NAVIGATOR

THE

Fall 2016

The Concussion Liability Crisis: How to Protect Your Clients in Tough TimesBy Lori Windolf Crispo, CPCUArea PresidentRPS Bollinger Sports & Leisure

The sports world is currently in turmoil over two words: concussion liability. The crisis has created a minefield for insurers, program managers and retailers who specialize in this niche. This shouldn’t be remarkable, as the insurance industry has weathered numerous crises before and survived. However, coupling the ambiguity of concussion diagnoses with the fact that this is an emerging claims trend igniting multi-million dollar class-action lawsuits, and sprinkle that with a full-blown media, legal and legislative firestorm, it is apparent that we have a problem.

Across the mainstream media we have seen the nearly $1 billion NFL class-action concussion settlement and subsequent

class-action suits in the amateur sports world – against the NCAA, youth soccer, state high school athletic associations, and others. At the local level, we are also seeing sizable judgments and settlements stemming from concussions against smaller sports organizations, schools, colleges, camps, sports facilities and health clubs, as well as religious and non-profit groups who run sports and recreation activities. Put this together with our litigious society and you have a perfect storm of severity and frequency, along with a standoff between organizations who won’t take the blame for their actions and those who shouldn’t have to do so.

Reports say that participation levels in some contact sports are dropping, allegedly because parents are fearful of concussions. The fear-mongering and sensationalism in the media doesn’t just affect parents, however; it also impacts insurers and their perception of the risk factors in youth sports today. The reaction of the insurers has been swift. Exclusions and coverage limitations have been implemented virtually across the board, while concussion protocols and risk

management are now being carefully underwritten. Thoughts of youth sports as “baseball, apple pie and Mom” have been replaced by the specter of lawsuits, jury trials and bankrupting judgments. Finding adequate coverage for your clients in this climate is no simple task.

What Are Insurers Afraid Of?The concussion crisis is not just about professional football.

Concussion liability impacts everything from church basketball leagues, gym classes in elementary schools, storefront martial arts studios, and beyond. Insurers today may be more afraid of the concussion risk among youth athletes than they are from NFL and NHL players. After all, professional athletes are getting paid handsomely to play at the highest levels, but no one anticipates a life-threatening injury when joining the Pee Wee League! Concerns among insurers include:

• Diagnostic Ambiguity: At this point, there is no “carbon-dating” to show when or if a concussion has occurred, and no way to know how that injury may manifest itself down the road.

• Potential for Severity: The most severe concussions can lead to permanent brain damage, paralysis and death, not to mention the possibility of developing chronic traumatic encephalopathy (CTE) in later years.

• Class Action Lawsuits: Carriers’ greatest fear is taking on class-action suits in a class of business (youth sports) where that risk was never contemplated in the rates. This is particularly worrisome when the “class” encompasses as many as 41 million youth athletes across the country.

• Latency: Today’s minor athletes may not present lawsuits for decades.

• Injunctive Relief: Some claims are not focused on compensation for a specific injury; they seek injunctive relief in an effort to change the rules of the game and subsidize education and baseline testing for all athletes.

• Medical Monitoring: Some class-action suits seek injunctive relief to cover the monitoring of “any and all past, present and future players” for potential brain injury stemming from known or unknown concussions. This is not only cost-prohibitive, but may not even present a coverage trigger if monitoring is paid to those for whom there has been no (apparent) bodily injury or occurrence.

• Assumption of Risk: Is this defense still valid? From the tenor of recent claims, it appears not. The court of common sense no longer applies, and that is the scariest of all.

In an industry where there is a “right price” to insure just about any risk, you can see why concussions are being touted as the new “Asbestos” among insurance carriers.

