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ODOT CONTRACTS - INSURANCE AND BONDING BUSINESS DECISIONS

ODOT CONTRACTS - INSURANCE AND BONDING BUSINESS DECISIONS . Collaborate, Simplify and Clarify. How Can We Work Together?. To get the best project protection, as respects the insurance and surety market, that is available, affordable, and applicable.

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ODOT CONTRACTS - INSURANCE AND BONDING BUSINESS DECISIONS

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  1. ODOT CONTRACTS - INSURANCE AND BONDING BUSINESS DECISIONS Collaborate, Simplify and Clarify

  2. How Can We Work Together? • To get the best project protection, as respects the insurance and surety market, that is available, affordable, and applicable. • To eliminate unnecessary insurance costs for everyone. • To reduce or eliminate insurance coverage requirements when risk is low. • To get those who are involved in ODOT work to have a common understanding about insurance and surety issues relevant to ODOT. • To collaborate, simplify and clarify!

  3. Alleviating Potential Misunderstandings • Is the insurance coverage ODOT’s contractors purchase what is needed to best protect all parties? • Address confusion in contract requirement and clarify expectation. • Modify contract language to better reflect insurance requirement. • Are general contractors purchasing “project general aggregate endorsements”, or “project specific coverage”? The cost difference is huge. • Appropriate Project General Aggregate endorsement is ISO “CG 2503 0397” or its equivalent. • How does the risk based scoring system work and impact the insurance requirements for ODOT projects?

  4. Risk Based Scoring for Project Insurance Requirement • The risk assessment tool asks questions related to the contractor’s activities on the project. • The questions are focused on areas of exposure that can likely be covered by insurance. • Each question is scored based on the importance of the exposure. • The Risk Score in each area of exposure determines the amount of insurance that will be required. • Of course, when the output doesn’t look right or questions arise, there is manual review of the project.

  5. Does Everyone Involved Understand What Insurance Covers? • What is considered a “tort” and what is considered a “contractual dispute”? • A tort is a civil wrong, other then a breach of contract, that includes negligent acts or omissions. • Negligence is failure to act with the legally required degree of care for others, resulting in harm to them. • General Liability covers unintentional torts resulting in bodily injury and/or property damage.

  6. Does Everyone Involved Understand What Insurance Covers?(continued) • General Liability policies contain Contractual Liability coverage. However, it is intended to address liability incurred by the insured through entering into a written or oral contract (the policy defines a contract). For there to be coverage there still must be unintentional negligence and bodily injury and/or property damage. An important term to remember is “in the absence of a contract.” • An Indemnity Agreement is an example of an insured contract.

  7. Does Everyone Involved Understand What Insurance Covers? • How does Products and Completed Operations coverage apply? • Where does insurance coverage end and a surety bond come into play? • Where does insurance coverage for general liability end and become a professional liability exposure? • When is pollution, professional and etc. insurance really needed? • When is insurance not the answer to the project exposures?

  8. The Difference Between Insurance and Surety • Insurance is a two party agreement (you and the insurer). • Surety is a three party agreement (you, the surety and the owner or obligee). • Insurance expects losses and pricing reflects that. • Sureties do not expect losses; pricing is the cost of extending their capital as credit to you. • In the event of an insurance loss, you aren’t expected to indemnify the insurance company and fully reimburse them for the loss. • In the event of a surety loss, you (or your entity) are obligated to indemnify the surety. • An insurance policy is a contract and specifically identifies what it covers and how it responds to those obligations. • A surety bond is not a contract; it follows a contract and guarantees performance/payment of the contractual obligations.

  9. Premises /Operations vs. Products/ Completed Operations As traditionally defined within the insurance industry: • Premises/Operations coverage covers you for bodily injury or property damage, to third parties, arising from your premises or ongoing operations (office, work site, maintenance yard, etc.) that you become legally obligated to pay.

  10. Premises /Operations vs. Products/ Completed Operations(continued) • Products/Completed Operations coverage covers you for bodily injury or property damage, to third parties, arising out of products or work, away from your premises, that are completed or put to their intended use, for which you become legally obligated to pay.

  11. CGL vs. Contractors Pollution Liability Coverage Today's General Liability policies typically exclude most pollution hazards (granting limited sudden and accidental job site coverage, hostile fire and pollutants' you bring to the site such as fuels and fluids for mobile equipment). These policies also exclude any clean-up costs.

  12. CGL vs. Contractors Pollution Liability Coverage(continued) Contractors Pollution Liability coverage is designed to address the legal liabilities and sometimes clean-up cost associated with pollution related incidents'. This form is much broader then the limited coverage in most GL policies and is designed to fill the void left by most common GL pollution exclusions. And in some cases they can be endorsed to include pollution exposures related to the use, loading and unloading and maintenance of auto’s.

  13. CGL vs. Professional Liability Typically general liability policies exclude professional liability exposures such as the preparation or approval of maps, drawings, surveys, construction management activities or the rendering (or failure to render) any professional service. If by chance your GL is endorsed to provide this coverage (CG 2280), it still only applies to bodily injury and property damage...not economic loss. (Means and Methods are usually assumed to be covered by a GL policy, CG 2279). In any case, bodily injury and property damage are what is covered.

  14. CGL vs. Professional Liability(continued) Contractors Professional Liability coverage is designed to address professional liabilities for design and/or management of construction projects and the legal liability you may become obligated to pay. This can include providing expertise in the form of recommendations to an owner or design professional, project coordination and scheduling and the rendering (or failure to render) professional advise. These policies are written to cover economic loss resulting from the incident and can be endorsed to also include bodily injury and property damage that arises from such an incident. This can be related to an A/E E&O coverage, but for contractors.

  15. In Closing Questions? ----------------- Who to contact: Ronda Hollis ODOT Procurement Risk Manager 503-986-2825

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