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Why you need Long Term Disability Care coverage?
"I’m dead." At least, that is what you were thinking as you watched the blue (or was it red?) car come through the red light (that, you are sure of), almost in slow motion, and T-Bone you at 70 miles per hour. Turns out that you were wrong, you are going to make it. But with a spine broken in three places, you are never going to walk again. Will you be able to return to your job as a construction superintendent? Most construction job sites aren’t exactly wheel chair friendly. One thing is certain, with one kid in college and two more in high school, you are going to have to figure out a way to make a living.
You’ve got an open and shut case against the drunk that hit you, but your lawyer is explaining the meaning of “judgment-proof defendant” as we speak.
What about your $500,000 term life insurance policy? Well, it would have paid if the drunk had killed you, but “permanently disabled” is not an excuse your policy allows for non-payment of premium.
This admittedly melodramatic fact pattern is pretty darn scary. But the fact of the matter is that while we do a pretty good job insuring ourselves and our families against the Grim Reaper, disability remains a huge uninsured risk for most people.
Did you know that 1 out of 3 workers between ages 35 and 65 will experience an accident or illness that keeps them out of work for three months or longer?
Did you know that 1 out of 7 workers will be disabled for 5 years or more before age 65?
Did you know that nearly half of all mortgage foreclosures are caused by disability?
Did you know that Social Security requires that your disability last (or be expected to last) 12 months in order to collect?
Did you know that only 30% of Social Security disability applications are approved?
The right long-term disability (LTD) policy can manage this risk. A policy that defines disability as “your own occupation” can provide income benefits to support you and your family through an extended period of disability. In addition, many companies are beginning to make group LTD plans available to their employees as an additional benefit.
Regardless of whether you are interested in a single LTD policy to ensure income continuation for your family or whether you want to set up a LTD group policy for your employees, there is no standard LTD form. You need an experienced agent reviewing the policy language and details. That is where AIS comes in. Call us today!
Hunting with Guns and ATV: Risk? What Risk?
Been on Interstate-10 much lately? Not if you can help it, right? We kind of feel the same way, but the good huntin’ is out West, so sometimes you just cannot avoid it. Next time you are sitting in I-10 traffic, count how many trucks or SUVs you see hauling their ATVs and camo gear to their hunting leases. You will get a big number. Of course, every time you see one of those rigs you are thinking, “I wonder if they have taken some simple and cost effective steps to ensure that their liability exposure is covered while hunting.”
OK, OK, you probably are not thinking that, but WE ARE. That may sound a little weird, but we get paid to think like that. There are a few steps you can take that are cheap and can be handled with one telephone call that will make sure that warm blanket called “liability insurance” covers your next hunting trip.
Make sure the liability coverage you pay for under your Homeowner’s policy covers you on your hunting lease.
It is pretty clear (at least as clear as an insurance policy can get) that the liability coverage included in your homeowner’s policy will cover most accidents that may take place while you are hunting (assuming they do not involve an ATV). An accidental shooting on a hunting lease will be covered in 99% of all cases.
HOWEVER, if there is bodily injury or property damage “arising out of a premises,” for example, some hidden condition on the property that causes an injury to a guest, such an injury may be excluded IF the lease is not listed as an “insured location.” To eliminate any gray area or any question about whether your homeowner’s policy will speak to injuries that occur on your lease, the lease should be added to your policy as an “insured location.” The small expense of adding the location is more than outweighed by the peace of mind you will receive.
Obtain specific coverage for your ATV to insure coverage.
Call us crazy, but the simultaneous use of guns and ATVs might be a little dangerous. But, ATVs are fun, and using one while hunting can make the experience much more enjoyable. Just make sure you have liability coverage when you are using that ATV.
Your homeowner’s policy will provide liability coverage while you are using your ATV, but only if you are doing so on the “residence premises.” To be considered a “residence premises,” your lease will have to be listed as an “insured location” in your homeowner’s policy. Of course, you already did that because you took the step listed above.
Are you really only going to use that ATV at your lease? What if you get invited to that exclusive hunting club? What if your brother-in-law wants to take you to his lease?
To end any question about liability coverage for that ATV (and to get coverage for damage to the ATV), you need specific coverage for the ATV. This can be accomplished by purchasing a separate ATV policy that covers liability and physical damage. Surprisingly, the expense is not that great. It is down right cheap when you think of the risks you are covering with your ATV.
These are two of the essential steps you should take before heading out on your next hunting trip. Call us and we can help you make it a safe one.
Do I really need to buy the Loss Damage Waiver on my rent car?
“Would you like to buy Loss Damage Waiver for an additional $17.99 per day?” asks the smiling rental clerk with the gold jacket and black-yellow striped tie. As your mouth forms the word “No,” several thoughts strike you simultaneously:
Thought #1: How gullible does this guy think I am?
Thought #2: Who buys this stuff?
Thought #3: This is what I pay my insurance premium for, right? Right?