How Has Liability for Concussions Changed? To respond to this crisis, General Liability and D&O carriers have

implemented a number of changes to sports and recreational policies. Even though D&O policies exclude bodily injury claims, certain concussion claims are hitting those policies as well with allegations of “failure to implement concussion management protocols,” or because the plaintiff seeks injunctive relief to rewrite the rules, even where there is no actual bodily injury occurrence. Changes to look for in sports liability policies are:

• Total exclusions for “Neurodegenerative Injury,” which excludes more than just concussion or TBI, and is defined to include any other forms of neurological impairment that may develop

• Sublimits for Neurodegenerative Injury claims• Defense costs for Neurodegenerative Injury claims

inside the limits of liability• Exclusion for or cap on damages for Medical Monitoring• Exclusions for class-action lawsuits• Exclusions or limitations for pre-existing or continuous

injury• Definition of occurrence tied to one policy term so that

only one limit applies

What Can Be Done?Despite the litany of woes, a lot of good has come out of

this crisis. Did anyone ever think a movie called “Concussion” would feature marquee actors and bring in over $50 million at the box office? People are talking about concussions. Coaches, parents and players are being educated. Sports organizations are limiting the amount of contact time allowed in practice and eliminating hazardous plays from their rule books. Money is being spent on research and development–on the medical side for treatment and diagnoses of concussions, and on the sports side with the goal to make the games safer and protect athletes more effectively.

What is a Concussion?The Center for Disease Control (CDC) defines a concussion

as “a type of traumatic brain injury—or TBI—caused by a bump, blow, or jolt to the head, or by a hit to the body that causes the head and brain to move rapidly back and forth. This sudden movement can cause the brain to bounce around or twist in the skull, stretching and damaging the brain cells and creating chemical changes in the brain.”

We have come a long way, but there is still much more to accomplish. Taking a page from the risk management playbook, we can still do a number of things to work our way out of this crisis:

• Eliminate the Risk: We could cut out sports altogether, but that is not an acceptable or realistic answer for anyone. What we can do is eliminate coverage for the exposures that insurers fear most: class-action lawsuits and lifetime medical monitoring for all participants. Perhaps by doing this we can convince insurers to allow full limits for individual concussion injuries, which is what sports clients need.

• Manage the Risk: We could encourage insurers to grant full liability limits only to those organizations who implement best practices and who mandate concussion education. While some of this is required under the Lystedt Law [see sidebar], that legislation is primarily targeted at schools, and does not always apply to other sports-related organizations.

• Legislate the Risk: Prevail upon lawmakers to give immunity from class-action lawsuits to all schools, colleges, and amateur sports organizations. A hefty long-term goal, but a worthwhile effort.

• Outmaneuver the Risk: Consider having your clients put an individual arbitration clause into their membership agreement or waiver and release form. Doing so could preclude any class-action suits (not just concussion-related) from being filed against the organization, and may make them a more desirable risk in the eyes of the insurer.

How Can You Help Your Clients in the Meantime? Whether or not they are legally obligated to do so, all

organizations involved in sports or recreation activities should have a Concussion Management Plan (CMP) in place. This should include an emergency plan in the event of an injury or suspected injury; a return-to-play policy that meets the minimum standard set by the Lystedt Law; and an educational component for all constituents. CMP plans are now considered the standard of care, and not having such a plan in place can put your client at risk.

From an insurance perspective, check your liability policies for any new endorsements, exclusions and limitations as described above. As always, seek out the best and broadest coverage in the market for your client. You can supplement new liability limitations by putting a high-limit accident policy in place, particularly one that has a long benefit period to cover treatments that may extend over a period of years, if necessary. And if the day arises when your client is served with a serious concussion lawsuit, request that the insurance carrier seek out a legal defense team that is experienced in concussion

Zackery Lystedt Law

In October 2006, a 13 year old middle school football player in Washington state named Zackery Lystedt collapsed from a traumatic brain injury when he was allowed back into a game just 15 minutes after suffering a concussion. Zackery spent the next 9 months in a coma and today still sits in a wheelchair.

On May 14, 2009, then-Washington Governor Christine Gregoire signed into law the “Zackery Lystedt Law.” This first-in-the-nation law prohibits youth athletes suspected of sustaining a concussion from returning to play or practice without a licensed health-care provider’s approval. The law became the most comprehensive return-to-play law in the US for athletes under 18.

The law has 3 requirements: Education for coaches, parents and players; immediate removal from play of anyone suspected of concussion; and no return to play without clearance from a concussion expert.

