INSURING OWNERS DESIGN ERRORS AND OMISSIONS EXPOSURES

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Workshop W9

Workshop W9

Wednesday, November 12

1:30–2:45 p.m. and 3:05–4:20 p.m.

INSURING OWNERS’ DESIGN ERRORS AND OMISSIONS

EXPOSURES

Presented by

Jeff Slivka

Chief Operating Officer/Executive Vice President Construction Practice Leader

New Day Underwriting Managers LLC

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Expert

Advice.

Smart

Solutions.

New Day Underwriting is a specialty resource

for agents and brokers with a reputation for

providing undivided attention and proven

expertise for all of your construction related

professional liability and environmental

Knowledgeable

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Workshop W9

Jeff Slivka

Chief Operating Officer/Executive Vice-President

Construction Practice Leader

New Day Underwriting Managers LLC

Mr. Slivka is COO/Executive Vice President, Construction Practice Leader at New Day Underwriting Manag-ers LLC, where he assists in establishing the strategic direction and vision for the company. His expertise includes construction-related professional liability insurance (including contractor protective, owner pro-tective, and project professional liability programs), environmental insurance, and risk management ser-vices associated with each.

Having worked with major brokerage firms, managing agencies, and insurance carriers, Mr. Slivka has spent nearly 25 years developing his skills at Aon, Arthur J. Gallagher, and ECS, Inc./XL Environmental. Over his career, Mr. Slivka has assisted over 50 percent of the Engineering News Record (ENR) Top 400 Construction firms with managing environmental and/or professional liability. He has also been in the forefront of help-ing businesses address emerghelp-ing concerns such as buildhelp-ing information modelhelp-ing and sustainable design/ construction and he has conducted seminars on a variety of other topics including integrated project deliv-ery and environmental risk management.

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Workshop W9

Presented By: Jeff Slivka

Executive Vice President and Chief Operating Officer

New Day Underwriting Managers LLC

Insuring Project

Owners’ Professional

Liability Risks

Professional Liability Insurance Alternatives

Overview of Owner’s Protective

Owner’s Protective Features/Benefits

FAQs

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Slivka

Aptitude

Test

S.A.T.

1. Of the entities listed below, who retains the ultimate responsibility for design errors on a construction project?

a. Project owner

b. Design professional c. General Contractor d. POTUS

e. All of the above

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Workshop W9

1. Of the entities listed below, who retains the ultimate responsibility for design errors on a construction project?

a. Project owner

b. Design professional c. General Contractor d. POTUS

e. All of the above

Question 1

2. The Owner’s Protective product has been offered…

a. Since 1975 b. Since 1988 c. Since 2002

d. Only on freakin-huge projects

e. Since 1975 and only on freakin-huge projects

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2. The Owner’s Protective product has been offered…

a. Since 1975

b.Since 1988

c. Since 2002

d. Only on mega-huge projects

e. Since 1975 and only on mega-huge projects

Question 2

3. Since last year the percentage of

construction related professional liability claims have….

a. Decreased

b. Increased by about 30% c. Stayed the same

d. Risen by 351.5% e. None of the above

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Workshop W9

3. Since last year the percentage of

construction related professional liability claims have….

a. Decreased

b. Increased by about 30%

c. Stayed the same

d. Risen by 351.5% e. None of the above

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Workshop W9

Step 1….PL Alternatives

Professional Liability Insurance

Alternatives

Benefits Drawbacks

(Under or un-insured exposure)

Cost Relying on contractual indemnities Easy to achieve DPs may lack the financial strength

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Professional Liability Insurance

Alternatives

Requiring Evidence of DPs/DBs Practice Programs

Benefits Drawbacks

(Under or un-insured exposure)

Cost Impaired limit of insurance? Easy to achieve Quality of insurance program?

