M&A Due Diligence for Engineering Firms

REPORT

M&A Due Diligence for Engineering Firms

Commonly Overlooked Insurance Concerns

Mergers and acquisition (M&A) activity has accelerated in the architect, engineers, and contractors (A/E/C) space with a strong uptick in activity in 2021 which is expected to continue into 2022. The process of merging with or acquiring a new firm is complex and requires heavy due diligence. An important aspect of the due diligence process is the consolidation of, or, in certain circumstances, a conscious decision not to consolidate, the buyer’s and seller’s insurance programs to make sure that there are no uninsured liabilities or gaps in coverage post-closing. 

Based on our experience as an insurance brokerage and risk management firm specializing in A/E/C industries, below are the areas of insurance that are often overlooked during the due diligence process which, if not properly recognized, could have severe financial consequences to the buyer. 

  • Professional Liability 
  • Technology Errors and Omissions 
  • Workers’ Compensation 
  • General Liability 
  • Cyber Liability 
  • Representations and Warranties Insurance 
  • When Not to Consolidate Insurance Policies
Mergers & Acquisitions

Professional Liability

The bulk of an A/E/C firm’s exposure is covered under the professional liability (PL) policy. The first step to ensuring that the consolidation of this line of coverage occurs smoothly and to avoid any under-insured or uninsured liabilities is to determine the structure of the deal, and whether it will be an asset-only or a stock transaction. The elected deal structure has an impact in determining which party is responsible for pre-existing liabilities which can be addressed through the procurement of a tail policy, also referred to as an extended reporting period (ERP). A tail policy allows for an insured to report claims that are made against them after a policy has expired or been canceled as long as the wrongful act that gave rise to the claim took place during the expired or canceled policy period.

Tail policies are typically purchased by sellers in asset purchase transactions since pre-existing liabilities remain with them, meaning that the seller is responsible for future claims that arise from work performed prior to closing. This is usually backed up by an indemnity in the purchase agreement. If tail coverage is not purchased by the seller and a claim were to arise after closing for work performed by the seller prior to closing, then there would be no insurance coverage on either the seller’s cancelled Professional Liability policy – as it is no longer in effect – nor the buyer’s current Professional Liability policy in place, which would only provide coverage for claims that arise post-closing.

Our recommendation to buyers is to require sellers to purchase tail coverage even in asset-only transactions to avoid any uninsured liabilities and future uncertainty with courts potentially assigning liability to the buyer even with a purchase agreement in place outlining the seller’s responsibilities.

For stock transactions, there are generally two ways to address the pre-existing liabilities of the seller. The buyer can either integrate the full prior acts of the seller into their existing professional liability policy, or they can procure tail coverage through the seller’s professional liability policy and schedule excess coverage over this tail on their current professional liability policy. Most buyers elect to integrate the full prior acts of the seller into their existing policy as this is usually the cheaper option. However, the procurement of separate tail coverage should more often be considered for stock purchases so that the cost of the transaction (and its liabilities) is fully accounted for and does not create later balance sheet issues, especially if the buyer is involved in several transactions each year.

Insulating the seller’s pre-existing liabilities through the procurement of a tail policy as opposed to integrating them protects the buyer’s professional liability loss history, a factor insurers evaluate at renewal. A large claim brought against the seller post-acquisition for work done pre-acquisition would have an undetermined effect on the buyer’s future professional liability renewal pricing. The seller’s tail options are usually outlined in their professional liability policy with various options ranging from 1 year to 5 years. The buyer’s professional liability policy is then modified to pick up the past work of the seller (since they are buying the seller’s liabilities), but excess of the seller’s tail policy which acts as primary insurance. Any new work performed is picked up under the buyer’s professional liability policy on a going forward basis.

Some buyers elect to purchase the shortest tail option available to reduce costs at the time of the transaction, which we do not recommend, particularly since an A/E/C firm’s exposures for claims extends well past the expiration date of a particular policy period as claims are generally made several years after work is performed. Additionally, once the decision on the length of the tail is made at closing, it cannot be extended at a later date. Our advice to buyers in stock transactions is to purchase the longest available tail option on the seller’s professional liability policy (or at a minimum 3 years). Purchasing a longer tail option to remain in place during the lag time between when work is performed and a claim is made isolates a good portion of the exposure from the buyer’s professional liability program, as the tail policy acts as a buffer before the buyer’s professional liability policy responds.

Our firm has seen a number of large claims filed under tail policies which protected our client’s professional liability loss history and minimized any impacts on future renewals. For example, a seller firm worked on a project where they provided surveying and staking services prior to closing. The firm used inaccurate reference points which resulted in errors during the staking of the site, but these errors were not discovered until 2 years later after the site had been graded. If the decision was made during due diligence to purchase the shortest tail option available of 1 year, then there would be no coverage under the seller’s program and the buyer would have to assume the liability and subsequent costs associated with work performed by the seller pre-closing.

Another recommendation is to have the buyer’s insurance broker become the broker of record (BOR) of the tail policy to control the placement of the tail and the servicing that comes with it. This includes filing claims, obtaining sensitive loss information, and the coordination of complex mixed claim scenarios in the event that a claim or circumstance triggers both the seller’s tail policy and the buyer’s professional liability policy.

Technology Errors and Omissions

For A/E/C firms merging with or acquiring a firm that provides technology services or products, one of the fastest-growing industries worldwide, a careful examination of the seller’s technology errors and omission (Tech E&O) policy and most recently completed application must be conducted by your insurance advisor to understand all services provided by the seller. If the buyer firm does not already have a Tech E&O policy in place, a thorough analysis of the seller’s services should be performed to determine if there is coverage under the buyer’s PL policy. Some policies exclude technology-based services or software products altogether, while others may provide limited tech coverage but do not have an adequate definition of professional services to pick up all services provided by the seller.

Moreover, other insurers may exclude consulting services (which are covered under professional liability policies) if it pertains to technology-based consulting services – an important distinction. A/E/C PL insurance policies usually do not provide adequate coverage for tech services and relying on this policy alone could be a risky decision.

Our recommendation for A/E/C firms looking to move into the tech industry via a merger or acquisition is to have your insurance advisor perform an in-depth analysis of all services provided by the seller. New policies or significant amendments to current policies in place will most likely be needed in order to avoid uninsured liabilities post-closing.

Workers’ Compensation

Each year, the National Council on Compensation Insurance (NCCI) issues a new experience modification rate (EMR) for eligible businesses comparing its actual loss experience against the expected loss experience of other businesses in their classifications and states based upon data collected from millions of workers’ compensation claims and policies. This rate must be used by insurers to calculate premiums for workers’ compensation policies in about 40 states. When one firm purchases another firm, assuming they both have NCCI EMR’s, the acquiring firm is also purchasing the loss experience of the target firm, meaning that they are also buying their workers’ compensation payroll, classification, and loss history. This, in turn, impacts the buyer’s EMR.

NCCI has specific rules as to combinability, with ownership being the principal driver. Firms under common ownership (even if the % of ownership differs) generally must have their payroll classification and claims experience combined for EMR purposes. This is most commonly determined by a specific NCCI form detailing ownership and the combination, which NCCI uses to set combinability. With few exceptions, NCCI’s determination is not challengeable. In a stock acquisition, integration of the seller’s EMR with the buyer’s EMR post-closing is an insurance issue often overlooked during the buyer’s due diligence process.

The resulting effects can be serious both in terms of increased premiums and potential loss or ineligibility of work. For example, a buyer firm with an EMR of 0.89 purchased a firm with an EMR of 1.15. The transaction was reported to NCCI in accordance with the rules governing business combinations, and the buyer’s EMR increased to 1.05. This resulted in a $30,000 additional premium at audit time and an increased premium in subsequent renewals. Additionally, since the buyer’s EMR is now above a 1.00, their bids on 2 jobs were rejected by large industrial clients who have strict rules preventing any vendor with an EMR over 1.00 to work on their sites, resulting in a $1.2M loss in work.

While it is common for buyers to request a copy of the seller’s loss runs detailing claims during the due diligence process, it is uncommon for buyers to request a copy of the seller’s current Experience Rating Worksheet which outlines the firm’s EMR rating, including policy audits for three years. This data enables a broker to predict the combined buyer and seller EMR.

High EMR’s are not solely attributable to one-off, large losses. Claim frequency, even if it results in relatively small claim amounts, can also push a firm’s EMR over 1.00. In fact, based on the way that NCCI calculates EMR, high frequency, smaller losses can push a firm’s EMR higher than a single large loss would. Based on the many variables that go into how EMR is calculated, viewing loss runs alone will not provide enough insight to the buyer’s insurance broker to determine the impacts that the transaction will have on the buyer’s EMR post-closing. Due to the many implications of an increased EMR, it is recommended for stock acquisitions that a full analysis of the impact of the seller’s workers’ compensation payrolls, classifications, states of exposure and claims experience on the buyer’s EMR is performed as part of the due diligence process.

General Liability

For contractors merging with or acquiring another firm, an important coverage to consider during the due diligence process is completed operations coverage for discontinued operations, which can be thought of as a tail policy for general liability. This policy provides coverage for incidents of bodily injury or property damage to a third party arising after a business is no longer operating. It is important for sellers to investigate this coverage if the buyer has included as a condition of sale that they will not assume liability for any injuries caused by work performed prior to the date of sale.

