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Risk Management and the CCA Insurance Manual. New York State Council of Contracting Agencies (CCA) Procedure Manual November, 2011. Objectives of this Presentation. Introduce basic risk management principles. Describe contractual protection. Introduce the CCA Procedure Manual.

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Risk management and the cca insurance manual

Risk Management and the CCA Insurance Manual

New York State Council of Contracting Agencies (CCA)

Procedure Manual

November, 2011


Objectives of this presentation
Objectives of this Presentation

  • Introduce basic risk management principles.

  • Describe contractual protection.

  • Introduce the CCA Procedure Manual.

  • Using the Manual to draft specifications.

  • Using the Manual to set limits.

  • Ensuring compliance with specifications.


Loss exposures associated with public contracts
Loss exposures associated with public contracts

Public projects are risky business!



Contractor may not do the work right loss of the work property
Contractor may not do the work right.Loss of “the work” (property).






Risk management
Risk Management known to the public entity.

The process for making and carrying out decisions that will minimize the adverse effects of accidental loss.

The organized treatment of loss exposures by…


Exposure avoidance
Exposure Avoidance known to the public entity.

Just Don’t Do It!


Retention
Retention known to the public entity.

  • Going bare-back

  • Retain any loss exposure that can be controlled when you can absorb the loss.

    Those who fail to plan…

    …plan to fail.


Loss control
Loss Control known to the public entity.

  • Trying to “be safe.”

  • Organized programs for inspection and prevention.


Loss reduction
Loss Reduction known to the public entity.

Lower the severity of losses that may be unavoidable.

Band aid after the fact.


Duplication of safeguards
Duplication of Safeguards known to the public entity.

Belts and suspenders


Contracting the loss exposures to others
Contracting the Loss Exposures to Others known to the public entity.

  • Control of the premises or the work

  • Delegating the means and methods to independent contractor

  • Indemnity provisions


Insurance
Insurance known to the public entity.

  • Assure contractor’s financial responsibility.

  • Make the contractor buy insurance for agency.

Risky Projects

To the rescue!


Contractual protection
Contractual Protection known to the public entity.

  • Assure that vendors stand behind products.

  • Central to all public contracts.

  • Contractor controls site, means and methods of work.

  • Contractor is independent.

  • Contractor is financially responsible.

  • Contractor must save public entity harmless.


Contractual protection1
Contractual Protection known to the public entity.

Allocate the risk of loss to those

who are best able to prevent it


Contractual indemnity
Contractual Indemnity known to the public entity.

  • DEFENSE and INDEMNIFICATION.

  • New York law prohibits making another party hold owner harmless unless, and then limited only to the extent of owner negligence.

  • Indemnity extends to any claim arising from “the work.”


Contractual indemnity1
Contractual Indemnity known to the public entity.

  • Works in most cases where work being delegated.

  • Few unpleasant cases of “finger pointing.”

  • We avoid many disputes by requiring insurance.

“To the fullest extent permitted by law, the Contractor shall indemnify and save harmless the State… from … claims… arisingfrom the contractor’s work under this contract…”


Insurance1
Insurance known to the public entity.

Transfer of the financial consequences of a loss exposure to the insurer in exchange for the payment of a premium.


Insurance works where
Insurance Works Where… known to the public entity.

  • There is a pure risk beyond control.

  • Losses of predictable value occur at a known probability and regularity.

  • Losses can be spread between a large number of insureds.

  • Everybody won’t have a loss at once.


Insurance necessary where
Insurance Necessary Where… known to the public entity.

  • There is any question about the financial responsibility of a contractor.

  • There the expertise of professional risk management and adjustment are required or will add value.


Claim services
Claim Services known to the public entity.


Insurance the dark side
Insurance: The Dark Side known to the public entity.


Insurance the dark side1
Insurance: The Dark Side known to the public entity.

  • Adverse selection- only people who need insurance will buy it.

  • Moral and morale hazards- causing a loss deliberately, or “who cares, we have insurance.”


Insurance the dark side2
Insurance: The Dark Side known to the public entity.

  • It adds cost- about 15% of the cost of the insurance goes to underwriting.

  • Defending claims is expensive too.


