August 1, 2019

Insurance Geeks, Here’s How to Get Down to the Basics for Your Insureds

Insured: We’re updating our contract language. Do you have any suggestions for our standard insurance requirements?

Agent: I’d be happy to help! For the standard, you’ll want to require 1/2/2 limits on GL with the 2010 and 2037 AI endorsements or equivalent, primary & non-contributory, and a waiver of subrogation, oh, and at least $1M in excess.

Insured: …?

As a third-party risk service provider, myCOI has the unique opportunity to hear different perspectives from both sides of the Agent/Insured relationship. Often, that means hearing from confused insureds who know their agent is giving them great advice; they just don’t understand the advice well enough to implement it effectively.

We’re all guilty of getting too comfortable with our ‘insurance bubble’ and forgetting that our insureds don’t always share the same level of understanding. Insureds turn to agents to answer questions about contractual insurance requirements, and if we as agents simply tell them what to include without the education as to why those requirements are so important they are unable to properly appreciate the exposure to risk if (and when) they make an exception. 

In this article, we’ve broken down a few of the most common insurance vocabulary words to help those future conversations make a bit more sense to your insureds.   

Additional Insured: Nearly every company we talk to knows that being named as an additional insured is critical any time they work with a third party… but they don’t know why. It’s not unusual for their status as certificate holder to be confused with their status as an additional insured. In our experience, we find that it’s very helpful to explain that being named as an additional insured is the primary mechanism that will allow the company to seek coverage under that third party’s policy. Without this piece, any insurance coverage that the third party provides is useless for our clients when a claim occurs.

Ongoing and Completed Operations: Whether this topic comes up regarding your insured’s coverage or the coverage they are seeking from a third party as an additional insured, carveouts for completed operations are an ongoing problem.  Again, these are buzz words most of the companies we talk to are familiar with, but questions remain about where ongoing operations end, where completed operation begin, and how long they could be on the hook for those claims. Our best advice here is to give them an example. If you don’t have your own, give us a call! And if you have a great one, we’d love to hear from you too! 

Primary & Non-Contributory: We find that our clients are less likely to be familiar with this term, but they are quick to catch on when we equate it to the more commonly understood waiver of subrogation. Of course, these are two very different things, but it helps insureds to understand that a primary & non-contributory endorsement is intended to help clarify which insurance policy is responsible for responding to a claim. We often talk about primary & non-contributory status being the proactive tool that define which policy should respond at the beginning of a claim and the waiver of subrogation being the reactive tool that keeps the claim with that policy.

Waiver of Subrogation: As mentioned above, our clients tend to be familiar with the waiver of subrogation. However, like the additional insured topics, they often only know that they’ve been told it’s an important requirement.  They still need your help understanding exactly how they can be impacted by this item, especially if they are asked by a third party to make an exception for that party providing a waiver of subrogation.

Follow-Form: Follow-form endorsements on excess and umbrella policies are easily the least talked about items on this least.  However, we find them to be among the most common causes of underinsured claims. Your insureds need to understand that “following form” is, like most topics in insurance, not as straight forward as it seems. Talk to them about the common exceptions found in these endorsements and the importance of confirming the underlying polices.

We know you discuss a ton of other topics with your insureds, and we’d love to hear how you’ve been successful in creating those “light bulb” moments. Reach out to a myCOI team member today to share your knowledge and see if your team is speaking the language of your insureds!

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