This coverage can also be advantageous for the buyer to procure on behalf of the seller if the buyer wants to protect itself against future bodily injury or property damage claims that arise out of work performed by the seller prior to the closing date as this policy effectively separates the seller’s past work exposure from the buyer’s general liability policy. This coverage can be expensive, but usually decreases by a certain percentage each year, as the risk of liability falls overtime in relation to the statutes of repose in the states of exposure. However, the cost of the policy can be justified in many cases, particularly for contractors with high general liability rates as the buyer’s insurer will price the addition of the combined firm’s exposures at a lower rate knowing that they are not responsible for past exposures of the acquired firm.

As with professional liability, our recommendation is to have the buyer’s broker become the broker of record to control the placement of the policy and the service that comes with it. This includes claims filing, obtaining sensitive loss information, and the coordination of complex mixed claim situations if a claim or circumstance triggers both the seller’s completed operations coverage for discontinued operations and the buyer’s general liability policy.

Cyber Liability

Another line of coverage where tail insurance is often missed during the due diligence process is the cyber liability policy. Potential claim scenarios covered by a cyber tail are not as intuitive as with professional liability and general liability. However, in today’s world where cyber claims are on the rise, we recommend that tail coverage be considered for cyber liability as well.

For asset transactions, the ideal course of action is to fold the seller entity into the buyer’s cyber liability policy effective on the date of the acquisition with full prior acts coverage. If the buyer’s cyber insurer does not agree to full prior acts, then the tail option on seller’s cyber policy comes into play.

For stock transactions, we recommend procuring tail coverage on the seller’s cyber policy as potential unknown liabilities relative to data and privacy can exist after closing which would not be covered under the buyer’s policy. Claims scenarios that would be picked up under the tail policy, but not under the buyer’s cyber policy post-closing are usually related to liability due to wrongful acts resulting in misappropriation of data, as opposed to ransomware or hacking. For example, an employee of the seller entity left plans out pre-closing which were then sold to third parties, but the act was not made known until post-closing. In this scenario there would be no coverage under the buyer’s policy. Without the purchase of a tail under the seller’s policy, this would result in an uninsured liability that would be absorbed by the buyer. The cleanest way to address any unknown liability due to pre-transaction acts or negligence that manifest in alleged liability is through the procurement of tail coverage on the seller’s policy.

Representations and Warranties Insurance

For larger transactions, there is a specific insurance product on the market, representations, and warranties insurance, which provides protection against financial losses for certain unintentional and unknown breaches of the seller’s representations and warranties made in a merger or acquisition agreement. We make the distinction of “larger transactions” as the cost for this insurance – which typically ranges from 2.5% to 5% of the coverage limits – generally is not justified for smaller transactions.

The product is unique in that limits and retention can be negotiated with the insurer and responsibility for the retention can be split between the buyer and the seller. When the product was first introduced, many insureds were suspicious that an insurer would cover these types of claims; however, over the past several years, we have seen insurers pay valid claims under these policies allowing insureds to feel more comfortable relying on this insurance.

The product is available for both buyers and sellers and provides key benefits for both sides. For a buyer-side policy, this insurance offers additional protection beyond the negotiated indemnity cap and survival limitations in a purchase agreement. For a seller-side policy, this insurance can reduce the amount of funds held back in escrow. It’s important to note that this insurance is not a catch-all product and policies are issued with standard exclusions, such as known breaches. Additionally, the insurer will conduct detailed underwriting for each deal, and may also add transaction-specific exclusions, which can include professional liability, cyber liability, and directors and officers exclusions.

When Not to Consolidate

For some transactions, the conscious decision may be made to not consolidate the buyer’s and seller’s insurance programs. One example would be if the seller’s services are riskier than the buyer’s portfolio and falls outside of the appetite of the buyer’s insurers. Types of risk that could potentially make insurers hesitant include the performance of construction or remediation activities, large vehicle fleets, and poor loss history. Another example would be if the target firm provides technology services involving heavy software and technology exposures. In this situation it may be preferable to keep the technology-based insurance program separate from a more traditional engineering program to ensure that the digital risks are adequately covered.

International acquisitions are another example of when it can be beneficial to keep the seller’s insurance program in effect, particularly if the buyer does not already have a local insurance program in place or a local presence. In these cases, the buyer can usually be added as an additional named insured on the seller’s local program and the policies can remain in effect rather than cancelling the program at closing.

Finally, if the transaction is set up as a partial ownership acquisition where the buyer is not purchasing 100% of the seller firm, then the best route may be to keep the insurance programs separate as well.

It is important to note that in each of these situations, the seller’s insurers must be fully aware of the transaction as many insurance policies include “change-in-control” or similar provisions which restrict or eliminate coverage due to changes in ownership. We strongly advise engaging both the buyer’s and seller’s insurance brokers when contemplating the idea of maintaining separate insurance programs post-closing to avoid any unintentional gaps or full loss of coverage.

Conclusion

Mergers and acquisitions require a significant amount of due diligence. Insurance plays an important role in the process to assist buyers in evaluating risks. Insurance brokers should be conducting an in-depth review of the target firm’s business profile and services to identify and understand the exposures and key risks associated with them. A thorough review and assessment of the seller’s insurance program should also be conducted and a summary of key policy provisions including insuring agreements, definitions, exclusions, and conditions along with the claim reporting provisions should be provided to ensure customary coverages relevant to the seller’s industry are included. This also assists in identifying under-insured or un-insured risks and how to best manage them.

A full analysis of pending claims should also be conducted to assess potential exposure and the applicability of coverage. Additionally, your insurance broker should provide advice on how best to consolidate exposures or assist buyers with the conscious decision to not consolidate programs. Insurance products needed to adequately insure exposures, mitigate risks, and facilitate transactions should also be evaluated and recommended if necessary.

There are numerous factors for insurance brokers to evaluate and consider to ensure that there are no gaps in coverage or under-insured or un-insured liabilities post-closing. It can be costly and detrimental to the success of a transaction if these factors are not properly evaluated. As an insurance brokerage and risk management firm specializing in the A/E/C industries, we partner with buyers and their legal team to provide our expertise, conscious advice, and accumulated experience to guide them through the mergers and acquisitions due diligence process.

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AUTHOR

Nina_Vicario 2

Nina Vicario, CRIS

BROKER

[email protected]

(770) 220-7684

Nina Vicario is a broker with Greyling Insurance Brokerage, a division of EPIC. She is responsible for supporting client executives with negotiating, placing, and servicing professional liability and property/casualty insurance programs for our large design firms and design-builder clients. She works with clients that have global operations and revenues from $100 million to more than $1 billion. She is also experienced with providing insurance due diligence services as they relate to mergers and acquisitions.

Rules of the Rental Road

REPORT

Rules of the Rental Road

How to Avoid Buying Trouble When You Rent a Car

You’re on a business trip that requires a rental car. You’ve endured the flight, made it out of the airport, ridden the bus, and reached the rental-car counter. The clerk asks if you want to buy any of the four different coverages offered. It will cost your firm as much as $40 per day if you say “Yes” to everything. You need the car for a full week, and $280 seems like a lot of money on top of the rental fee. You say “No,” and the clerk places the contract on the counter, instructing you to “Initial here… and here… and here… and here….” You know your firm is well-run; you figure the firm has all the necessary coverage in place; you know the coverage is overpriced; so you initial box after box, page after page. You take the keys and drive away, secure in the knowledge that you made the right decision.

But unlike every other time you’ve rented a car on a business trip, this time, you have an accident. A car runs a stop sign and pulls out onto the highway doing 20 miles per hour. You jam on the brakes, but the collision is unavoidable. You’re OK, but the rental car definitely is not. You know that dealing with the accident will be an inconvenience, but you are certain that your firm or your credit card will insure the loss. And the other guy seems to be at fault. What could go wrong?
rental car policy
The answer, unfortunately, is a $14,800 bill from the rental-car company, but only $7,800 in insurance coverage. It turns out that under the rental-car agreement, you are responsible for “diminution of value.” In this case, the car was valued at $26,500 before the accident. It was sold at auction for $11,700, resulting in a $14,800 loss. Your insurance will only cover $7,800, which includes the total amount for the cost to repair the vehicle, a portion of the loss of income to the rental-car company, and the cost of the appraisal. Since you signed the agreement, the $7,800 uninsured gap is your responsibility, and you have to hope your firm-which has no formal policy on this issue-will back you up.

To help your firm avoid surprises and make the right choices in its corporate policies for renting cars, this article looks at car rental, including:
  • Rental-Car Company Options
  • Coverage for the Gaps
  • Other Sources of Coverage
  • Steps to Protect Your Firm

Rental-Car Company Options

Most rental-car agreements give you the choice of buying or rejecting various coverages. The following are the four most common options:

  1.   Collision damage waiver
  2.   Supplemental liability protection
  3.   Personal accidental insurance
  4.   Personal effects coverage

Collision Damage Waiver
Purchasing the collision damage waiver {CDW) shifts all financial responsibility to the rental-car company in the event that the vehicle is damaged. If the renter does not buy the CDW, the responsibility is on the renter for damage even if the renter is not at fault. The financial responsibility is not limited to the cost of the vehicle, but also includes loss of rental income and diminution of value.

  • Loss of Rental Income: If the damage to the rental vehicle means that it must be withdrawn from service while being repaired, the rental-car company will derive no income from that vehicle for that period of time. Many rental-car agreements require that the renter be responsible for that loss of income.
  • Diminution of Value: A vehicle that has been in an accident, even after it has been repaired, generally loses some resale value. Many rentalcar agreements hold the renter responsible for that loss of resale value. If the damages are substantial, the rental-car company may decide to sell the damaged vehicle at auction. The renter will be responsible for the difference between that sale and the value of the vehicle before it was damaged-which may amount to thousands of dollars.

And rental-car agreements tend to have a catchall clause or two that hold the renter accountable for other costs, such as claims administrative fees, storage or impound fees, towing fees, and any other costs the rental-car company may incur in the process of recovering the vehicle and establishing the amount of the damage.