All 50 states have passed Lystedt legislation. Many states go further by extending the Lystedt requirements to private schools, charter schools and independent youth sports organizations.

litigation. Knowing the legal landscape is key to providing the best protection for your client.

We live in a blameful society. Regardless of the fact that many of these suits defy logic or that many sports organizations would be out of business if the demands of these class-action suits were put into place, we still have to defend the claims and manage their exposures. Therefore, the two most important aspects of the concussion crisis boil down to insurance and risk management. Proper insurance coverage protects the financial livelihood of our clients so that youth sports can remain viable now and in the future. Risk management and education protects players from becoming injured in the first place, or if they are injured, puts procedures in place to identify the concussion quickly and prevent any further compounding injury. All of these efforts will ultimately have a positive impact on concussion claims in the future and allow the insurance industry to move away from its current crisis-driven position on sports liability. For now, though, let the kids play and hope that no one gets hurt!

What Can Happen? Two Claims Scenarios

Scenario 1A 14-year-old Massachusetts lacrosse player suffered a concussion when he was checked from behind during a game. Four

days later, without clearance from his doctor to return to play, his coach put him in a game against a big rival. The player fell while going for a ball and the impact of the fall caused “second impact syndrome” – a serious complication of multiple, back-to-back concussions. His parents sued the coaches and the league for the permanent effects of the traumatic brain injury (TBI) their son experienced. The league’s Liability policy paid out $512,000 for this claim on behalf of the coaches and the league itself, offering a $200,000 indemnity to the player and his family, and ringing up $312,000 in legal expenses to defend the claim.

Scenario 2A woman watching her daughter’s soccer match at a local indoor facility was injured when an out-of-bounds player knocked

her over. She fell backwards and hit her head on the concrete step. The resulting concussion caused lasting vertigo and migraine headaches. The woman sued the league and the facility – both insured under the same policy. The facility’s GL insurer settled the claim at mediation for a $295,000 indemnity payment to the plaintiff and $168,000 in defense costs.

The Evolving Energy MarketBy Steve MoughamianBrokerRPS Lexington

Few industries have seen the amount of change in the past decade as the energy market. Increasing concerns about the industry’s environmental and carbon footprint, among many other factors, are shifting focus away from traditional forms of energy and towards cleaner, renewable methods. These changes are not only being seen in the Unites States, but globally. Fresh capital will continue to pour into the industry as new and existing companies introduce innovative designs to produce cleaner, safer and sustainable energy. Our world’s reliance on traditional energy will keep it relevant for now, but the winds of change have undeniably started to blow and show no signs of stopping.

The coal mining industry has seen possibly the greatest decline of any other in recent years, as it continues to be replaced by cleaner and cheaper alternatives as well as increased governmental pressure. The U.S. saw its largest production and consumption numbers in history from 2005-2010, but they’ve since declined rapidly.

Coal-produced energy still represents a substantial part of total consumption in the U.S. and is mostly associated with the generation of electricity. Production companies are continually looking for innovative ways to extract the mineral while leaving a smaller carbon footprint. Traditional mining involved underground quarrying, but this method has gradually been replaced by a variety of surface mining techniques like open-pit mining and strip mining. While this transition has reduced safety concerns, environmental concerns remain. Recent technological advances within the industry have focused on achieving cleaner production and have also led, in many cases, to greater economic benefits for coal companies.

The oil and gas industry has also seen drastic changes in recent years. Much like mining, petroleum producers are faced with increasing pressure for cleaner and safer production methods. Hydraulic fracturing, or “fracking,” has been in the spotlight recently, although the origin of the basic technique dates back over a hundred years. The benefits of fracking are clear to producers, but are argued by many to be outweighed by the geological and environmental impact.

Economic concerns also continue to pressure the petroleum industry. Falling prices and increased competition are making it more and more difficult for oil and gas companies to stay profitable. Still, like coal, oil is not going away anytime soon.

By far, the largest use of petroleum fuel is by automobiles. Even with increasing environmental scrutiny, motor vehicle consumption of gasoline is still expected to reach historic highs this year. This is linked in large part to the increase in highway travel due to growth in employment rates and lower retail gas prices, according to Energy Trends Insider.

