Texas Indemnity Laws Have Changed, Who Bears The Responsibility?

On January 1, 2012, a new law went into effect that changed the way owners and general contractors are allowed to shift their risks to subcontractors under indemnity agreements. Texas is now among a minority of states that prohibit both indemnity and additional insured status for owners and general contractors in construction contracts for their own or partial negligence.

 In the past, Texas courts have enforced these risk-shifting indemnity agreements so long as: 1) the indemnity language in the contract was conspicuous, or it was not hidden in the contract; and 2) the contract expressly / clearly stated in specific terms that the owner or general contractor was seeking indemnity for the owner’s or general contractor’s own or partial negligence.

 Under HB2093 contracts on or after January 1, 2012, the owner and general contractor can no longer require the subcontractor to indemnify them for the owner or general contractor’s negligence or partial negligence. In addition, the owner and general contractor can no longer require the subcontractor to purchase insurance coverage for the owner or general contractor’s negligence.

 Instead of transferring the risk to someone else, the new anti-indemnity law will require the property owner to incur the additional costs, purchase appropriate insurance coverage, and provide its own “defense” when an accident occurs.

 However, the new anti-indemnity law will not apply to on-the-job employee bodily injury claims or death of an employee of the indemnitor, its agent, or its subcontractor of any tier. This means that the current indemnity laws which transfer risks to the subcontractor will still apply to bodily injury and wrongful death claims. The new legislation will also not apply to residential or public works construction projects, nor does it apply to named insured status under Owner Controlled Insurance Programs (OCIP) or Contractor Controlled Insurance Program (CCIP) policies, indemnities in loan agreements, copyright infringement indemnities, or joint defense agreements entered into after a claim is made.

 Owners and contractors need to re-evaluate and revise their contracts and construction insurance programs to reflect the changes in the new law. Owners and contractors should remove the broad indemnity language in their contracts and include indemnity language to reflect the limitations identified in the carve-out exceptions. This article was taken in large part from http://texasceomagazine.com/tag/indemnity-agreements/.  A copy of the full bill is available at http://www.legis.state.tx.us/tlodocs/82R/billtext/html/hb02093F.htm.

Please contact your Hibbs-Hallmark & Company account representative for more information.

 Sincerely,

Christian Merritt, CIC, CISR

Assistant Vice President   

Hibbs-Hallmark & Company

Insurance Agency

501 Shelley Drive, Suite 200, Tyler, TX 75701

P.O. Box 8357, Tyler, TX 75711

(903)561-8484  *  (800)765-6767 

www.hibbshallmark.com

Fire Department Service Charge Coverage

Did you know that, in some instances, you can be held responsible for Fire Department Service charges?  Did you know that those charges can sometimes amount to several thousand dollars? The standard commercial policy contains the following provision: “When the fire department is called to save or protect Covered Property from a Covered Cause of Loss, we will pay up to $1,000, unless a higher limit is shown in the Declarations, for your liability for fire department service charges: (1)   Assumed by contract or agreement prior to loss; or (2)   Required by local ordinance. No Deductible applies to this Additional Coverage.”  Most city fire departments do not make a service charge for properties located within the city limits.  However, this is starting to change and everyone should check with their responding fire department to determine their position.  If your property is located outside the city limits, a different position may be applied.  Also, please note that the coverage provided under the property policy is for Covered Property only.  If the property consumed in the fire is not insured, no coverage would be afforded under the Fire Department Service Charge provision.  Any special charges for Hazardous Materials Disposal could be in addition to this and a specific charge for this may be applicable.  If you feel you have a need for higher limits of coverage than those provided in the property policy, contact your Hibbs-Hallmark representative and they will assist in helping you get the additional coverage desired. Homeowner’s policies have similar provisions.  Due to the many different homeowners’ forms, you will need to check your policy to determine coverage available.

Hibbs-Hallmark & Company Insurance Agency 501 Shelley Drive, Suite 200, Tyler, TX 75701 P.O. Box 8357, Tyler, TX 75711 (903)561-8484  *  (800)765-6767  www.hibbshallmark.com

Have You Looked at Refinancing Your Life Insurance Lately?