The next time you are asked that question, here are some more things to think about:
Your typical personal auto policy will provide liability coverage for you in a rental car, but your liability to the rental car company for damage to the rental car will normally be limited to your liability for physical damage limits. Are those high enough to cover the cost of the vehicle you are renting as well as a claim for lost use?
If you are renting any vehicle larger than a truck (say, a U-haul) your policy will probably exclude it.
If you are relying on a business auto policy to provide coverage, you may be out of luck, or, at best, come up short. The vehicle must be rented in the company name or the name of an individual specifically insured by the policy. In addition, the business auto policy must include coverage for “Damage to Rented Vehicles.” This is not automatic.
Even if all of the items in #3 are in place, the business auto policy will still not cover loss of use to the rented vehicle.
Loss Damage Waiver provides full coverage for physical damage to the rental car and its loss of use regardless of what your policy may or may not cover.
Have you ever been in a “hurry” when you were returning your rental car? When you return a damaged car with the Loss Damage Waiver box checked in your rental agreement, all you do is hand over the keys and walk away. Returning a damaged car without that box checked is more complicated.
The fact of the matter is that buying Loss Damage Waiver when you rent a car is a pretty smart move. Does the rental car company make a killing on it? Yes. Does it provide coverage and peace of mind worth the cost? Yes.
It eliminates any question about damage to your rental vehicle and who will pay for it. It eliminates the hassle of trying to return a damaged vehicle and catch your flight. It can save a vacation or keep a quick business trip from turning into a very long nightmare.
Got Defects ?
As a member of the HOA board for “El Dorado del Abrogados,” the condominium project in which you live, you were puzzled by the attorney’s request for a meeting with the HOA Board. That puzzlement turned to stark terror after the attorney’s presentation on construction defects.
The attorney noted that condominium projects across the country are plagued by defects. In fact, the attorney said even though “El Dorado” was only five years old, it was likely that it was also riddled with defects. What really scared you about the presentation was the fact that so many HOA boards had been sued for failing to detect and take action before the statute of repose lapsed.
The attorney indicated that if the Board did not take action to protect itself, it would be running the risk that some other greedy attorney (but certainly not the attorney speaking to the Board) somewhere down the line would come along and sue them for failing to take action.
So, the Board unanimously approved the inspection by the outfit recommended by the attorney. Incredibly, the attorney was correct! The attorney’s inspector found that the project was riddled with hidden defects. Yesterday, you filed suit against the general contractor and 37 subcontractors who worked on the “El Dorado” during construction seeking 5x the value of the “El Dorado” project as damages.
Thank goodness you agreed to listen to that attorney!
Welcome to one of the chief causes of the construction defect crisis gripping California, Nevada, Arizona, and slowly but surely trickling over to Texas. This scenario has been played out thousands of times and has led to a 90% reduction in condominium construction in California. It is the reason the purported “soft market” for general liability (“GL”) insurance seems to be materializing for everyone but construction contractors. It is also the chief reason why most insurance company underwriters hide under their desks when they hear the word “residential,” and those who do not run from the risk charge premiums that approach policy limits.
If you are a contractor that does nothing but residential work and you still have affordable GL insurance that covers residential projects, you must be doing something right. But, those contractors are sort of like Bigfoot. You hear a lot about them, but few have actually seen them.
The contractors with the most to lose are the ones that currently have relatively affordable GL coverage with no residential or completed operations exclusions. Right now, these are the guys tempted to take the forbidden fruit that is the negotiated bid on the latest and greatest luxury condominium on Galveston Island or in downtown Houston.
Beware, partaking of that pleasing fruit and insuring it under your regular general liability program may have dire consequences in the coming policy years regardless of whether it results in a defect claim.
Why? Depending on your insurance carrier’s appetite for residential exposures, you may find yourself with a residential exclusion at next year’s renewal. If your carrier was kind enough to offer residential coverage odds are that they were determined to collect a pound of flesh for it. Other carriers will likely have the same reaction. Moreover, your coverage for completed operations, if you still have it, also will be at stake. Remember, in the example given above, the defect claim came five years after the job was complete. You could have coverage for residential and completed operations at the time you did the job. Who knows whether you will have it when the defect is likely to come in five years down the road?
What is the solution? Well, there is no single silver bullet that will kill this problem. Over the course of the next few columns, we will discuss several of the important things a contractor can do to reduce the risk that he will face an uninsured defect exposure. The first thing to do is to get the residential exposure out of your regular insurance program with a general liability-only “wrap-up” policy or contractor controlled insurance program (“CCIP”). Let’s be clear. The wrap is not going to save you or the owner money. In fact, it is going to be expensive. But, right now, as of June 2005, the coverage being offered in unbeatable!
You can purchase a GL-only wrap-up policy that will provide ten years of completed operations coverage (i.e., to the statute of limitations). There are few places you can go to get that type of coverage. You have no idea what the conditions and exclusions on your regular insurance program will be even three years from now. A GL-only wrap-up can give you peace of mind for the length of the statute of limitations. Moreover, it will ensure that there is some amount of insurance available regardless of the origin of the defect. The wrap also helps to eliminate the GC’s uncertainty that their subs will continue to have coverage for residential projects and completed operations.