The cost of the CDW tends to be in the range of $10 to $25 per day. This is clearly overpriced. If you do the math, that adds up to an annualized figure ranging from $3,650 to $9,125 for physical damage coverage. But that extra cost may still be preferable to the potential costs of not buying the CDW.

It should also be noted that the CDW does not cover every instance of damage. Certain actions on the part of the renter may invalidate coverage, such as:

  • Letting someone other than the renter or other authorized driver operate the car
  • Being under the influence of alcohol or drugs at the time of the accident
  • Using the vehicle in a reckless or wanton manner
  • Driving the vehicle off-road
  • Transporting hazardous materials

Most of the restrictions are reasonable – activities that your firm would likely not permit in any event. It is important, nonetheless, to be aware of them. It would be disheartening to buy the CDW, then be on the hook for a large sum because the driver was not authorized and/or violated one or more of these conditions.

Supplemental Liability Protection
Supplemental liability protection will provide the renter with third-party liability coverage in the event of an at-fault accident. One typical limit of liability is a $1 million combined single limit for bodily injury and property damage. The cost for this option is generally $10 to $20 per day.

If the renter declines this option, there may be some coverage available from the rental-car company, but not much. Most rental-car companies will provide only the minimum limits required by the states in which the vehicles are registered and/or are being driven.

One typical state requirement for bodily injury is $20,000 per person, $40,000 per accident. If a renter is involved in an accident in a state with that requirement and the accident causes severe bodily injuries to one or more people, the lower limits will likely be insufficient to pay the damages.

An additional complication is that not every rental car company carries even the minimum coverage in every state. For example, one company’s brochure clearly states that with regard to liability insurance, the rental-car company “is not required to provide such minimum protection in all states.”

Personal Accident Insurance
Many rental-car companies offer coverage for injuries to the renter and to passengers. There is coverage for medical expenses up to a certain fixed limit, such as $2,500 per person. In addition, there is often a fixed limit for the death of the person renting the vehicle, such $100,000, with an additional amount equal to 10 percent for the death of a passenger. This coverage generally costs less than $10 per day. If you decline this coverage, there is no coverage from the rental-car company for injuries either to you or to your passengers.

Personal Effects Coverage
Rental-car companies offer personal effects coverage, usually for less than $5 per day. Coverage applies to the renter’s personal effects while in the vehicle and while in a hotel room or other building while on a trip using the vehicle. If you decline this option, again, there is no coverage from the rental-car company for your loss.

Making the Right Choices
What to do can be confusing. The easiest thing to do, of course, would be to buy all of the optional coverages, but at $40 or more per day, that seems foolish. Most travelers-and certainly most business travelers-have access to other insurance that may partially or fully overlap what is offered. The problem is that there are some gaps, and those can become very expensive.

Coverage for the Gaps

The biggest gap in the coverage provided by personal and business auto policies for rental cars is the financial responsibility the renter has for damage to the vehicle-particularly for any diminution of value. The same type of coverage gap used to be an issue for those who lease their vehicles. In 2001, the mainstream insurance industry caught up to reality with the release of Insurance Services Office, Inc. (ISO) form CA 20 71 10 01, “Auto Loan/Lease Gap Coverage.” This form provides coverage for many of the gaps between the physical damage coverage you can buy to cover any auto and the additional exposures that are part of most leasing agreements.

What is needed for rental cars is a similar “leap forward” by insurers that will pick up the cost of all those additional exposures under rental agreements. We would suggest the best way to accomplish this would be with some type of “Auto Rental Gap Coverage” that covers those costs on a similar basis.

Unfortunately, our survey of several leading insurers determined that none of them have any near-term plans for providing such coverage.

Other Sources of Coverage

Some level of coverage for the four options is available from other sources.

Collision Damage Waiver
The collision damage waiver is actually a misnomer, as it covers far more than just collision damage. It also includes theft, so-called “Acts of God” (such as earthquake, lightning, and similar perils), and other causes of loss to the vehicle-all often called “physical damage.”

There are at least three other potential sources of physical damage coverage:

Personal Auto Policy: Physical damage coverage on the typical personal auto policy is fairly broad, applying in excess of any other collectible insurance for any other vehicle in the custody of or being operated by the insured. It applies not only to the individual named insured, but also to his/her spouse and other family members living in the same household.

But coverage applies only if the individual insured has purchased physical damage on his/her own vehicle. Keep in mind that some people drop physical damage coverage when their vehicles are beyond a certain age.

Business Auto Policy: Virtually every firm purchases some business auto coverage. Even if the firm owns no vehicles, the firm will purchase liability coverage for hired and nonowned autos, which would include rental cars. For “a few dollars more,” coverage can be extended to include physical damage. With some insurers, coverage can also be structured to act as primary insurance by treating any auto hired by an employee to conduct business on behalf of the firm as an “owned auto.”

If your firm requires a lot of travel that entails renting vehicles to conduct the firm’s business, this is probably a reasonable option. Of course, the amount of those “few dollars more” will vary, based in part on how often your firm rents vehicles and on the terms and conditions of the rental agreements.

Credit Card Benefits: From time to time, credit card companies will include some automatic coverage for rental cars as part of their benefits to cardholders. But coverage tends to be in excess of any other coverage available to pay the claim, and it does not generally cover such exposures as loss of rental income or diminution in value.

As well, there have been instances of credit card companies eliminating this and other benefits with little warning. Notification of the cessation of coverage may be part of a larger notice of changes to the credit card terms and conditions. Thus, it would be all too easy to miss the notice that this particular benefit was no longer provided.

At least one premium credit card company currently offers primary physical damage coverage for a flat fee per rental. The fee is lower than the average cost of buying a collision damage waiver from a rental-car company. However, this is available only to high-end customers, which may not include everyone at your firm who may rent a car from time to time.

The Gaps: Assuming there is physical damage coverage for a rental car under a personal auto policy and/or the firm’s business auto policy, there is still a shortfall, a gap between the coverage and the financial responsibility of the renter.

First, coverage for the damage is limited to the “actual cash value” of the damaged vehicle or the cost to repair it, but some rental agreements make you responsible for the vehicle’s replacement cost. Second, both personal and business auto policies include only a modest amount for a rental-car company’s loss of income-typically up to $20 per day, to a maximum of $600-if the individual is legally responsible for such expenses. This is clearly well below the amount a rental-car company generally charges in rental fees. Any shortfall will come out of the renter’s own pocket.

As for coverage under credit cards, it is unlikely that it would cover diminution in value, loss of rental income, or any of the other extras for which the renter could be responsible. Firms considering this option should investigate the particulars of the applicable credit card agreement thoroughly.

Note: Physical damage coverage provided by the personal and business auto policies may vary from one state to the next.

 

Supplemental Liability Protection
There are at least two sources of liability protection for anyone who rents a car for business:

Personal Auto Policy: The liability coverage under a personal auto policy is also fairly broad, extending to any vehicle driven by the individual named insured, his/her spouse, and/or other family members living in the same household.

This coverage is excess over any other collectible insurance-such as the rental-car company’s minimum coverage. And in those instances where the rental-car company provides no coverage, the personal auto policy will act as primary.

Business Auto Policy: As already noted, virtually every firm purchases some coverage for hired autos-in other words, rental cars. This coverage is most often purchased only for liability and only as excess, over and above any other coverage available to the particular accident, including both the rental-car company’s policy and the employee’s personal auto policy.

If the renter/employee does not have a personal auto policy, this coverage will kick in above the minimum coverage provided by the rental-car company. And in those instances where there is no personal auto policy and no coverage from the rental-car company, the business auto policy will act as primary. The firm also has the option of making the hired and non-owned auto liability act as primary regardless of other coverages available.

Note: As with physical damage, the liability coverage provided by the personal and business auto policies may vary from one state to the next.

 

Personal Accident Insurance
There are at least four potential sources of coverage for injury to the renter and to passengers in the vehicle.

Workers Compensation: Assuming the renter uses the rental car strictly for business, any injuries to the renter will be covered by the firm’s workers compensation coverage. This coverage, mandatory in virtually all states, is primary. As for injuries to passengers, if they are also in the vehicle as part of their jobs, they, too, will be covered by workers compensation.

Health Insurance: If the renter keeps the rental car a few extra days for strictly personal use, with the firm’s permission, the individual’s health insurance will provide coverage for any medical costs. If the renter’s spouse and/or children have accompanied the renter on the business trip, any injuries they sustain will also be covered by health insurance.

Personal and Business Auto Policies: If the accident is determined to be the fault of another party-for example, a vehicle that has run a stop sign and broadsided the rental car-the injured party or parties can sue the other driver. This is true in most states even if the injured parties are covered by workers compensation, but the workers compensation insurer does have the right to be reimbursed out of the proceeds of such a suit for the amounts it has paid.

Business Travel Accident: Some firms purchase business travel accident insurance, which is virtually identical to the coverage offered by rental-car companies-except that it may have higher limits and be more cost-effective.

 

Personal Effects Coverage
And finally, there are at least two potential sources of coverage for personal effects.

Homeowners Policy: The basic homeowners policy provides some coverage for business property away from the premises. For other than electronic apparatus, the coverage limit is $500; for electronic apparatus and accessories, $1,500.

The electronic apparatus must be equipped to be operated by power from a motor vehicle’s electrical system while still capable of being operated by other power sources. This coverage is clearly intended for cell phones, personal digital assistants (PDAs), and similar equipment.

Note: There are many variations in homeowners policies. Some will provide broader coverage.