Life insurance is a complex and highly flexible financial instrument. Too often it is purchased and tucked away in a filing cabinet or bank vault and not revisited for years.   Changing personal circumstances and changes in the financial environment around you can have a dramatic impact on your life insurance. Having an independent audit of your existing life insurance policies can help ensure that you are optimizing your life insurance coverage.   Consider the following:  Mortality costs for most carriers has declined over the years with result that in many cases it is possible to reduce cost by switching to a newer generation of product. Medical underwriting has been refined in the past decade making it possible in many cases to upgrade the medical rating on an in-force policy simply by submitting updated medical records. If you are listed as the “policy owner”, the insurance proceeds may be subject to estate tax at your death.   This is a very common situation and can be easily fixed while retaining your existing policies. In these times of financial uncertainty it is important to have a fair assessment of the financial stability of your life insurance carriers. Hibbs Hallmark can provide you with a no obligation independent audit of your existing personal and business life insurance policies. Review Your Business Life Insurance Review Your Personal Life Insurance

Please contact Heather Blaylock, our Sales and Marketing Coordinator if you have any interest in reviewing your life insurance.  Hibbs-Hallmark & Company 903-561-8484 * 800-765-6767 P.O. Box 8357, Tyler, TX 75711 501 Shelley Drive, Suite 200 Tyler, TX 75701 www.hibbshallmark.com

“Senate Bill 425″

Certificates of Insurance have been around for a long time. Hibbs-Hallmark and Company wants to keep you updated on recent changes in forms and the law.

The Texas Legislature passed and Governor Perry signed Senate Bill 425 to become effective January 1, 2012. This law will require all certificates of insurance forms to be filed with and approved by the Texas Department of Insurance before they can be used after the effective date of the law. In addition, the law codifies current Texas Department of Insurance rules that a certificate of insurance must not obscure or misrepresent the coverage provided by the insurance policies.

By clicking the link below you can find why: 

• Agencies sometimes decline to issue certificates of insurance that provide notices of cancellation to the certificate holder

• You can’t always get what you want on a certificate of insurance

• Some requests are uninsurable, illegal, or inappropriate

 Certificate of Insurance Forms & News 

 

As always, if you have questions please contact your account representative.

Hibbs-Hallmark & Company

903-561-8484 * 800-765-6767

P.O. Box 8357, Tyler, TX 75711

501 Shelley Drive, Suite 200 Tyler, TX 75701

www.hibbshallmark.com

Directors & Officers Liability Insurance: Not Just for Publicly Traded Companies Anymore

D&O Liability Insurance

 What is D&O Insurance? Directors & Officers Liability insurance helps provide financial protection for the directors and officers of your company in the event they are sued in conjunction with the performance of their duties for the company. The most preferred D&O policies will also cover the acts of the employees. Think of Directors and Officers insurance as a management Errors & Omissions policy.

What does D&O cover? D&O Liability insurance usually includes Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits and is where the majority of the exposure will likely be for most companies. D&O insurance is often confused with E&O insurance. The two are not synonymous. Errors and Omissions Liability is concerned with performance failures and negligence with respect to your product and services – not the performance and duties of management. It is sometimes a good idea to carry both D&O and E&O insurance.

Why does my company need D&O insurance? You may be thinking mine is a privately-held, family-owned business. Why do I need D&O Insurance?

•You need it because claims from stockholders, employees, competitors, suppliers, and clients might be made against your company and against the directors of your company. Many business owners assume that their General Liability or Commercial Umbrella policies cover D&O and EPL exposures which they do not. 

•Directors and officers can be held personally liable for their own actions or inaction. Some will demand to be protected rather than have their personal assets at stake. 

•Employment practices suits constitute the single largest area of claim activity under Directors and Officers Liability policies. 

•Can your company bear the financial burden to defend a D&O claim? Forget guilt or innocence for a moment. If sued, who will pay the legal expenses? When damages are awarded, figures can skyrocket.

In conclusion, whether a family member or a long term employee, people are people. Employers are sued every day for everything from discrimination and harassment, to unfair business practices and breach of duty. No business, including a family owned business, is completely immune from liability. A Directors and Officers Liability policy, with Employment Practices Liability, is one of the best ways to protect itself and its directors and officers.