Even with the push by traditional energy industries to stay relevant, there is no denying that the market is moving towards renewable energy. Two of the most commonly recognized types of renewable energy are solar and wind. There are many additional sources including hydropower, biofuels, geothermal and even landfill methane gas harvesting. Falling costs of production and increasing demand are cementing these renewable methods as the inevitable future of the energy industry. Furthermore, there is increasing legislation on renewable energy at state and federal levels, as well as homeowner tax credits and other programs designed to incentivize companies and citizens who transition to renewable energy.

The benefits of renewable energy are clear. The feasibility of completely replacing carbon-based fuels in the near future, on the other hand, is not as certain. Less than 10 percent of all energy consumed in the United States in 2015 was from renewable sources, according to the Institute for Energy Research.

There are many obstacles keeping this number from growing rapidly. As with any major technological advance, the transition to renewable energy will continue to require investment from governments and the private sector. Fortunately, costs to build an infrastructure for solar, wind and other energy production are declining, but there still remains a major lack of capacity to support mankind’s energy requirements. Beyond the issues of cost and capacity, there also remains a need for advances in the efficiency, quality and storage of renewable energy.

As the energy industry evolves, so do the insurance needs of all those involved. RPS continues to adapt, handling both traditional energy accounts as well as those embracing and revolutionizing cleaner, renewable and alternative energy. We secure coverage for companies involved in all phases of the energy business, from production and exploration (upstream), to transportation, storage and wholesaling (midstream) to refining, processing and distribution (downstream). Even those not directly involved with the production of energy represent a large portion of our business, such as manufacturers and installers of solar panels, wind turbines and other infrastructure, contractors specializing in closure and remediation/reclamation of production sites and a wide variety of consultants and engineers.

Property Market Update: Third Quarter 2016By James Rozzi, CPCU, ASLIArea Senior Vice PresidentRPS San Francisco

It is hard to believe we are entering the home stretch of 2016. Summer has disappeared, the days are a little shorter, and the air is crisp. Fall is one of my favorite times of year because it allows me to get slightly annoyed by the budgeting process that we all need to endure as part of planning for the year ahead. It also allows us time to think about the year we are wrapping up and what we need to do to finish strong and with as much momentum as possible. If reflective thinking doesn’t motivate you, then at least you have football to look forward to—which will either relieve or add to your stress depending on how your team performs. As always, I hope this article finds you well and trust the year has continued to meet, and hopefully exceed, your expectations.

State of the MarketI think it is safe to say that at this point, the market seems

to be a rat race to the bottom. It reminds me a bit of the “Lemmings” computer game I used to play long before iPhones and 3-D gaming were ever an option. If you remember the game, the Lemmings would mindlessly follow one another through various obstacles to get from point A to point Z, and the path from A to Z was increasingly challenging with every level. At this point in the market, the path from A to Z seems to be getting a bit harder but how we get there remains the same. Rates are still trending downward, albeit at a slower pace, and capacity seems to remain in abundance. Outside of a few consecutive hail storms, particularly in parts of Texas, and some catastrophic flooding in Louisiana, we have yet to see a significant number of CAT events in the U.S. P&C market for the 4th straight year. As we wrap up 2016, it is hard to plan for anything other than more of the same and I suspect it will be another profitable year for most major insurance providers, making it hard for clients to understand why further rate reductions may not be warranted.

What we will start to see and what we should note is that carrier margins and levels of profit continue to shrink, and the rate at which carriers can continue to absorb attritional claims without a meaningful effect on their balance sheet is likely to lessen in the year ahead. We move into 2017 with eight plus years of soft market conditions and four straight years of double-digit rate decline within the property marketplace for most asset classes across a wide array of geographic regions.

This pattern is forcing insurance companies to be smarter and more efficient. Alternative investments by traditional insurance providers are changing the game. Buzz words like “ILS Capital”, “Sidecar”, and “Master Program” are becoming as mainstream to the insurance world as “Facebook” and “Google” are to the 21st century. Insurance carriers and brokers are starting to catch up to the rest of the world by betting big on tech and data. Most industry experts believe that as the data gets better, the profit margins and efficiency created through more effective product delivery will be substantial and cause a shift in the way insurance transactions take place.