Business Personal Property Policy: The basic coverage form for business personal property includes up to $2,500 for personal effects. Coverage can be extended to include property off premises. Unfortunately, the coverage does not apply to property in or on a vehicle. However, most insurers offer enhanced coverage forms, and many of them provide broader coverage that would include both personal effects and business personal property in transit.

Note: The terms and conditions of business personal property policies vary from state to state. As noted, the basic commercial business property form does not cover loss to property in vehicles. Coverage for such losses under enhanced coverage forms varies from one insurer to another.

If your firm has large values of business personal property away from your insured premises on a regular basis, you should discuss your coverage with your insurance broker to determine if your firm’s coverage is adequate or what changes need to be made to provide protection.

Steps to Protect Your Firm

There are certain steps that you can take to protect your firm and yourself in the bewildering world of rental-car coverage and coverage gaps. Most importantly, you should decide how to handle each of the four options in advance, rather than leave it up to the discretion of a business traveler in a hurry to get the car and get on the road. The following are our recommendations.


Collision Damage Waiver
Unless and until the insurance industry catches up to the physical damage coverage gaps, firms with employees who rent cars for business from time to time must devise a strategy that limits their risk to a comfortable level. That may well be different for each firm, as some are risk-averse, while others are risk takers. In determining the level of risk your firm should accept, remember this simple principle of risk management: Never risk a lot for a little.

The following are our suggestions for “Rules of the Rental Road.”

  • If your firm rarely rents cars, always buy the CDW.
  • If your firm rents cars on a regular basis, determine which rental-car company or companies the firm’s members and employees most often use. Contact the top two or three rental-car companies, and discuss establishing a more formal relationship with one of them. This should include modification or elimination of some of the more onerous conditions found in standard rental agreements. Some of those modifications may include:
    • Shifting responsibility back to the
    • rental-car company for damages above a certain dollar limit
    • Lowering the deductible in the event of an accident
    • Adding automatic permission for colleagues and/or spouses to drive the vehicle
    • Having the rental-car company’s coverage be primary
    • Revising any other contract terms that pose a problem for your firm in particular.
  • To be sure you’ve covered all the bases, you should consult with your attorney about the contract revisions-before, during, and after your negotiations. Be certain that the wording does what you want it to do and does not create any unintended loopholes.
  • Once you’ve settled on one company, notify all of your firm’s members and staff of that agreement. Make sure they understand that they are to use that particular company and rent cars under the corporate agreement whenever possible.
  • Also notify all of the firm’s members and staff that if they are unable to use that rental-car company for any reason-for example, no cars are available or there is no rental-car office at a particular destination-they may rent from another company, but must purchase the CDW.

Supplemental Liability Protection
On the liability front, the personal auto policy and/or the business auto policy fill the gap created by the typical rental-car agreement, either acting in excess of the minimum coverage provided by the rental-car company or, in those states where there is no coverage, providing first-dollar coverage. But in some states, if you’re in an accident or just stopped by the police for any reason, you must be able to present evidence of insurance or face sometimes stiff penalties.

Rather than trying to keep track of 50 state laws plus the District of Columbia, your firm should require all employees who may rent a vehicle on company business to carry proof of coverage with them at all times. A simple auto ID card showing bodily injury and property damage limits of liability will establish that the renter does have the necessary coverage. That could be a personal auto ID card or the firm’s auto ID card.


Personal Accident Insurance
Our recommendation is not to buy this coverage. As long as your firm’s employees are traveling on business, you have already provided this coverage with your workers compensation policy. For some firms, this is supplemented by a business travel accident policy.

And for use after the business trip is over, if the employee takes some personal time at the travel destination, there will be coverage under the firm’s health insurance policy, assuming your firm provides health insurance. If the individual is not covered by health insurance, he/she might want to consider buying coverage personally, but not at the firm’s expense.


Personal Effects Coverage
Again, our recommendation is not to buy this coverage. There should be adequate coverage between the renter’s homeowners policy and an enhanced business coverage form for the firm.


Notifying Employees
Firms that establish a relationship and sign a contract with a specific rental-car company should provide this information in writing to everyone authorized to rent a car. This will facilitate their always renting from the right company in the name of the firm. The written notification should include:

  • Name of your firm
  • Name of your preferred rental company
  • Contract number (if there is a contract number)
  • Instructions regarding purchasing- or not purchasing- the CDW
  • Instructions regarding what to do if the individual is unable to rent from the preferred rental-car company.

Firms that do not rent enough vehicles to negotiate a corporate agreement still need a policy that will address what coverages to purchase or decline.

If your firm is confronted with any of these rental car risk issues, please don’t hesitate to contact us for a solution.

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AUTHOR

Gregg Bundschuh

Gregg bundschuh, JD

CO-FOUNDER & MANAGING PRINCIPAL

[email protected]

(770) 552-4225

Gregg Bundschuh is a co-founder and an equity partner of Greyling Insurance Brokerage. He is nationally recognized for his active role in addressing emerging issues that affect the construction, design, and development communities. He advises clients of the firm on their insurance programs and risk management strategies. He also provides guidance to industry organizations such as the Associated General Contractors of America (AGC), the American Institute of Architects (AIA), the American Council of Engineering Companies (ACEC), and the National Council of Architectural Registration Boards (NCARB). Gregg’s unique perspective on risk and insurance issues reflects his background as a construction lawyer, a general counsel to an international design firm, and an insurance broker and risk consultant.

Gregg’s experience includes design of customized insurance policies for risks associated with building information modeling (BIM) and integrated project delivery (IPD). He has developed insurance and risk management programs for domestic and international firms in a wide range of industries. In addition, he has spoken before dozens of national and international gatherings concerned with design, construction, risk management, and insurance matters. His publications include An Owners’ Guide to Construction Risk Management & Insurance; the insurance chapter of the New York Construction Law Manual; and The Design/Build Deskbook.

Dispute Resolution

ARTICLE

Dispute Resolution

CHECKLIST FOR DRAFTING AND REVIEWING SETTLEMENT AGREEMENTS

After the drawn-out process of contesting a claim and reaching a deal-in-principle to resolve it, executing a settlement agreement can often feel like an afterthought and mere formality. Don’t succumb to that type of thinking. Despite the exchange of that value settlement agreements facilitate, and the vitality they bring to the closure of time-rending disputes, all too many settlement agreements look like a mismatched cobble of copy-and-pasted parts. Don’t draft or endorse such a creation. The ultimate objective of drafters and signatories should be to develop and execute a document that enables a third party, unfamiliar with the matter, to comprehend what was settled, how it was settled, and find that its provisions are compliant with applicable law.


Unfortunately, settlement agreements that aren’t thoughtfully drafted to match the particulars of the matter being settled and the procedural requirements of the governing jurisdiction can leave a settling party exposed to subsequent claims and disputes that the party thought it paid to settle.

zombie

Don't let an improperly drafted settlement agreement allow unresolved matters to come back from the dead.

Whether you are self-drafting or reviewing an agreement, use the following checklist to inform the settlement agreement’s development and negotiation to achieve your objectives for closing out a matter.

Define What and How the Claims Are Settled

The fundamental first task for drafting or reviewing the settlement agreement is defining what and how the disputed claim(s) are subject to settlement. The content of these provisions informs the development of the remaining provisions of the agreement.

The first step in writing these definitions is identifying the type of claim(s) presented for resolution – ranging from a single discrete issue to multiple claims or cases. If the settlement agreement’s objective is to secure finality in resolving the matter, then accurately capturing the extent of that matter is critical to defending against subsequent disputes about whether a claim(s) was finally settled or not. Ambiguous, incomplete, or conflicting descriptions of the claim(s) crack the door for a party to renew, or initiate new claim(s) that were intended to be settled and closed.
  • Single Issue Claim:
    An example of this type of claim is when a project owner claims professional negligence against a design firm alleging a single standard of care breach resulting in direct damages and costs to the owner. This is the most straightforward settlement scenario and lends itself to discrete definition.
  • Multiple Claims or Claim with Multiple Components:
    An example of this type of claim is one where a project owner claims professional negligence against an architectural firm, alleging multiple standard of care breaches and design deficiencies in multiple parts of a building arising out of the firm's services on a project. The owner alleges the breaches and deficiencies caused the owner various direct damages and exposure to claims for costs and damages by third party construction contractors working on the project. In this scenario, the claims need to be parsed out into their individual components and then appropriately defined (as discussed further below) for according disposition.
  • Companion Claims:
    An example of this type of claim is when an employee of a design firm initially files a claim for workers' compensation benefits then adds further related claims or causes of action. In addition to filing the workers' compensation claim, the employee files an accompanying employment liability claim alleging the employer firm improperly handled the employee's injury, employment status, or accommodations in the course of the workers' compensation claim. The workers' compensation claim may be covered by the firm's workers' compensation policy and adjudicated through the applicable state's administrative law system. Meanwhile, the employment liability claims may be covered by the employment practices liability policy and may be adjudicated through litigation or private arbitration.

    While the claims are companions to each other, their separate and distinct insurance coverages and adjudication forums may dictate that the claims have separate settlement agreements, which may have to utilize a particular form agreement. It is important to consider that your outside counsel and insurance company partners will likely be different for each claim as well. Inasmuch, they are likely only familiar with their claim. For that reason, a party will need to assume a coordination role between the two camps as necessary to share information and coordinate settlement considerations.
  • Definition:
    Once a party has ascertained the type of claim(s) to be settled, focus should shift to defining those claim(s) in the agreement. A single claim is relatively simple, and once a party reduces the issue to a definition, the focus can shift to the identification of the remedy afforded.

