2. 9/1/20041 Insurance Requirements in Contracts www.doa.louisiana.gov

3. 9/1/20042 PURPOSE OF WORKSHOP u Limit State’s liability u Necessity of insurance requirements u L.R.S. 38:2195

4. 9/1/20043 TYPES OF BIDS OR CONTRACTS u IFB - Invitation for Bids u RFP - Request for Proposals u CONSTRUCTION u PRINTING CONTRACT u SOLE SOURCE u EMERGENCY

5. 9/1/20044 WHAT’S NEEDED u Coverages u Limits u Hold-Harmless Agreement ?

6. 9/1/20045 TYPES OF COVERAGE Workers Compensation and Employers Liability Maritime Liability Commercial General Liability Automobile Liability Property Damage Coverage Bond Coverage Crime and Fidelity Wet Marine Coverage Aviation Coverage Medical Malpractice

7. 9/1/20046 STANDARDIZATION OF FORMS 1.Insurance Services Organization ISO Standard Forms: CG 00 01 [10 01] -- CGL CA 00 01 [10 01] -- Auto 2.Manuscript Forms Company-written

8. 9/1/20047 ADVANTAGES OF STANDARD POLICY FORMS u Set rates using pooled data u Coverage generalizations  Comparison of policies

9. 9/1/20048 ADVANTAGES OF STANDARD POLICY FORMS (Continued) u Case law  scope of coverage u Simplified claims-settlement

10. 9/1/20049 Commercial General Liability Forms u OCCURRENCE u CLAIMS - MADE

11. 9/1/200410 ISO Occurrence Form CG 00 01 10 01 July 1, 1999 July 1, 2000 Will pay these sums that the insured becomes legally obligated to pay... DISCOVERY PERIOD u Occurrence during policy period u NO TIME element when claim is reported/paid u Statute of limitations

12. 9/1/200411 ISO Claims-Made Form CG 00 02 10 01 July 1, 1999 July 1, 2000 Will pay these sums that the insured becomes legally obligated to pay... DISCOVERY PERIOD u Claim made DURING policy period or extended reporting period.

13. 9/1/200412 ISO Claims-Made Form (Continued) 1.BASIC EXTENDED REPORTING PERIOD: 60 days - no additional premium 2.SUPPLEMENTAL EXTENDED REPORTING PERIOD: Up to 200% additional premium DOES NOT REINSTATE OR INCREASE LIMITS

14. 9/1/200413 COMMERCIAL GENERAL LIABILITY 1.Premises Operations 2.Off Premises 3.Products and Completed Operations 4.Contractual 5.Personal Injury and Advertising Liability 6.Broad Form Property Damage 7.Watercraft

15. 9/1/200414 Coverage B Personal Injury & Advertising Liability Personal Injury: Other than bodily injury u False arrest u Malicious prosecution u Wrongful entry u Libel or slander u Violation of privacy

16. 9/1/200415 Coverage C Medical Payments A. Medical expenses for accidents: 1.On premises you own or rent 2.On ways next to premises you own or rent 3.Because of your operations

17. 9/1/200416 Coverage C Medical Payments (Continued) B.Reasonable expenses for: 1.First aid 2.Medical, surgical, x-ray, dental services 3.Ambulance, hospital, nursing, funeral expenses

18. 9/1/200417 Common CGL Exclusions u Pollution (Asbestos and hazardous wastes) u Workers compensation, unemployment benefits, etc. u Aircraft and watercraft over 26 feet

19. 9/1/200418 Common CGL Exclusions (Continued) u Intentional Acts u Automobile Liability u Some Professional Liability u Property Damage to Property 1. You own, 2. Loaned to you, 3. In your care, custody and control

20. 9/1/200419 PROFESSIONAL LIABILITY (Errors and Omissions Coverage) u ACCOUNTANTS u ARCHITECTS u ENGINEERS u MEDICAL PROFESSIONALS u ATTORNEYS u HAZARDOUS ACTIVITIES

21. 9/1/200420 BUSINESS AUTOMOBILE POLICY CODES 1Any auto 2Owned autos only 3Owned private autos only 4Owned autos other than private autos 5Owned autos subject to no-fault 6Owned autos subject to a compulsory uninsured motorists law 7Specifically described autos 8Hired autos only 9Non-owned autos only

22. 9/1/200421 Owners Protective Liability ( OPL) u Protects the employer of an independent contractor u Employer can be liable for contractor’s negligence