I suspect it will be some time before material change is realized, but this data-driven insurance world will have an impact on our business that is tough to predict. In the immediate future, we can expect rates to continue to decline but we know that the market will turn at some point. Eventually the claims, whether CAT-driven or through a series of small scale events, will catch up to the cost at which the insurance was provided and drive rates upward. Until this occurs, expect the status quo to remain, with the only variance being how quickly tech can change and consolidate our business into a more effective and efficient provider of goods and services.

If I had a crystal ball I would have bet heavily on Facebook back in 2004 when it was just arriving on the scene at various colleges in the Northeast. Sadly, I don’t have a crystal ball so I can’t say with 100% certainty what will happen in 2017. However, if you look at a wide range of data points, the rat race is coming to a halt and the bottom is almost in sight. This year we have seen rate decline hold steadily around 7.5% to 15%. Next year, I think we will be looking at levels in the mid-single-digit range with the occasional anomaly. I think 2017 will be the year in which we see distinct differences in the rate levels for various regions; areas of LA, TX, and many CA EQ-exposed risks will start to see their rates trend closer to 5% down and flat. Also, for many non-CAT exposed risks I expect rates to remain steady and for schedules with less-than-favorable loss experience I expect increases and limited options for those insureds to move their business to new providers. Localized weather-related events and tougher asset classes will be under the microscope a bit more in 2017 and we will hear that the floor has been reached on various accounts. The point at which carriers will walk away is something that will be discussed at length as we finish out this year and head into the next.

Normally we would break out the rate levels by asset class and geography, but these seem to be less of a factor given the current state of the market. There are certainly some variances for less desirable classes of business but all in all, rate reductions are being obtained in every CAT region and across all major asset classes. The less desirable classes of business like frame hab and high-hazard manufacturing are seeing reductions as well, but those accounts come down to loss experience more so than market rates. Some find this market a bit mundane, because it has been more of the same for quite some time, but my belief is that it is relatively exciting. We are on the forefront of an industry shift toward technological advances, and market conditions are certainly lending themselves to further creativity and product development. In short, it is a very entrepreneurial time to be in insurance and I can assure you that all of us at RPS are working hard to stay ahead of the game.

Hit List1. Bound coverage on a $400M+ schedule of garden style

apartments and hotels. Coverage was renewed at a 7% rate reduction despite poor loss performance. Coverage was placed on a manuscript form on an All Risk including Flood and EQ basis.

2. Bound coverage on a $1.4B schedule of garden style apartments. The insured has CAT-exposed locations in TX, FL, CA, and a significant amount of non-CAT exposure. Coverage was secured at close to a 16% rate reduction with increased limits for Flood and EQ. Coverage was placed on a broker manuscript form.

3. Coverage was bound on a $40M Builders Risk. The project was a school renovation and remodel that consisted of renovating an existing building. Coverage was placed including Flood and EQ.

4. Coverage was placed on a schedule of $460M of Hotels, Vacant Buildings, and Apartments. The client had their policies with various carriers and the program was consolidated into one layered and shared property placement that included Flood and EQ. Overall savings was close to 20%.

projects. The traditional Wrap-Up was—and still is—predominantly a standard market product, but there is now a robust “GL-Only” Wrap-Up market, which has been written in the non-standard marketplace for two decades.

Like virtually everything else in business, the Wrap-Up had to make financial sense to exist for as long as it has. Having one party, either the owner or the general contractor, collectively purchase insurance for all of the participating contractors on a specific project, was a major breakthrough in a world of individual policies where every contractor hired brings their own annually-renewed insurance policies to the project. This individual insurance approach is still widely used today, but due to varied insurance companies, rates, terms, conditions, coverages, and the unpredictable nature of future renewals, the Wrap-Up policy has emerged as a collectively viable and often preferred alternative.