    In a multiple claim(s) scenario, the parties have to draft around the full extent of the claim(s) being settled, reserved, or qualified. If the claims were made in writing or a lawsuit was filed, consider referencing and incorporating those documents as exhibits to function as the definition. Claims are often a mix of written and verbal claims, allegations, evidence, etc… In those cases, it is often most prudent to define the claims and disputes as broadly as possible, then carve out exceptions (if any). Be prepared to confront the issues of latent claims as part of global release provisions. If the intent of the settlement agreement is to release claims whether known or unknown, then the language should include a specific waiver of those claims. Take care if introducing new defined terms into the settlement agreement. To the extent possible, the parties should reach back into the underlying contract(s) and utilize those terms.

    Companion claims should be defined individually for each separate case or cause of action. If required to use separate agreements, those agreements should cross-reference each other to the extent possible. If companion claims involve multiple parties in a contractual chain (e.g. project owner vs. architect and architect vs. civil design subconsultant), the agreements need to be coordinated.
  • Remedy:
    Working hand-in-hand with the definition provisions are the remedy provisions. These are the commitments of value that one party, or perhaps both parties, commit to the deal, forming the legal consideration for the agreement. Again, if the objective is finality and closure, then the parties should take care to define the exchange of value(s) in consideration of settlement of the disputes. Here are best practices:

    • Narrate the provision as if you are a sports play-by-play announcer conveying the action of a sporting event to an audience. For example… "In consideration of the mutual promises herein, Party A pays to Party B, and Party B accepts from Party A, the sum of $XXXX.XX to forever and completely settle the Claims and any other Controversy ever arising, connected to known or unknown, from the Project." If the value conveyed includes concession of a claim of a quantifiable value, spell that claim and its quantity out.
    • If the value includes contribution of value-in-kind (i.e. service credits, or services at a discounted rate) then prescribe and quantify the type and value of those contributions in detail.
    • Narrate the process by which the value is exchanged. This can be as straightforward as stipulating that the payor will draft a check, convey by mail service to payee's attorney, signature of receipt required from payee's attorney, within a certain number of days from receipt of fully executed copies of the settlement. In more complicated scenarios that involve mutual exchanges of concessions of value or contributions-in-kind, the parties should go to specific lengths to dictate the mechanics of how the values are documented, accounted for, and recognized.
    • Whenever attainable, include reciprocal indemnity, release, waiver, and hold harmless provisions as a component of the remedy. Some parties feel that these provisions are "overkill" for small claims. But their inclusion greatly improves the probability of finality as a deterrent against exposure to re-litigation of ostensibly settled claims and new third party claims relating back to the claim(s) and dispute(s) between the parties.
Comply With Applicable Procedural Requirements

The old law school adage of “read the rule” is especially instructive when drafting or reviewing the settlement agreement. An otherwise well-drafted agreement may be rendered unenforceable by neglecting to verify that the settlement agreement meets applicable procedural requirements.
  • Form Agreement:
    Claims adjudicated by an administrative law system or government agency often require use of a special settlement agreement form as a prerequisite to a judge or agency officer's approval of the agreement. A party also needs to understand how to incorporate non-form provisions (e.g. indemnity and hold harmless provisions are often not included in agency forms, but can be added by an addendum that is approved by the judge) so that the agreement is enforceable.
  • Statutory, Regulatory or Common Law Requirements:
    Based on the type of claim, there may be requirements applicable to the form and content of the settlement agreement that arise out of statutory, regulatory, or common law. This is most often true of settlement agreements for labor and employment claims. Examples of such requirements can include: (1) waiting or revocation periods for the settlement or related actions to become effective or be withdrawn; (2) forms (i.e. cash vs. wages), structure (i.e. lump sum or structured installment) and timing of payments; (3) "magic" language or acknowledgment statements; (4) document formatting requirements (e.g. size of typeface, bold, italic or other "conspicuity" requirement).
  • Rules of Civil Procedure:
    Finally, "reading the rule" is important for firms that operate in multiple jurisdictions. What a party may be accustomed to in its home jurisdiction may be wildly inconsistent with the requirements of another. For instance, to obtain a binding settlement for a litigated matter in South Carolina, counsel must: (1) have a draft consent order or written stipulation, signed by counsel, and entered in the record; (2) note the settlement in open court; or (3) have an agreement in writing signed by the parties and their counsel. Illinois has an even more detailed procedural requirement. By contrast, other states have only perfunctory obligations, or none at all.
Verify That Boilerplate Clauses Are Viable and Applicable

Like the trap of overlooking jurisdiction-specific procedural requirements for enforceability, reliance on boilerplate provisions to draft settlement agreements is fraught with peril. Don’t rely on the wholesale copy-and-paste of provisions from an old agreement to a new one. Reconsider your boilerplate for each of these key provisions in light of the type of claim, remedy, and requirements of the applicable jurisdiction:
  • Changes in Law:
    It seems so basic that it goes without saying, but parties need to verify that the state of the law applicable to each provision is still good and reliable.
  • Agreement and Procedure for Dismissal of Litigation:
    Parties to litigated claims often assume that the parties will take mutual steps necessary to dismiss the pending case(s) as a "matter of practice." A better approach is to expressly define the procedural obligations, sequence, and timeline for dismissal (and any contingent obligations) of the case(s). Having defined procedural steps in place is invaluable when dealing with a recalcitrant counterparty that seeks to delay or frustrate final resolution wherever possible.
  • Integration and Merger Clauses and/or Preservation of Underlying Contracts:
    Settlement agreements almost universally contain an integration/merger clause(s) for the intended purpose of making the settlement agreement the complete and exclusive statement of the terms of the settlement deal. However, integration and merger clauses are some of the most arcane and misunderstood of contractual clauses, and without the right language (respecting the governing jurisdiction), the intent of the parties to achieve completeness and exclusivity may be undermined, potentially introducing prior or contemporaneous agreements into the settlement agreement.

    Closely related is an oft-overlooked or omitted consideration, particularly for design and construction claims, is how or whether the settlement agreement should address the underlying contract(s) between the parties. Some practitioners argue that the settlement agreement should remain silent on the status of such contracts, leaving those agreements to survive or perish on their own terms. Others advocate for expressly addressing the survival and preservation (or the demise) of the underlying contracts. Practitioners should think critically about the latter approach in every settlement agreement because expressly preserving the viability of such contracts would keep their provisions viable in the event of future disputes involving the services or project(s) in the underlying contracts. A preservation clause can also avoid arguments about whether the settlement agreement operated to integrate, merge, or extinguish such contracts.
  • Subsequent Disputes:
    Although the settlement agreement's objective is usually closure and liquidation of disputes between the parties, the potential for subsequent claims and disputes cannot be overlooked. Consider how the parties may handle future claims and disputes, arising out of the underlying contract(s) or the settlement agreement itself. To promote the idea of the claim "being over" (particularly for a party that pays money or concedes value as a remedy), party needs to critically weigh the merits of specifying a dispute resolution process or forum that may have a deterrent effect on initiation of such claims.
  • Confidentiality and Publicity:
    This provision is a classic copy-and-paste candidate and most drafters regard it as "standard." But, in the context of the deal, consider whether the "standards" are really applicable, or the nature of the deal or the value paid dictates bespoke terms. Also, a party must review for compliance with recent changes in law and public policy, especially as applicable to claims involving employment, human rights, and social justice issues.
  • Third-Party Claims and Indemnity:
    Even when the parties intend for a settlement agreement to resolve all claims between them, subsequent third party claims are beyond their control. Therefore it is important to weigh the inclusion of additional indemnity provisions to address the procedures and obligations the parties will employ in the event of third party claims. The inclination of the parties is often to resort to boilerplate mutual indemnity provisions. However, the parties, especially the payor, should consider whether that sort of arrangement really makes sense, or whether a broad indemnity arrangement that shifts risk to one of the parties is warranted based on the relative exchange of value.

    Rules of indemnity (and often referred to as "anti-indemnity") can vary significantly between jurisdictions, particularly regarding whether indemnity against a party's own negligence or fault is enforceable. The same goes for limitation of liability provisions. Accordingly, parties need to weigh whether/how their boilerplate clauses need to be adjusted to meet applicable rules.
  • Attorneys' Fees:
    If not addressed as part of the "remedies" portion of the settlement agreement, the attorneys' fees provision is stock-in-trade for the "miscellaneous" portion of most settlement agreement boilerplate. But, not always. In alignment with the objective of finality, make sure your agreement defines how responsibility for attorneys' fees are allocated as part of the deal.
If your firm is confronted with any of these risk issues, please don’t hesitate to contact us for a solution.

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AUTHOR

Kent Collier

KENT W. COLLIER, JD

MANAGING PRINCIPAL

[email protected]

(770) 220-7692

Kent provides day-to-day service to Greyling clients regarding insurance and risk issues in the architecture, engineering, construction, environmental, and legal service fields. He brokers practice and project specific insurance placements for A/E, construction, and law firms across the country. Drawing on years of experience as a construction attorney, Kent is heavily involved in his clients’ recognition, reporting, and resolution of insured claims.

Kent performs risk management consulting for clients including preparation and presentation of educational seminars, compilation and analysis of risk surveys, drafting and negotiating professional services contracts, and answering various client questions concerning legal, insurance, and risk issues impacting the construction and engineering industry. He has experience presenting continuing education training to staff regarding risk management, contracts, and insurance topics.

Design Firm Insurance: Data & Analytics

ARTICLE

Design Firm Insurance: Data & Analytics

The Value of Greyling’s Approach to Comparative Benchmarking

Design firms crave comparative metrics – most firms want to know as much as possible about what their peers are doing. When leasing new space, your commercial real estate broker will give you pricing on “comps.” The same is true when buying a new home. And when your clients ask you to design a new structure, your firm’s professionals use data to determine how the project will fit into the budget.