But, this is just the starting point. We will talk more about the additional actions contractors should take next time.
Got Defects? part II
Congratulations! You have just been selected as the general contractor for the newest luxury condominium project in town – El Dorado del Abrogados! Unfortunately, you missed this column in last month’s Houston Construction News so you forgot to factor in the cost of a GL-only “wrap-up” that will provide ten years of completed operations coverage for you and all the subcontractors working on the job. Maybe you will be able to convince the owner to pay for the enhanced coverage . . . fat chance.
If you are not able to purchase the wrap-up (and they are expensive) you can still take the additional steps even a contractor with a wrap-up should take to help insulate your company from the wave of construction defect lawsuits plaguing residential contractors. What are those additional steps? Answer: anything you can do to put obstacles in the way of a future attorney who will try to finance his new 2011 Mercedes with your 2011 gross revenue.
The first and best obstacle is to build it the right way. In avoiding defect lawsuits, there is no substitute for building it the right way the first time. Defect claims come in all shapes and sizes, but water intrusion is the most popular ticket to the courthouse. As a contractor, you know a heck of a lot more about building things right than your insurance agent does. You probably know more about building things right than the owner and his architect.
So, if you know it will not work, do not build it that way! That is easy to say, of course. But consider this: seven years later when the lawsuit comes, the developer will be long gone and the architect will still have the same inadequate limits. You, the professional general contractor with the strong reputation and top-notch insurance program, will be the primary target for any defect lawsuit.
In addition to building it right, you should consider how you are going to prove you built it right at a later date. Your ability to document a job well done may be the key to warding off a future defect lawsuit or convincing an arbitrator to render judgment in your favor. There are a few well-respected quality control consultants willing to play this role. Indeed, many of the insurance carriers willing to write those expensive GL-wraps we mentioned last month require the contractor to hire these outfits.
These quality-control consultants are a presence on the jobsite pointing out potential problems and then making sure they are fixed or remedied. Through this process, a record of a job built right is made and, more importantly, preserved. If and when the frivolous defect claim comes, you have a credible third-party expert with the key documentation to back up his opinions. It may not be a silver bullet, but it sure is close!
Whether you purchased the wrap-up insurance or not, your ability to ensure quality construction and prove it will be critical to defending and perhaps avoiding the future defect suit. Your goal should be to build a condominium that you would be willing to construct without insurance (and this is the insurance agent talking)! If you failed to purchase a “ten year” wrap-up, chances are you just might be doing that already. But, quality construction is only the first step, albeit the most important one. We will discuss the other steps a contractor can take to reduce the risk of defect claims next month.
Got Defects?, part III
If the movies coming out of Hollywood these days are any indication, the fact that this column is the third in a series is not a good sign. Anyone remember Superman III? The Godfather III? Jaws 3-D? I rest my case. But, that rule only applies to movies and boxing match-ups. Newspaper columns about insurance and their sequels are always new and exciting!
You may recall when last we met, we were discussing the quandary of the condominium defect crisis. Our case study was the condominium project known as El Dorado del Abrogados (that means “The Attorney’s Gold” for the monolingual). We discussed (in the classic Got Defects?, part I) the problems that a GL-only “wrap-up” could help solve and the ten years of completed operations coverage available through such wraps for a significant premium. We also discussed (in the riveting Got Defects?, part II) the important role of ensuring quality construction and having the ability to proveit was built the right way through third-party certification. These are both important points for contractors wishing to take on residential condominium work and preserving their current insurance coverage and pricing.
The subject of today’s column is the third step a contractor can take to insulate against defect suits – contractual limits on liability. This is the most difficult aspect to nail down because there is really not one way to do it. We recommend a shotgun approach that employs several different means to reduce the likelihood that the condo-owner will go lawyer shopping and increase the chances he will call you to solve the problem before it becomes a lawsuit.
The contract documents, including the Condo Declarations, Purchase Agreements, By-laws, and HOA Articles of Incorporation, offer several ways to incorporate dispute resolution procedures, warranty programs, and loser-pay provisions into the contractual relationship between contractor and homeowner. Moreover, though Texas’s HB 730 defect dispute resolution program does not apply to condominiums, there is no reason a contractor cannot use HB 730 as a template to set up a private defect dispute resolution system in these same contracts. All of these measures can resolve legitimate problems and complaints and avoid wasteful litigation.
This is cutting edge stuff in Texas and elsewhere. We have not seen the “total” solution yet, and we have yet to see a body of law develop that clearly defines how it can be done in a “bullet-proof” Texas Supreme Court-certified way. But, using these defenses in concert with certifiable quality construction and wrap-up insurance present a formidable barrier of protection between you, the general contractor, and the construction defect lawsuit. It may not make your insurance coverage for a condo any cheaper, but it just might make you the only contractor in town with the ability (i.e., the insurance coverage) to do the job. |
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