need existing inventory coverage.
Reduce Financial Liability in Contract Dispute Cases
Before you sign a contract for your next business transaction, take a closer look at the fine print. There may be a provision in the contract holding you liable for the attorneys’ fees of the other party should you enter litigation over breach of contract and lose. Known as the "prevailing party" (or loser pays), this provision is widespread in contract litigation, specifically in construction and real estate contracts, and one that you should be familiar with when conducting business under contracts.
Research shows that more than 50 percent of all contracts contain "loser pays" provisions.
Today, like most businesses, you likely operate under contract with vendors, customers, and even with employees. While you attempt to perform work as guaranteed in your contract, there may be instances when the other party does not meet their promise or may be under the belief that you did not meet the terms of your agreement. These disputes, whether major or minor, often lead to a lawsuit over a breach of contract. The court will use the contract signed between you and the other party to help determine a winner and loser should it go to trial.
The cost to hire an attorney to represent your case in court can mean paying a considerably large amount of money. If the contract under dispute includes a "prevailing party" provision or is a state-mandated statute, the uncertainty surrounding litigation is even greater. Courts are required to enforce the payment of opponent’s attorneys’ fees under a prevailing party (or loser pays) provision. You could be liable for your attorney fees plus the fees of your adversary should you lose the lawsuit. In some cases, fee awards can be greater than the actual damages. The financial consequences could be devastating for your business.
33% of plaintiffs and 66% of defendants lose their contract disputes at trial, according to the Bureau of Justice Statistics.
A solution to your financial risk
A rapidly emerging risk management tool for businesses in litigation is a new insurance policy that helps reduce the financial risk when involved in dispute over a breach of contract. Contract Litigation Insurance helps protect a litigant - plaintiff or defendant - from the risk of paying their opponents’ attorneys’ fees in the event of an adverse ruling at trial or summary of judgment. What makes this insurance coverage unique is that businesses or individuals are not required to purchase the policy until a lawsuit is filed or served. In other words, you can purchase insurance coverage when it’s actually needed — after litigation begins exposing you to the potential of having to pay your opponent’s attorneys’ fees.
Having this risk management tool as an option in contract litigation can give you the certainty needed to proceed with a lawsuit without the fear of dire financial consequences resulting from loser pays exposure. Since Contract Litigation Insurance removes a significant financial threat in litigation, the protection it offers allows you to make better decisions in a lawsuit.
A Contract Litigation Insurance policy can increase negotiating power, reduce your opponent’s leverage, and improve a potential settlement – creating a level playing field for all litigants.
The longer a lawsuit goes unresolved, the greater your liability becomes and the less cash you have on-hand to pay attorneys’ fees. When entering litigation consider the risk involved and then work with your attorney to use proven legal strategies, like Contract Litigation Insurance, to help mitigate the risk involved.
If you are within the first 12 months of litigation involving a breach of contract dispute, talk to your insurance agent or broker today. They may contact us at 800.713.1158, option 8, or visit www.usassure.com/contractlitigation for more information.
Assessing the Percentage Complete
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The Builders Risk Plan Risk Management Publication
Job Site News
I Winter 2012 I Page 2
Risk and Productivity Management on the Go
Using sophisticated vehicle telecommunications to advance your operation
Mobile GPS devices have changed dramatically over the years and are gaining momentum as legitimate business resources for managing a successful operation. Today’s tracking devices are sophisticated risk management and productivity tools used by some of the most successful businesses that rely on vehicles to move from one job to the next. These modern telecommunications devices, otherwise known as telematics, provide real-time driving data and allow for the monitoring of vehicles around the clock. Telematics devices offer vehicle and risk managers insight to observe employee driving performance, plan and view individual vehicle routing, receive scheduled maintenance alerts, minimize fuel and insurance costs, and increase operational safety and productivity. Many businesses incorporate intelligent software like telematics as part of their risk management practice and as a resource to increase productivity and cost savings.