Greyling takes the same approach with commercial insurance. We maintain a national database that allows us to use real data to reveal what the insurance marketplace can, and should, provide for a design firm’s insurance program. We’ve developed this approach into a series of steps, a consistent process that delivers market-leading results.

WHY DO WE USE THIS PROCESS?

New clients of Greyling average over 15% in savings versus prior premiums, and many also end up with higher limits, right-sized retentions, and coverage enhancements or correction of gaps. These results are possible through Greyling’s relevant and accurate benchmarking process – described further in this Risk Report.

After any initial savings, our comparative benchmarking keeps insurers honest and consistent year-after-year to the benefit of our clients. With this innovative approach, we have saved clients millions of dollars in insurance premiums. Download a case study that demonstrates just how compelling Greyling’s process can be.
STEP 1: DATA COLLECTION

An analysis based on data and metrics, of course, requires initial information for comparison purposes. This includes a copy of current policies, renewal applications for key coverages such as professional liability, and a rough idea of loss history for each line of coverage – good, fair, poor, etc. A checklist is provided. We keep this information confidential and use only our own proprietary data; we are always happy to sign a Non-Disclosure Agreement with firms regarding this information.
STEP 2: PROGRAM ANALYSIS

Once the baseline information is collected, Greyling assigns a team of specialists to analyze information, including coverage, policy limits, deductibles, or self-insured retentions (SIR) and risk funding. The program analysis includes a full review of a firm’s exposures and analysis of policies to see if they match up. Because most insurance policies are “off-the-shelf one-size-fits-all” disconnects are common. Here are a few examples:
  • Insured works for public entities and policy excludes all government work
  • Hydrographic survey equipment is used underwater but only covered when not in the water
  • Ancillary professional consulting services are uninsured
  • Projects in the Middle East require local admitted coverage but it is not provided
  • Certain employees are eligible for federal workers' compensation benefits, but exposure is not covered
  • Fraudulent transfer of funds via cyber theft is not covered
  • Property in a flood zone is not insured for flood
STEP 3: DETERMINE APPROPRIATE COMPARABLES

While no two large design firms are the same, Greyling has data on the insurance programs for enough firms to develop meaningful comparisons. One benefit of our singular national approach is we see firms all over the country. We can compare all aspects of an insurance program from similar firms and provide metrics for low, median, average, and high comparables for cost, limits, and deductibles/SIRs.
“JB&B switched to Greyling five years ago. We had been with a big national broker and were astounded that Greyling could improve our coverage, move us to a better insurer, and cut costs by 60 percent. And costs have stayed that low ever since. For any firm looking to reduce overhead costs in this current difficult environment, I strongly recommend you talk to Greyling. Access to their benchmark data has helped us save millions of dollars over the years we’ve been with them.”
Mitch Simpler, Partner
JB&B
STEP 4: BIG CHART ANALYSIS

To help insureds better understand their insurance programs, and especially how all policies work together, we develop an illustration of every policy and how they interact. We’ve had some CEOs say that’s the first time they understood what they’ve purchased. Having a clear illustration makes it easier to make informed decisions on changes needed, if any, for the proper level of protection.
Big Chart example
STEP 5: PRESENT AND REVIEW

We then gather the decision-makers to present:
  • Coverage: Gaps and fixes (based on what is available) are illustrated on the big chart
  • Policy Limits, Deductible/Self-Insured Retention (SIR) and Pricing: Bar charts are provided showing comparative data including average, low and high ranges
STEP 6: IMPLEMENTATION

If we end up working together, Greyling is responsible for delivering on the coverage fixes promised and what the benchmark data said about limits, deductibles/SIRs and premiums. On the first renewal, we provide a comparison between what was promised and what was delivered. While results vary from firm to firm, you can download a case study with actual results.
CONCLUSION

Our process leads many firms to decide they need a new broker because the findings are often compelling. Sometimes it is major coverage gaps, sometimes it’s pricing, and sometimes both. Business is too competitive for firms to be unexpectedly uninsured or to overpay, compared to your competitors, for insurance.

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AUTHOR

Kent Collier

KENT W. COLLIER, JD

MANAGING PRINCIPAL

[email protected]

(770) 220-7692

Kent provides day-to-day service to Greyling clients regarding insurance and risk issues in the architecture, engineering, construction, environmental, and legal service fields. He brokers practice and project specific insurance placements for A/E, construction, and law firms across the country. Drawing on years of experience as a construction attorney, Kent is heavily involved in his clients’ recognition, reporting, and resolution of insured claims.

Kent performs risk management consulting for clients including preparation and presentation of educational seminars, compilation and analysis of risk surveys, drafting and negotiating professional services contracts, and answering various client questions concerning legal, insurance, and risk issues impacting the construction and engineering industry. He has experience presenting continuing education training to staff regarding risk management, contracts, and insurance topics.

Finding the Right Professional Liability Insurer for Your A/E Firm

ARTICLE

Finding the Right Professional Liability Insurer for Your A/E Firm

Criteria for Evaluation

There are some 50 insurers that offer Professional Liability (PL) Insurance for Architects and Engineers (A/E) today, and they place more than $2 billion of annual premium. The good news is that this large number of insurers creates considerable competition in themarketplace, which can help keep premiums down and keep broad coverage available. The bad news is that you must factor in the many differences among these insurers when choosing where to place your coverage.

But where do you begin? An independent broker with design-firm-specific experience can help you sort through all the many facets of insurer offerings in premium, coverage and other services, and can provide important context that will help you make a knowledgeable decision.

This article provides an overview of these key differences among the many A/E PL insurers – financial strength, underwriting appetite, scope of coverage, claims-handling, risk management services, underwriting flexibility and pricing sensitivity – and explains how an experienced broker can help your firm make a well-informed selection.

 

FINANCIAL STRENGTH
There are some basic financial ratings that could affect your firm’s ability to comply with certain contractual insurance requirements. Many construction contracts, for example, require an A.M. Best Rating of at least A-: VII. (The A.M. Best rating symbol is a grade of the insurer’s financial strength, and any insurer with an A rating is considered in the “excellent” range. The second part of the rating indicates the financial size category of the insurer.) Also, some project owners will not allow their design consultants to have a non-admitted (or surplus lines) PL policy.

 

UNDERWRITING APPETITE
Underwriting plays a major role in A/E PL pricing and coverage. Underwriters can apply pricing credits or debits to a policy as they see fit based on a firm’s claims history, risk management practices, areas of practice and client selection. Coverage enhancements or exclusions can also be added by underwriters at their discretion. Some insurers may also prefer certain disciplines and project types over others. For example, some insurers will not agree to write a geotechnical or structural engineer. Other insurers specialize in firms under $5M in revenue, and some prefer to write excess policies but not primary.

 

PRICING SENSITIVITY
Underwriter flexibility in both pricing and coverage should be taken into account when determining which insurer is best for your firm. Some underwriters are more sensitive to adverse claims experience and market conditions than others. An underwriter’s pricing pressure is determined by your firm’s individual loss experience, their A/E PL book of business, the overall PL book, the specialty book (PL, property and casualty) and, ultimately, the overall performance of the insurer as a company.

Insurer premium rates vary greatly depending on discipline, loss experience, project type and even geographical location. Insurers have a base rate that is applied to a firm’s revenue that generates the starting point for the premium. The premium can then increase or decrease based on credits and debits applied by the underwriter. Positive things like ideal project type, good risk management practices and good loss experience will generate credits and lower the premium, while the opposite is true for debits.

 

SCOPE OF COVERAGE
Since there is no standard coverage form for A/E PL like there is for other lines of coverage, the coverages offered are different from insurer to insurer. For example, some insurers provide worldwide coverage territory while others only cover claims arising out of projects in the United States, and some cover pollution incidents caused by your firm’s activities while others exclude such claims. More often than not, policy amendments or endorsements are needed to sufficiently cover your firm’s exposure, which makes having a broker with A/E experience who can negotiate those coverages all the more important.

 

CLAIMS HANDLING
Insurers’ claims handling capabilities can vary widely. Before choosing an insurer, you’ll want to vet the claims handlers by inquiring about experience, case load, and areas of expertise. Will your firm work with one claim handler for all claims, or will the handler be assigned based on geographical location or case load? Is the person assigned a lawyer? Will the carrier allow you to choose or have input on defense counsel? Some insurers reserve the right to force you to settle a claim, otherwise known as a “hammer clause,” while others will not settle without your approval. Pre-claims assistance is a must have that can potentially save your firm from a sticky situation becoming a full-blown claim.

To complicate matters further, new insurers are constantly entering the A/E PL market. Ask your broker if they have any claims experience with an insurer. If your firm has frequent claims activity, choosing an unproven insurer may not be the best option for your firm, even if they have the best pricing and coverage.

 

RISK MANAGEMENT SERVICES
Most A/E PL insurers offer risk management to their insureds, but the quality varies widely. These services may be provided by a website platform with webinars, white papers and claims studies, while some carriers offer in-person training programs.

Contract review is another risk management offering from some insurers. To ensure that this service is effective, you’ll want to make sure the reviews are handled by qualified personnel, are turned around in a timely manner and are redlined so the edits can be easily sent back to your clients for negotiation.

Some insurers also offer credits to premium if your firm meets a certain threshold of risk management education during the policy period. There are pros and cons to these credits, however. Risk management credits do force your firm to do some risk management training throughout the year, which is a good thing. Many insurers offer live in-person or online training, which can be beneficial for your staff. However, some of these “canned” sessions may not offer much value to your firm – other than the 10% premium credit you get for attending.