Over the years, the Wrap-Up’s inherent economies of scale benefit has compounded with stronger underwriting results for Wrap-Up vs non-Wrap-Up projects, open sharing of new construction techniques, and shared loss control practices. The opportunity to purchase a Wrap-Up extends to virtually any size project and segment of the construction industry. As a result, construction projects with costs smaller than $1,000,000 have been written on a GL-Only Wrap-Up basis. This is an extremely small number compared to the $100,000,000 project size many people associate with traditional Wrap-Ups.

However, the GL-Only Wrap-Up is not the be-all, end-all policy for a construction project. All Wrap-Ups, whether traditional or GL-Only, carry their own set of financial and

Why Do Wrap-Ups Exist?By Casey Evans, CICArea Vice President/Casualty BrokerRPS Atlanta

Wrap-Up policies for construction projects exist because of potential financial advantages, coverage enhancements, collective coverage uniformity, coordinated claims handling, and possibly the most important factor of all, pure necessity.

Construction projects are complex and potentially messy undertakings. Both the owner and general contractor face a swarm of unpredictable variables. As an investment of both time and money, liability insurance is one of those unavoidable variables that can lead to a construction project’s long-term success or disastrous ruin. A Wrap-Up policy may be the smartest choice for success.

What exactly is a Wrap-Up? Simply put, it is a General Liability and/or Workers’ Compensation/Employer’s Liability policy covering all participating contractors on a construction project under one primary insurance policy. The idea is to cover the entirety of both the project’s construction phase (aka “boots on the ground”) plus its completed operations phase (aka the “tail”). In conjunction with a Wrap-Up, significant Excess/Umbrella liability limits are typically purchased as well to provide some additional coverage.

The traditional Wrap-Up policy approach was developed in the 1940s as a combined program with the same insurance carrier for both primary General Liability and Workers’ Compensation/Employer’s Liability on mega-infrastructure

administrative burdens that, despite best efforts by even the most avid Wrap-Up insurance buyers, make it impossible to completely eliminate individual insurance buying. In the current marketplace, the main reason a Wrap-Up won’t work on every construction project is due to financial feasibility.

For example, the aforementioned sub-$1,000,000 construction project is quite small for a Wrap-Up, because insurance companies tend to have minimum premium thresholds. This makes even the most risk-averse insurance buyer not want to pay the Wrap-Up’s price tag. However, there are reasons beyond up-front financial savings for why a Wrap-Up makes sense.

The first non-financial factor is coverage enhancements. The typical GL-Only Wrap-Up policy starts with the ubiquitous ISO CG 00 01 policy form. From there, Wrap-Ups take on a number of unique coverage endorsements that are rarely, if ever, found on an individual GL policy for a contractor. Some examples of these unique coverage endorsements are:

• Extended Completed Operations Endorsement, aka the “tail”

• Amendments to or outright removal of the ISO CG 00 01 policy exclusions “j., k., & l.”

• Repair, Warranty or Call Back Extension Endorsement• Expanded named insured definition to encompass all

participating contractorsThe inclusion of these types of coverage-enhancing

endorsements is one factor as to why someone with a sub-$1,000,000 construction project might be inclined to spend more up-front money on a Wrap-Up, but it certainly is not the only one.

Another key advantage of a Wrap-Up policy is the simplification of claims handling and reduction in the number of competing interests. In the event of a construction-related liability claim, the collective mindset of the contractors plus the coverage uniformity provided under a Wrap-Up policy creates a stronger, single-entity defense against a lawsuit. When everyone is collectively relying upon the same policy, it makes legal firms less incentivized to start costly infighting among the contractors involved. This major benefit allows insurance carriers to charge less premium for a Wrap-Up policy than an individual one.

Control of defense alone, though, isn’t going to push someone with a sub-$1,000,000 project into a GL-Only Wrap-Up. The integral reason why the GL-Only Wrap-Up exists isn’t because of an overwhelming desire to get the best coverage enhancements, collective coverage uniformity, and claims handling factors in one policy. The GL-Only Wrap-Up exists because without it, no reliable General Liability insurance coverage may even exist for contractors.

In the late 1990s, the GL-Only Wrap-Up finally got its time to shine. In that era, new construction defect laws were passed

in many states, most notoriously in California. These laws gave new consumer protections to homeowners, but at the same time created a whole new legal industry dedicated solely to targeting and litigating new residential construction projects.

