Waiver of Subrogation, What is it?

If after an insurance claim is paid out by your insurance company, it is deemed that another party was actually the negligent one, then your insurance company (via the insurance policy contract) has the right to go after the negligent party. This right is usually found in the "Conditions" section of your insurance policy. This conditional right can, however, be waived. This means that your insurance company would then not be allowed to go after the negligent party. The term for this waiving of rights is called Wavier of Subrogation.

Often you will see the Waiver of Subrogation in commercial leases. Landlords will require that tenants have this verbiage in their insurance policy so that if a claim occurs at the leased location that the tenant's insurance company cannot come back after them for damages. The landlord, however, would be less inclined to have this wording on their policy since it would mean they and their insurance company would not be allowed to go after their tenant after a claim. A building owner and their insurance company usually have more to lose (the building and its rental income) than the tenant does so they would be very interested in being able to go back after a negligent party.

There are two example of where a landlord may want the Waiver of Subrogation wording on their own insurance policy. The first is if they are renting to a family member or friend who they know doesn't either have enough assets or money to be able to cover them in case of a claim, they may not want their insurance company to be able to go after them to collect for damages. The second is if the landlord and tenant are owned by the same person or organization. In some cases, usually for legal or tax reasons, a person may have one company that owns the building and another company that owns the business that is the tenant. In those cases you would probably want both the landlord and tenant policy to have a Waiver of Subrogation clause in their policies so that you don't have your two insurance companies fighting over payout. 

Another place where you will see Wavier of Subrogation is in situations where companies or organizations will subcontract work to other companies or organizations. Often, if a business is going to hire another business to do work on their behalf they will request that the subcontractor have Wavier of Subrogation on their policy. Similar to the Landlord/Tenant relationship, if the contractor requires the subcontractor to have Waiver of Subrogation on their policy it means the subcontractor, if a claim arises, is not able to go back after the contractor for money. 

When entering into a lease or a business contract it is important to know if you are going to be required to have Waiver of Subrogation and if you have it or not in your insurance policy. It is best to have both your legal team and your insurance professionals review contracts to make sure you are adequately protected.

Certificates of Insurance

It is good risk management for customers to check and make sure their vendors have insurance. Because of this small business owners are often asked to prove to their customers they do indeed have insurance. When customers ask for proof of insurance what they are often asking for is a form called a certificate of insurance. A certificate of insurance gives the basic information of a business insurance policy. It tells things such as the insurance company's name, dates the policy covers, name of the insurance agency who handles the policy and highlights the different types of liability coverages the policy has and the limits or amount of insurance in each of those coverages.

Any type of business can be asked to provide a certificate of insurance. Three areas where you see certificates of insurance most commonly asked for are construction and maintenance contractors, businesses that lease space and consultants. The reason that construction and maintenance contractors are often asked to show certificates of insurance are because their customers want to be sure if they cause injury around their premises or damage around their premises that they are covered. Also, many contractors are acting as subcontractors to other construction and maintenance companies. If their subs cause damage or injury they want to be sure they have insurance because if they do not they will then be the responsible ones.

People that lease space are asked for certificates because the owner of the building wants to make sure that if they cause damage to the building they have insurance to put the building back as it was prior to incident that caused damage. They also want to make sure if the person leasing space is responsible for someones injuries while they are visiting the building that they have insurance in place to cover those injuries.

Consultants are asked to provide certificates of insurance in order to meet contract requirements. Often, consultants sign a contract with their customers and in the contract there is always an insurance section that outlines the required coverages they must have. The best way for that customer to make sure the consultant is meeting the requirements is to ask for a certificate of insurance.

So the next time you are asked by a customer to show proof of insurance you will understand that you are being asked for a certificate of insurance. Contact your agent and let them know you need a certificate of insurance. Make sure to provide them with the name and address of the company or individual that is asking you for the certificate. 

ACV vs Stated Amount vs Agreed Values for Vehicles

Every time you get into your car and start the engine it is very likely that pennies fall off. Well, not actual pennies but the value of the car drops a very small amount each mile it is driven. This is because most cars are a depreciating asset. With this in mind let's talk about three common ways you can insure the value of your vehicle. The three ways are Actual Cash
Value (ACV), Stated Amount and Agreed Value.

Actual Cash Value is the most common form of valuing a car by insurance companies. What this means is that after an accident they take the original value of the car when it was brand new and they then depreciate the car over time until the date of the claim. They taking into account the miles driven, prior damage to the vehicle, wear and tear and maintenance upkeep of the vehicle. The farther away you are from the date the car was made the lower the value of the car.

Stated Amount is a little bit different. In this case you would tell the insurance company what you feel your vehicle is worth, say $30,000. This $30,000 is now the most the insurance company will pay out for the car, however when you have a claim they will research to see what other vehicles similar to yours are being valued for. If that value is less than the $30,000 they will give you the lesser amount. You often see this in collectors cars or cars that have a lot of specialize equipment attached to the body of the vehicle.

Agreed Value is where both the insurance company and you come to a prearranged value for your vehicle. When you agree upon this value, say it is $30,000 again, when a claim arises you are going to automatically be paid the agreed upon value of $30,000. Unlike Stated Amount, they do not go out and decide if the market still feels your car is worth a certain amount, they just agree to pay the agreed upon value that was settled before the claim even happened. This is most used for classic/collector cars. In fact it is best to make sure your classic/collector car is an Agreed Value instead of a State Amount. Often this requires an appraisal which may cost a little money to have done. One other thing to take into account when vehicles are insured for an Agreed Value, they can often have a limit on how many miles the vehicle can be driven each year. 

For more information on valuations of vehicles please feel free to get in touch with Fey Insurance Services. We have been serving the Oxford, OH and Cincinnati, OH areas since 1958. 

Employment Practices Liability

A popular insurance text starts with, “The growth of federal and state legislation dealing with employment discrimination and sexual harassment, the changing legal views on wrongful termination, and the increasing tendency of aggrieved parties to turn to the courts for settlement of such disputes have caused insurers to specifically exclude coverage for such employment-related claims in the commercial general liability policy.”

To fill this gap, a number of insurers are offering employment practices liability (EPL) coverage as an endorsement to the commercial general liability policy or as a stand-alone policy. Independently developed by each company, the EPL coverage forms vary by company, however, most policies are similar in terms and conditions.

EPL policies are usually written on a claims-made basis, which means that for a claim to be covered, it must occur during the policy term. Extended reporting periods from one to three years can be added for an additional premium.

In addition to damages paid for judgments or settlements, the cost of defense is covered. However, it is usually paid from the limit of liability, not in addition to the limit of liability. Most EPL policies specifically cover back pay. Back pay is commonly awarded to successful claimants in discrimination and wrongful termination actions.

Typically, the definition of “insured” in an EPL policy includes the corporation, its directors and officers, its employees, and, in most policies, its former employees. Some policies limit the definition of “insured” to include only managerial employees.

The deductible for this coverage ranges from $1,000 to $250,000, depending on underwriting factors. One difference from other types of policies is that the EPL policy usually requires the insured to participate in losses exceeding the deductible. The amount that the insured contributes after the deductible has been satisfied is based on the “participation rate.” Participation rates are usually 5 to 10 percent, but can reach as high as 25 percent depending on underwriting factors.