Hibbs-Hallmark & Company

501 Shelley Drive, Ste. 200

Tyler, Texas 75701

P.O. Box 8357, Tyler, TX 75711

(903) 561-8484  * (800) 765-6767

www.hibbshallmark.com

“Does Your Property Conform to the Latest Building Codes?”

Ordinance or Law Coverage

 After a property loss, you may be surprised to learn your damaged or destroyed structure does not conform to the latest building codes.  Then comes the unpleasant surprise of discovering that the “Ordinance or Law” exclusion in the property insurance policy will prevent a full recovery. With building codes continually changing – requiring features like new or improved sprinkler systems, better wiring and handicap accessibility- this dilemma is not uncommon.  That’s why it is important to understand the Ordinance of Law Exclusion- and the coverage that addresses it.

 

What is the Ordinance or Law Exclusion?

The Ordinance or Law Exclusion states that the insurer will not pay for loss or damage caused directly or indirectly by:

 ”The enforcement of any ordinance of law:

1)      Regulating the construction, use or repair of any property; or

2)      Requiring the tearing down of any property, including the cost of removing its debris.”

This exclusion is aimed at the application of building codes of various kinds-construction, electrical, plumbing, fire safety, etc. – that may require more expensive reconstruction materials, installations, design or methods after the loss than used in the existing building.  Some laws, even when allowing reconstruction with the same materials or design, also require that if the building is damaged beyond a specified percentage of its value (50,60 or 75 percent is typical) the remaining portion of the building must be demolished before reconstruction can begin.

Three Areas of Loss  

Ordinance or Law Exclusion can produce three distinct and separate areas of uninsured loss:

 1)Loss of the value of the undamaged portion of a building when the building must be torn down or modified to meet the current code requirements, when building damage exceeds the percentage specified in the code, or when reconstruction of the building at the site is not permitted under the code;

2) Cost of demolition and removal of the debris of undamaged portions of the structure that must be torn down.

3) Increased cost of reconstruction-the added cost to repair or rebuild in accordance with the current code.

 What To Do?

The question naturally arises at this point: How can we determine whether the exclusion will apply in any given case and what will be it’s probable effect on a loss adjustment?  Consultation with the city or county building department will often be the most helpful in this regard.  These officials may even be aware of federal laws that might come into play or be able to offer the names of persons who are knowledgeable in this area.

Some basic questions should be raised:

–Do any existing codes prohibit rebuilding with present construction, occupancy, size or location, or require demolition if more than a given percentage of the building is damaged?  What percentage?

–Since the present building was constructed or operations began, have there been changes in any of the codes that could adversely affect the property or operations? What are they? What would be their probable effect in the event of a severe loss?   As an alternative, it might be advisable that you seek the assistance of competent attorneys involved in real estate law.

While the increased costs associated with rebuilding to current codes might bring a rude awakening, they need not result in an unpleasant surprise for the insured who has experienced a major property loss.  Properly planned and placed Ordinance or Law Coverage will help make sure that the full recovery to which the insured believes they are entitled actually takes place.

“Ever Rent a Car? This is a Must Read!”

Should I purchase the Loss Damage Waiver offered by the rental agent when I rent a vehicle?

Are Loss Damage Waiver (LDW) fees worth the additional cost?  The answer may depend on your tolerance for risk and inconvenience.  You must decide if the extra cost is reasonable, considering the potential for an uninsured loss should something happen to the vehicle during the term of the rental contract, and the resulting inconvenience of dealing with the rental company and your insurance company to satisfy the rental company’s demands.

First, you should know that the LDW is not actually an insurance policy.  It is a waiver of the rental company’s requirement in the rental contract that you bring the vehicle back in the same condition as when it left their lot.  Most rental contracts make you responsible for any damage to the vehicle, including theft and weather-related damage.  When you purchase the LDW, the rental company is removing that provision from the contract on a conditional basis. 