 

OTHER CONSIDERATIONS

  • Capacity – How much limit can any one particular insurer deploy for your firm?
  • Premium installment plans – If cash flow is a concern for your firm, some insurers offer interest-free installment plans. These could potentially save your firm hundreds or thousands in finance costs or keep your line of credit free for other expenses.
  • Meeting your underwriter in person – For larger firms, meeting with potential new insurers before renewal and again with its incumbent underwriters each year makes sense and will help solidify the relationship. Ask your broker how much business they have with a particular insurer and about their relationship with the underwriter. How long has that particular underwriter been at that insurer? Is that position a revolving door or is there stability? An underwriter will typically be more flexible with coverage and may not penalize as much for adverse claims history if they have a good relationship with your broker. Being connected to the top leaders of an insurer may pay dividends down the road.

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AUTHOR

Cooper_Smith

COOPER SMITH, CRIS

VICE PRESIDENT, BROKER

[email protected]

(770) 670-5325

Cooper Smith, CRIS, is a client executive and broker with Greyling Insurance Brokerage. He manages client service teams and negotiates and places coverage for large design firms, contractors, and law firms. He handles day to day client service and advises clients on claims. He works with mid to large-size clients, many with global exposure and complex insurance programs. In addition to being well versed in professional liability, property/casualty, cyber and executive risk practice programs, Cooper has negotiated a wide range of large and complex project-specific policies for professional liability, primary and excess casualty, pollution liability, and builders risk programs.

Cooper performs risk management consulting for clients including preparation and presentation of educational seminars, compilation and analysis of risk surveys, recommendation of and coordination with legal counsel, and answering various client questions concerning insurance and risk issues impacting the construction and engineering industry. He has experience presenting continuing education training to staff regarding risk management, contract negotiation, and insurance.

Reducing Overhead Costs

REPORT

Reducing Overhead Costs

EvaluatING Your Insurance Program COULD HELP

With the uncertainty of the current economic slowdown, the potential for stagflation, and staffing difficulties, firms are aggressively moving to manage costs. With project delays and shutdowns, clients processing invoices slower, and new opportunities delayed or limited, managing expenses and overhead costs is critical.

One area for potentially significant cost reductions is business insurance. Total insurance program costs for professional services firms average from roughly 1 percent to as much as 3.5 percent of gross revenue. Depending on the size of your firm, the potential for savings ranges from thousands to millions of dollars.

 

SHORT-TERM INSURANCE PREMIUM SAVINGS

Has your firm been provided with a benchmark report showing what comparable firms pay for insurance? Without access to legitimate and meaningful benchmark data on insurance program design, coverage, and cost, you do not have the data to determine if your firm has a competitive deal. Not every insurance broker has the needed data for benchmarking for three typical reasons:

  • Many insurance brokers operate only in a single regional market and do not see program design and pricing throughout the country. While it’s not supposed to happen, some insurance companies are more competitive in some regions than others.
  • There is no sharing of data. An insurance broker with multiple offices, or account managers who operate in silos without collaboration across teams and offices, does not aggregate information in a way that allows competitive analysis.
  • Many brokers simply lack the client portfolio for effective benchmarking and thus offer only what wholesalers or insurers can provide or offer no benchmarking at all. Even those insurance brokers with enough clients in the professional services space to create benchmark data can only do so by revenue—but not by discipline. Rates, limits, and retentions vary tremendously among disciplines.

The key to effective benchmarking is not only collection of information for similar sized firms but also those with similar disciplines. 

Engineering Firm Professional Liability Premium Comparative Analysis

To further drive home the point on the importance of insightful comparative data, here are some examples of potential scenarios and solutions that could impact the cost of insurance:

 

Misunderstood Exposure: The underwriter of a unique firm may misunderstand the exposure thinking it is a lot riskier than it is. After successful communication, the underwriter’s opinion could be changed, and the premium reduced.

Multiple Policies: As a design firm grows and adds new services and exposures, the insurance broker keeps adding new policies. The correct solution is not more policies but simply to find a new insurance company that could handle all exposures in one policy, reducing cost.

No Other Design Firm Clients: The service team at a large national broker may not be experienced in serving design firms. The bigger broker was selected for their perceived market “clout” rather than their familiarity with the client’s unique needs.

Excessive Limits: In some cases firms will purchase, perhaps on the advice of their broker, a policy limit well in excess of what benchmark data indicates their peers have purchased.

 

LONG-TERM RELATIONSHIPS

For many firms, a long relationship with an insurance company or broker provides certainty and peace of mind. Insurance is a product that depends on trust—design firms pay premium now for the promise of quality coverage and claim service in the future. A long-term arrangement should result in a good deal for both sides. But is that always the case? And is the perceived trust warranted? In cases where a design firm makes the decision to leave a long-term broker relationship, they might be surprised by one or all the following issues:

  • The premium that had been paid in the past, often for many years, is much higher than prevailing benchmarks. The cumulative additional cost incurred can be substantial.
  • Coverage gaps can be considerable. Despite higher premiums, firms are unknowingly uninsured for major risks. As one example, a firm that mostly does work for public entities may have an exclusion in their policy for all work done for government agencies.
  • Some design firms outgrow their insurer. Many insurance carriers specialize in representing firms of a particular size or discipline or focus on smaller firms with revenues below a certain threshold. The insurer may maintain an insured as they grow but normally at a less competitive premium with gaps in coverage.

 

Loyalty should result in a better deal, with lower premiums and better coverage, but that is not always the case.  Usually one of two things has happened:

  • The insurance program suffers neglect and drifts higher, just a little each year, than market pricing. Over several years, the cumulative difference become considerable.
  • The incumbent broker has limited experience working with design firms and is unaware of what options are available.

The argument isn’t against long-term relationships between insurance companies and insureds.  However, an insurance program must be properly tested against market pricing so an “open book” decision can be made on cost and coverage. This can be achieved without planning to obtain competitive options each year – which could exhaust underwriters and leave the insurance marketplace less competitive over time – by using benchmark data and the timeframe outlined below.

 

TIMING MATTERS

While it might seem an easy goal to achieve, few insurance brokers complete the renewal process well ahead of policy expiration. Last minute renewals result in a time crunch that limits options, reduces negotiating strength, gives little time for making decisions, and causes late issuance of certificates of insurance—which can negatively affect cash flow when clients will not process invoices without a renewal certificate.

Your renewal should be started many months ahead of the renewal date (as much as six) and planned to finish at least 30 days ahead of policy expiration. That means if your firm’s insurance renews on July 1, your kick-off renewal planning meeting should happen around February 1. Working well ahead of time not only reduces stress, but it also allows time to pursue and evaluate cost-competitive options. Many firms with summer and early fall renewals this year may soon find that their renewals are progressing slower than they should because brokers and underwriters are affected by the shift to remote working and a hardening insurance marketplace.

 

CREATIVE SOLUTIONS

Larger firms have even more creative solutions available to address cost savings related to their business insurance programs. For firms of $50M in revenue or more, this is particularly true. They have the option to enter a group captive insurance program for their workers compensation, commercial general liability, and business auto coverage, potentially saving millions of dollars over the long term.

A group captive works and looks like traditional insurance with two key differences:

  • The investment income that insurers normally keep is instead paid to policyholders.
  • The premium is not fixed regardless of losses. If your firm has favorable losses in these lines of coverage, as most design firms do, then the group captive program will provide a refund of most unused premium dollars.

CONCLUSION

Access to benchmark data and creative alternative risk programs, plus being open to competitive options, has the potential to save your firm significant dollars at a time when reducing expenses may be critical.

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AUTHOR

Dave Collings

DAVE COLLINGS

MANAGING PRINCIPAL

[email protected]

(770) 670-5320

Dave Collings is a co-founder and an equity partner of Greyling Insurance Brokerage, a division of EPIC. He is a recognized expert on risk management issues affecting design firms, contractors, and design-builders, as well as large-project risk management. Dave is a frequent speaker on risk management and insurance topics, including construction and design-related risk. He is also active on many industry committees.

Dave has 30 years of industry experience. He has designed and negotiated a Web-based project-specific professional liability program for a multibillion-dollar mass transit system. He has developed insurance and risk management programs for ENR top 100 firms, including those serving the petrochemical, infrastructure, transportation, and residential markets. He has also published benchmark studies on design-firm professional liability insurance, project-specific professional liability insurance, and contractor’s professional liability insurance. His experience also includes developing and negotiating project insurance for privatized bridge and toll-road projects, as well as designing and placing a project-specific professional liability policy for a $1 billion million fast-track stadium project.

21 Predictions for 2021

ARTICLE

Design Firm Risk & Insurance: 21 Predictions for 2021

SUCCESS IN 2021 WILL DEPEND ON DESIGN FIRMS’ ABILITY TO ADAPT AND MANAGE RISKS

Making predictions is a tricky business at the best of times, but especially so after a year of upheaval. If anything, the uncertainty creates a stronger temptation for us to try to forecast the year ahead. We are, of course, in the risk and insurance business–so here goes!

2021 will mark a turning point. The business landscape has fundamentally shifted and so has the playing field for developers, architects, engineers and contractors. Success will depend on design firms’ ability and willingness to adapt to the disruption and to effectively manage the risks that come with that opportunity.

Here then are our 21 best design firm risk and insurance predictions for 2021 provided by our team of AEC experts.

Design & Construction Market Changes

1.  Interdisciplinary Approaches.  As the economy resumes, developers take on the built environment will be different as a result of the pandemic. Interdisciplinary approaches will bring new expertise and views to architecture to integrate notions of public and personal health, mobility and transportation, environmental psychology, and biophilia. Architects will be confronted with a decision about whether to integrate and take responsibility for this new team of experts.