A number of studies substantiate the reduction in accidents and speeding when telematics devices are used to monitor driver behavior. The studies also confirm that when drivers are being monitored, they improve their driving behavior. Using various driver development tools, offered through programs such as Zurich’s Fleet Intelligence, to help educate drivers to drive more safely can result in up to 20 percent* fewer collisions, reducing the direct costs of vehicle repair, vehicle replacement, and third party liability. The impact of the indirect costs associated with the collision such as lost customers and management time can also be reduced.
With the data easily accessible, insurance providers are expressing interest in the technology using it for underwriting and claims processing that can benefit the insured, including premium discounts. The voluntary use of these devices in a business operation shows insurance providers the business operation has a proactive approach to safety and risk management. The devices can also help reduce losses for the business and the insurer by locating stolen vehicles or alerting the business when vehicles are tampered with after hours.
Beyond the safety and risk management benefits, telematics providers report an improvement in operational efficiency and reduction in expenses when their technology is incorporated as an integral part of the business operation. The intelligent telematics software allows customers to view vehicle location in real time, spot trends in fuel usage, plan and organize the most efficient route and order of stops for a list of addresses, and monitor vehicle location. Better route management allows businesses to save on fuel by using the most efficient route to travel from one location to the next. Businesses could potentially lower operating cost by as much as 10 percent.** The increased fuel economy and reduced wear and tear on replaceable components such as tires and brakes should help reduce vehicle running costs.
The data collected by telematics devices is generally captured via a small box installed on the vehicles. This data is then routed to a web-based management system through a wireless network allowing the business operation manager access to the data system to monitor individual vehicle operations at any time of day.
Your insurance agent or broker may be able to assist you in selecting a qualified telematics provider. We offer direct access to FleetDaddy, a telematics provider with multiple service capabilities for vehicle operations and risk management. Your agent or broker may contact us at 800.713.1158, option 7, or visit www.usassure.com/telematics for more information.
*Based on subsequent review, analysis and conclusion of GreenRoad Technologies’ study on crash reduction by Zurich U.K. underwriters and pricing actuaries.
**Based on generic studies conducted by GreenRoad Technologies from data derived from the U.S. and European customers.
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Job Site News
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is published twice annually by Zurich Insurance Services, Inc. and US Assure for the participants in the Builders Risk Plan underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Zurich Insurance Services, Inc. is an independent, third-party administrator managing policy processing for certain builders risk policies issued by Zurich in North America and its affiliated companies.
The information in this publication is provided for informational purposes only. This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America. Your policy is the contract that specifically and fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy. All sample policies and procedures herein should serve as a guideline, which you can use to create your own policies and procedures. We trust that you will customize these samples to reflect your own operations and believe that these samples may serve as a helpful platform for this endeavor. Any and all information contained herein is not intended to constitute legal advice and accordingly, you should consult with your own attorneys when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication and sample policies and procedures, including any information, methods or safety suggestions contained herein. Moreover, Zurich reminds you that this cannot be assumed to contain every acceptable safety and compliance procedure or that additional procedures might not be appropriate under the circumstances. Risk engineering services are provided by Zurich Services Corporation.
© 2011 Zurich Services Corporation
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Risk Consultation Services for the Construction Industry
Zurich has a team of risk engineering consultants available to assist construction customers in risk and management services. These risk consultants work with you, and with claims professionals, to identify challenges in your specific operation and develop innovative programs and solutions designed to mitigate risk.
Zurich helps contractors protect their profits by offering a consultative approach to loss mitigation through value-added risk services.
Zurich understands the financial, operational, and competitive environment involved in managing and maintaining a safe and productive work site. Key areas of Zurich’s consultative focus include, but are not limited to:
•
Risk assessments including project safety, operational and corporate
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Orientation and safety development program
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Injury management, injury identification, and return to work/absence management programs
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Loss investigation assistance
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Research, analysis, and recommendations that include identifying means to improve contractor’s work method, subcontractor pre-qualification, and management
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Quality management program review including evaluation of existing quality management manual, inspection forms, and procedures; best practice consulting regarding use of third party vendors, material verification, and zero defect programs; and construction defect awareness training
For more information on Zurich’s risk consultative services for the construction industry, contact your insurance agent or broker or visit
www.zurichna.com, or call 800.982.5964
Very nice article.I think that more every contractor should be aware of the same.
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