If you don’t purchase the LDW and the vehicle is damaged, here are some of the costs for which you could be held responsible under the rental contract: 

1. Cost to repair damage to the vehicle, or the full value of the vehicle if it is a total loss 
2. “Diminished value” of the vehicle – the difference between what the vehicle was worth before the accident and what it is worth after repairs have been made 
3. “Loss of use” – the amount of money the rental company loses on rental fees while the vehicle is out of service for repair or replacement 
4. Administrative or loss-related expenses incurred by the rental company, such as fees for towing, appraisal, and claims adjustment, plus general office expenses for handling the paperwork

 Whether all or any of these costs are covered by your personal auto policy depends on several factors.  Since insurance companies sell different policies in Texas the coverage and exclusions may not be the same from one company to the next.  You should check with your agent because the differences can be significant. 

 When you have purchased the LDW, you can bring a damaged vehicle back to the rental company and walk away.  When you haven’t purchased the LDW, you may have to spend a significant amount of time dealing with the rental company and your insurance company.

 In Summary, your best bet may be to buy the Loss Damage Waiver from the rental company.  Peace of mind does have value.

Tornadoes: “Get a Kit, Make a Plan, Be Informed”

 Just a couple of weeks back we witnessed the incredible damage and loss of life caused by the violent outbreak of tornadoes through Mississippi, Alabama, Arkansas, and Tennessee.  Estimates are between 2 and 5 billion in damages and over 300 lives were lost.*  What makes tornadoes so violent and dangerous?  What is a tornado in terms of force?  A tornado is a violent rotating column of air extending from the base of a thunderstorm down to the ground.  The intensity is measured from F0 to F5.  tornadoes are capable of destroying well made structures, uprooting trees, and hurling objects thru the air like deadly missiles. Typically local stations will issue a Tornado Watch or a Tornado Warning.  A tornado watch means that tornadoes are possible in and near the area. A tornado warning indicates that a tornado has been sighted or indicated by weather radar.  Warnings indicate imminent danger to life and property.  If a warning is issued you should go immediately under ground to a basement, storm cellar, or an interior room.

What is the best method or methods to prepare for a tornado and its aftermath? 

Get a Kit:  This should include the basics of water, food, flashlight, battery-powered radio, extra batteries, first aid kit, blanket, manual can opener, matches, 7 day supply of your medications, pet food, extra cash, a whistle, and copies of personal data.  This is only a partial list but you can go to  various websites for a more detailed list.  

 Make a plan:  Have a meeting with your family to discuss, prepare, and respond to emergencies.  Identify  responsibilities for each family member. Plan what to do in case you are separated during the emergency.  Choose two places to meet– one outside the house in the neighborhood and another out of the area.  Choose an out of area person that all family members know to contact.  Plan what to do if evacuation is an option.  Choose where to go and how you will get there.  Include your pets and remember that all hotels are not pet friendly. 

 Be informed:  Learn about what type of disasters or emergencies may occur in your area. These events range from those affecting only you–a fire or medical emergency– to those affecting your entire community– a tornado, earthquake, or flood. Know the difference between watch and warnings signs. Prepare emergency contact cards for all household members and enter them on-line at http://www.redcross.org/prepare/ECCard.pdf.

 From an insurance standpoint consult your agent about your coverage.  Make sure that you are covered in the event of a disaster.  Take time BEFORE to make sure you are covered later.  Tornadoes are considered windstorms and are generally covered in your policy. Carriers will usually apply one deductible for property claims and sometimes (depending upon where you are located) apply a larger deductible for wind and/or hail. The deductible will apply per occurrence or per claim.  “Per claim” would mean a deductible per building.  When possible, always buy “per occurrence” as this has no limitation per building.  Business Interruption coverage can be purchased to cover your profits while your business is closed due to wind storm.  In summary, make sure you and your business are protected by having the right coverage BEFORE tornadoes or other disasters occur.

* Riley, Charles. “Storm Insurance Losses Estimated at $2 – $5 Billion – Apr. 29, 2011.” CNNMoney – Business, Financial and Personal Finance News. 29 Apr. 2011. Web. 03 May 2011. <http://money.cnn.com/2011/04/29/news/economy/tornado_damage/index.htm>. 

(We will provide a printed copy of the source upon request)