2.  Global Space Economy.  The $350b global space industry will grow to a $1.1 trillion space economy by 2040.The sector breadth for design firms is quite large, led by Aerospace & Defense, IT Hardware, Telecom Services, and Media. Insurance plays an important role, from facility development to launch, to orbit, to third-party liabilities. More civil engineering firms will be attracted to this market and all design firms will need to approach the market from a different risk perspective.

3.  Drone Usage Takes Off.  With A/E firms decreasing the number of employees performing field operations, firms will increase utilization of drone technology, particularly for inspection and survey work. While the burdens of flying drones have lessened with respect to licensure and costs, insurance and liability concerns (related mainly to privacy and trespass) remain, requiring a specific risk management approach.

4. The Standard of Care Will Change Whether or Not Codes and Regulations Do Too.  Focusing on health-oriented issues, new design and construction standards will be established. While modular design, prefabricated elements, flexible partitions, and lightweight structures will increase in use, architects will start planning new configurations with social distancing measures in mind.

5.  First COVID-19 Related Professional Liability Claims. 2021 will bring the first noticeable wave of COVID-19 claims against A/E firms but we expect these claims to truly be based on factors outside the control of A/E firms, such as project delays due to government shutdowns and equipment/material availability or owner/developers pursing recoveries anywhere they can as office space is jettisoned to work from home. These claims will masquerade as A/E professional liability claims but have much more defense exposure than indemnity.

6.  Private Equity Influences Acquisition Considerations. 2021 will see a continued flurry of activity with A/E firms and acquisitions by private equity firms. These prospective transactions emphasize bottom line over top line, so EBITDA preservation is key. This means A/E firms will pay closer attention to structure of professional liability insurance, spend on insurance deductibles/retentions, and higher limits. The transactions will also incorporate Representations & Warranty insurance, which has been less common in the A/E space.

7.  Cyber Claims Continue to Rise. 2020’s sudden shift to remote working facilitated cyber threat vectors, resulting in frequent cyber extortion, business interruption, and social engineering events. Roughly 1 in 4 A/E firms experienced a cyber breach in 2020, and more midsize firms ($50M to $250M gross revenue) will see such claims in 2021. Insurers will react with higher premiums (averaging 15% rate increases) and more underwriting questions. Some insurers will offer better rates after performing a threat assessment. Design firms will seek increased limits, especially social engineering coverage.

8.  Force Majeure Clauses Considered in Contracts. Historically, A/E firms have tended to not include specific Force Majeure clauses in professional services contracts. COVID-19 has shown that contractual relief resulting from epidemic is appropriate, and since March 2020, more owners have accepted A/E firms negotiating FM clauses, including allowances for virus, climate emergency, social unrest, civil authority and cyber-attacks. In 2021, owners (and their counsel) will increasingly ignore reasonable requests for FM clauses by adopting a “deal with it” posture and refusing to incorporate such relief clauses. As mitigation, firms will need to develop price and schedule proposals that incorporate assumptions about known and probable impacts and be diligent in exercising notice and claim rights available under contracts, including invoking impossibility where appropriate.

9.  Project-Specific Professional Liability Capacity Crunch. Savvy A/E firms pursuing work under alternate project delivery methods like design-build and public-private partnerships already know to demand project specific professional liability to protect against commonplace attempts by prime contractors to shift risk to A/E subconsultants. Unfortunately 2021 will see a continued reduction in overall market capacity for these placements, leaving firms without project insurance or underinsured compared to the exposure.

10.  Collaboration, Technology and Quality Control Will Mitigate Professional Liability Claims. A/E firms that successfully navigate the economic pressures of 2021 will do so by mastering remote collaboration, technology, quality control, and employee mentorship. Otherwise, firms will see an alarming growth in claims, client dissatisfaction, and employee turnover in 2021 and beyond. Moreover, advancements to BuildTech, 3D printing and fabrication, virtual and augmented reality as well as generative design, will accelerate new ways of working to create value. This acceleration will directly relate to hiring for new skills and to managing teams and how they are staffed to leverage individual talent.

Insurance Changes

11.  Business Interruption. Insurers will react to the thousands of lawsuits filed seeking coverage under property policies by…..continuing to not offer business interruption coverage for virus exposure.

12.  Continued Professional Liability Hardening. 2020 saw an acceleration of A/E professional liability hardening, particularly in the London market. This trend to continue throughout 2021, with U.S. domestic insurers firming pricing and unusual risks more difficult to place. Many firms will be faced with cost/benefit analysis of increased deductibles/retentions in order to keep professional liability premiums in check.

13.  Auto Liability. For design firms, fleet miles and rental car use also dropped significantly in 2020. More auto insurers will move to mileage-based insurance to differentiate exposures for insureds. Technology (telematics) will hasten the decline of the risk pool.

14.  Excess/Umbrella Insurance Coverage Changes. The umbrella/excess market has hardened quickly – largely driven by nuclear auto verdicts and large construction casualty losses. With new insurers in the excess and surplus market, coverage is far from standardized. 2021 will see continued proliferation of virus and communicable disease exclusions. Other coverage issues will arise from lack of true follow-form language, as well as coverage forms that have issues specific to underlying additional insureds, primary/non-contributory and waiver of subrogation provisions.

15.  Certificates of Insurance Move Electronic. Electronic delivery of certificates of insurance will be the norm in 2021 with recipients preferring to receive certificates via e-mail with fewer brick and mortar offices open and project staff further spread out.

16.  Data-Driven Brokers Will Find Better Deals for Clients. With underwriters spread thin (physically and numerically), insurers will rely more and more in 2021 on analytics and actuaries rather than relationships, experience, and feel to make decisions. The best results will involve brokers who aggregate, share, and effectively use data, metrics, benchmarking, and analytical tools.

17.  Group Captive Insurance Continues to Reap Benefits for Qualifying Firms. For more than a decade, Greyling has led the industry in placing A/E firms in group captive insurance programs for high exposure/low claim coverages like commercial general liability, business auto, and workers’ compensation. 2021 will see more qualifying A/E firms benefit from exiting traditional insurance and moving to a group captive in the wake of an increasingly hardening insurance marketplace – with massive short and longer term savings.

18.  Concerns Over Cancellation of Insurance. Given the likelihood of smaller firms going out of business or being acquired, clients and third-party certificate recipients will be stringent about obtaining copies of specific notice of cancellation endorsements attached to certificates of insurance and frequently required by contracts. These requirements – which are often written in a way that most insurers cannot satisfy – will be increasingly enforced by third-party compliance firms as the economic downtown and personnel changes has disproportionately impacted administrative staff at A/E firms and their clients who are used to dealing with certificate of insurance processing.

19.  Firms Assess Insurance Limits. Despite the hardening of the market for many lines of coverage, A/E firms will purchase higher limits of insurance in key areas for 2021. Firms in prime contract positions will consider higher per claim and aggregate professional liability limits to guard against sub defaults, acquisitions, and closures. Private equity participation in A/E firm ownership will cause benchmarking and likely increase in professional liability and umbrella/excess insurance. The prospect of further layoffs and adverse employment decisions will lead A/E firms to raise employment practices liability insurance limits.

HR and Employee Benefits

20.  New Benefits, and Risks, for Flexible Work Locations. As A/E firms have been forced to become more flexible in work location requirements, they will increasingly have employees that are living and working in new cities and states during 2021. With this expanding geographic footprint, firms need to be aware of new benefit and compliance requirements that may apply in new places. A/E firms will also need to guard against increased risk with a more remote workforce, with a focus on adding states to workers’ compensation policies and considering employment practices insurance coverage and limits.

21.  Focus on Managing Healthcare Claims. While the impact of Covid-19 on health plans resulted in an approximately 5% reduction in medical claims in 2020, we anticipate that claims will return to normal levels in 2021. In additional, for-profit medical providers may be looking to recoup revenue that was lost in 2019 at the height of the shutdown, so we may see more aggressive billing and collection tactics. With that in mind, firms need to have renewed focus on managing their health plan and claims adjudication accuracy to ensure that they can continue to offer a high level of benefits. We’ll see increased attention to pharmacy and stop loss captive strategies that provide significant financial returns but minimal employee impact.

If your firm is confronted with any of these risk issues, please don’t hesitate to contact us for a solution.

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AUTHOR

Gregg Bundschuh

GREGG BUNDSCHUH, JD

CO-FOUNDER & MANAGING PRINCIPAL

[email protected]

(770) 552-4225

Gregg Bundschuh is a co-founder and an equity partner of Greyling Insurance Brokerage. He is nationally recognized for his active role in addressing emerging issues that affect the construction, design, and development communities. He advises clients of the firm on their insurance programs and risk management strategies. He also provides guidance to industry organizations such as the Associated General Contractors of America (AGC), the American Institute of Architects (AIA), the American Council of Engineering Companies (ACEC), and the National Council of Architectural Registration Boards (NCARB). Gregg’s unique perspective on risk and insurance issues reflects his background as a construction lawyer, a general counsel to an international design firm, and an insurance broker and risk consultant.

Gregg’s experience includes design of customized insurance policies for risks associated with building information modeling (BIM) and integrated project delivery (IPD). He has developed insurance and risk management programs for domestic and international firms in a wide range of industries. In addition, he has spoken before dozens of national and international gatherings concerned with design, construction, risk management, and insurance matters. His publications include An Owners’ Guide to Construction Risk Management & Insurance; the insurance chapter of the New York Construction Law Manual; and The Design/Build Deskbook.