The insurance industry responded to this as would any for-profit industry that suddenly started experiencing horrendous losses from one sector of business would—they stopped writing that sector of business. In turn, contractors couldn’t find reliable, affordable Residential Liability coverage to even consider bidding on residential projects. The fact that most contractors, especially in the burgeoning California marketplace, couldn’t find the all-important Residential coverage was a huge problem. We need residential building to continue to house the nation’s population growth, not to mention all of the retail, commercial, industrial, and public buildings needed to employ and service a rising population. Thus, the GL-Only Wrap-Up was born. Remember that the sub-$1,000,000 construction project I have been mentioning? You guessed it...it was a residential project in CA.

In recent years, “Right to Repair” laws have been passed in most of the heavily-affected construction defect states, including California. This means the first step for affected homeowners should now be allowing the contractor the opportunity to repair their alleged building mistake before an expensive lawsuit is filed. In addition, supply and demand has naturally rebalanced itself over time, and GL-Only Wrap-Up premium costs have gone down considerably, even for residential projects.

Another relatively recent event that has increased current popularity of the GL-Only Wrap-Ups was the recession. Many contracting firms did not survive the late 2000s downturn, even commercially-focused contractors. If a contractor is no longer in business, their individual insurance policy is no longer being renewed either, leaving a significant gap in the “tail” coverage for any owner or general contracting firms that hire them. GL-Only Wrap-Ups fill that coverage gap worry of “what if there is another recession, my hired contractors don’t make it, and a claim is filed?”

Another state-by-state legal trend known as Anti-Indemnity Statutes took hold in recent years as well. These statutes come in various forms, but generally their goal is to limit the ability of one party to push their own negligent acts contractually to the firm they are hiring to perform a job on their behalf. Many owner and general contracting firms’ response is to write a GL-Only Wrap-Up, so they no longer have to worry about pushing down liability contractually.

Lastly, as I said before, nothing in business tends to last without being financially relevant. In contrast to the traditional Wrap-Up, a GL-Only Wrap-Up does not have a reputation for high claims frequency, presumably due to the removal of Workers’ Compensation from the policy. This allows underwriters of GL-

Only Wrap-Ups to write significantly lower deductibles with no collateralization requirements, which is the polar opposite of most traditional Wrap-Up policies. For example, under a GL-Only Wrap-Up, deductibles average around $25,000 per occurrence with no collateral required, whereas under a traditional Wrap-Up, retentions start at $250,000 per occurrence with significant collateral requirements. Altogether, the entrepreneurial spirit and flexible nature of the non-standard marketplace has allowed the GL-Only Wrap-Up to stay relevant, grow, and, most importantly, continue adapting to the ever-changing demands of the construction, legal and financial climates within the US.

The concept of the Wrap-Up was developed 70+ years ago purely as a smart way to save money on the financial cost of insurance on mega-infrastructure projects. Over the years, however, these policies have played a much more important and possibly even idyllic role in construction beyond just saving some premium dollars. Wrap-Ups have spawned creative coverage enhancements never before seen; individual policies on their own are generally not large enough to get the insurance industry’s creative juices flowing.

The Wrap-Up has also been used to fill a void in the liability marketplace; coverage for an entire industry segment might not exist without it. Insurance coverage uniformity on a construction project is a solid means to avoid finger-pointing dilemmas if there is a complicated liability claim. This allows contracting relationships to flourish even after a tough claim, leading to better cohesiveness among project managers and trade workers, which in turn leads to more carefully built projects. And what does that lead to? Less “boots on the ground” and “tail” claims, which is the ultimate goal. Everyone involved with financing and constructing these projects will hopefully save a little premium money, and the insurance companies hopefully won’t have to pay out as much in claims. Can anyone else think of a better win-win insurance product than this? Or maybe I’m being too romantic…after all, this is still just an article about an insurance product, right?

Risk Placement Services—YOUR wholesaler of choice!

Contact your local RPS office today for more information about our products and services. Two Pierce Place • Itasca, IL 60143866.595.8413 Contact_Us@RPSins.comRPSins.com