Renewal implications Named Insured = DP/DB Defense within the LOL

Limitations of liability provisions DP discontinues operations

Professional Liability Insurance

Alternatives

Project Excess Endorsements - Practice Programs

Benefits Drawbacks

(Under or un-insured exposure)

Cost Impaired limit of insurance? Dedicated portion of limit Quality of insurance program? Easy to achieve depending on carrier Renewal implications

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Workshop W9

Professional Liability Insurance

Alternatives

Project PL Policy

Benefits Drawbacks

(Under or un-insured exposure)

Primary protection (replaces DP/DB insurance)

Protects the DP/DB

Dedicated LOL and term = financial security LOL – may be maximum available Focused/quality coverage Defense within LOL

Owner = indemnified party Cost

Material variation endorsements Complex underwriting

Limited carrier interest

Note: Project policies defend the DP/DB from the third party claim (i.e. owner claim)

Professional Liability Insurance

Alternatives

Owner’s Protective E&O

Benefits Drawbacks

Supplements DP/DB PL insurance

Excess Insurance Additional Cost Dedicated LOL to named insured

Owner is only insured and beneficiary No interference with DP’s PL insurance DIC

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CORE CONCEPT:

Insuring against catastrophic

design errors or professional

liability loss

Overview of Owner’s

Protective

Two Primary Coverage Parts

Indemnity:

Indemnity for damages incurred by the Owner excess of the DP’S PL insurance

Result of DP’s negligent acts/errors/omissions

Damages that the Owner is legally entitled to

recover

Applies to design and/or other professional services

Overview of Owner’s

Protective

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Workshop W9

Two Additional Coverage Parts

Excess Contractors PollutionPollution Legal Liability

Structure options: Project or Blanket

Overview of Owner’s

Protective

Product Description

Owner hires DP to perform services

Requires PL limit via contract

Owner suffers damages($$) resulting from DP

services

Owner makes demand against the DP (aka protective claim)

DP tenders claim to its professional liability carrierPolicy pays the “delta”:

Total damages

-PL limits available from DP

Overview of Owner’s

Protective

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Owner’s Protective

Features/Benefits

Owner’s Protective E&O

Benefits Drawbacks

Supplements DP/DB PL insurance

Excess Insurance Additional Cost Dedicated LOL and term

Owner is only insured and beneficiary No interference with DP’s PL insurance DIC Provided

MIR – no subrogation against DP Reduced cost – Excess insurance Flat/non-auditable No MV endorsements Advocacy to owner Easier Underwriting/Administration Emerging market

Overview of OPPI

Marketplace

Carriers “Primary”: 6 or 7 carriers and growing Excess: Plus 3 or 4

Limits Up to $25,000,000 with single carrier or $100,000,000+ with layered approach

Term Construction term

ERP Up to 5 years OR LONGER

SIR $50,000 minimum

• may only be applicable to third party defense coverage

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Workshop W9

Are the Owner’s litigation costs against DP covered?

No. Policies typically contain exclusions for the insured’s legal expense in investigation, prosecution, adjustment or making of the claim against the DP.

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Is Owner’s Protective available for all types of projects?

Yes

Do limitations of liability in contracts with DP’s impact coverage?

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Workshop W9

Does the Owner’s Protective carrier pay prior to the DP’s professional liability carrier?

Typically No.

Excess v.

Primary

Should Owner’s Protective be purchased prior to design? Prior to construction?

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What project owners are most likely to buy Owner’s Protective?

Larger. Private. Sophisticated/Innovative Projects.

Goal: secure insurance program for catastrophic design/professional liability loss

What project types have the highest hit ratios with the carriers?

Healthcare Education

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Workshop W9

Does project size matter?

Yes.

Projects between $250M to $1B in CV Needing catastrophic protection

Jeff Slivka, ARM, CRIS New Day Underwriting Managers LLC Executive Vice President/Chief Operating Officer

609 298 3516 ext. 102

Jeff.slivka@@newdayunderwriting.com

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