23. 9/1/200422 WORKERS COMPENSATION Per Labor Code of the State of Louisiana Disability Benefits Updated annually in Sept. 9/1/2004 $438 max $117 min 9/1/2004 75% of average salary (from Dept. of Labor)

24. 9/1/200423 BID BONDS u Guarantee the good faith of the bidder u L.R.S. 38:2241 (A) (2)

25. 9/1/200424 PERFORMANCE AND PAYMENT BONDS 1.Financial protection 2.Prompt completion upon default 3.Defective work / materials 4.Payment of bills L.R.S. of 1950 Title 38 Chapter 10 Sections 2241 to 2248

26. 9/1/200425 “ADDITIONAL INSURED” I.BLANKET ADDITIONAL INSURED ENDORSEMENT Example: “The State of Louisiana is added as an additional insured on the above liability policies.”

27. 9/1/200426 “ADDITIONAL INSURED” CONTINUED II.LIMITED ADDITIONAL INSURED ENDORSEMENT Example: “The State of Louisiana is added as an additional insured as regards the (sole) negligence of XYZ contractor.”

28. 9/1/200427 “ADDITIONAL INSURED” CONTINUED III.NAMED INSURED ENDORSEMENT (Owners Protective Liability) Example: “The State of Louisiana, as the owner, is added as a named insured on the above policy.”

29. 9/1/200428 WAIVER OF SUBROGATION SUBROGATION: The right of one who has taken over another’s loss to also take over the right to pursue remedies against a third-party NOTE: ORM will NOT accept contract language which allows waiver of subrogation with regard to damage to State-owned property

30. 9/1/200429 HOLD-HARMLESS AGREEMENTS u Deductibles u Under-insured u Exclusions to insurance policies

31. 9/1/200430 TYPES OF HOLD-HARMLESS AGREEMENTS  All liability, except that arising out of the sole negligence of the agency (State) u All liability without regard to fault u Own negligent acts (Contractor) u Agrees to share responsibility when both parties contribute to a loss

32. 9/1/200431 COMMON ERRORS u Neglect to review certificates u Using old insurance requirements u NO insurance requirements in bid u Insurance Company Ratings - taking company’s word on it

33. 9/1/200432 COMMON ERRORS CONTINUED u Neglect to review policies for exclusions u NO hold-harmless agreements u Not enforcing rating requirements u Leaving some insurance requirements out of bid

34. 9/1/200433 UNACCEPTABLE INSURANCE u Risk retention groups (unless A.M. Best rated) u Self-insurance funds (except WC) u Companies rated below insurance requirements u Claims-made coverage (some exceptions)

35. 9/200034 FINANCIAL RATINGS OF INSURANCE COMPANIES

36. A.M. BEST 2003 Property/Casualty Ratings

37. 9/1/200436 BEST’S Financial Size Categories

38. 9/1/200437 BOND COMPANY RATINGS www.fms.treas.gov/c570/c570.html

39. 9/200238 DEPARTMENT OF INSURANCE Regulates insurance companies licensed to do business in Louisiana DOMESTIC COMPANIES - 28 FROM 1978 TO 2002 583 insurance companies under rehabilitation or liquidation

40. 9/1/200439 CAPITALIZATION REQUIREMENTS Insurance Company Capitalization: $2,000,000  1989  $3,000,000 Premium Limited By Law:  4 times policyholders surplus  Example: $3,000,000 X 4 = $12,000,000 Exposure to company = $100 millions

41. 9/1/200440 Louisiana Insurance Guaranty Association LIABILITY {CGL & Auto} $150,000 per claim- $100 ded. $300,000 per accident - $100 ded. WORKERS’ COMPENSATION Follows law - limits do not apply PLUS Unearned premium up to $10,000 (in addition to above limits)

42. 9/1/200441 PROOF OF COVERAGE Certificates of Insurance u State’s Form (State Designed) u Accord Form (ISO Designed) u Manuscript Form (Company Designed)

43. 9/1/200442 BEST’S Key Rating Guide BEST’S Key Rating Guide Property/Casualty Edition A.M. BEST COMPANY Oldwick, NJ 08858 Phone: (908) 439-2200 Fax: (908) 439-3296 www.ambest.com

44. 9/1/200443 Illustrations

45. 9/1/200444 ORM Website u www.state.la.us/orm/orm www.state.la.us/orm/orm u Click on Underwriting u Click on Procedures Manual for Insurance Requirements in Contracts