Insurance the dark side denial of coverage
Insurance: The Dark Side known to the public entity. Denial of Coverage

  • After a claim, if….

  • Agency fails to comply with a policy condition.

  • Denial must be timely (10-30 days).

  • Notice of claim requirement.


Insurance the dark side disclaimer of coverage
Insurance: The Dark Side known to the public entity. Disclaimer of Coverage

  • After a claim, if….

  • Claim is “excluded.”

  • Denial must be timely (10-30 days).

  • Pollution.

  • Not arising from “work” or “operations.”


Insurance doesn t always pay
Insurance Doesn’t Always Pay known to the public entity.


Types of insurance for public entity contracts
Types of Insurance for known to the public entity. Public Entity Contracts

  • Contractors often have MORE insurance.

  • Agency requires only what Agency needs.

  • Agency requires only what is available.

  • These are the basic types.



Council of contracting agencies cca
Council of Contracting Agencies (CCA) known to the public entity.

  • Created within the Executive Department by Executive Order Number 125 on May 22, 1989 to ensure the systematic collection and timely exchange of information relevant to agency determinations of responsibility and reliability of bidders, contractors1 and proposed subcontractors.

  • On June 24, 2004 the Council of Contracting Agencies established the Insurance Subcommittee for the purposes of establishing general insurance standards and practices among participating Council Agency members.


Council of contracting agencies cca mission statement
Council of Contracting Agencies (CCA) known to the public entity. Mission Statement

Provide a standard for consistent insurance-related language and requirements for use in Agency contract documents. While the standards referenced in the manual have been developed via a collaborative effort involving all of the participating agencies and insurance industry representatives, and the Council believes these standards to best meet the needs of the Agencies operating in the current contract and insurance industry environments, the Council also recognizes that each agency faces its own unique operations and contracting needs. Therefore, it is understood that each Agency may find a need to deviate from the standards presented here as it deems necessary.


Agency
“Agency” known to the public entity.

  • The public entity engaged in contracting activity.

  • Your employer.


Insurance analyst
“Insurance Analyst” known to the public entity.

  • Recommends insurance language and/or requirements for use in contract documents

  • Evaluates and approves proof of insurance.


Contractor
“Contractor” known to the public entity.

Persons who provide..

  • Services (contractor or consultant).

  • Goods (vendor).

  • Tenants.

  • Permitees/licensees.

  • Revenue contracts.


How this manual is organized chapter 1 summary
How This Manual Is Organized known to the public entity. Chapter 1- Summary

  • A summary

  • Steps to completing and tracking insurance information

  • Reference materials that are available in this manual.


How this manual is organized chapter 2 insurance requirements
How This Manual Is Organized known to the public entity. Chapter 2- Insurance Requirements

  • Insurance Requirements need to be considered as part of the procurement process.

  • Remember, this manual addresses only the most common exposures for our organizations.

  • You will run into situations that are not covered here.

  • Choosing insurance requirements in those cases will require some assistance from the Insurance Analyst.


How this manual is organized chapter 3 model insurance specifications
How This Manual Is Organized known to the public entity. Chapter 3- Model Insurance Specifications

  • Provides model insurance language.

  • Including requirements that pertain to all forms of insurance.

  • This language is not to be used without some thought to the scope of work and applicability.


You can cut and paste
You can cut and paste – known to the public entity.

with CAUTION.

Consult your Legal Dept and/or risk manager….this manual is NOT the final word on insurance requirements and limits.


How this manual is organized chapter 4 matrices
How This Manual Is Organized known to the public entity. Chapter 4- Matrices

  • Provides matrices of insurance limits.

  • Address common exposures.

  • Thought should be given to increasing or decreasing these limits as appropriate to the scope of work.

  • Again, consult your Insurance Analyst as needed.


How this manual is organized chapter 5 model procedures forms
How This Manual Is Organized known to the public entity. Chapter 5- Model Procedures & Forms

  • Provides model procedures, sample letters, insurance review checklists, and other information that CCA agencies have found helpful in their operations.

  • It is best to provide the Contractor with instructions and sample documents as part of the procurement process to minimize errors. However, errors will always exist and the agency should conduct reviews of the insurance documents at appropriate times.

  • Each agency will have to devise its own process, specific to its needs and operations. The materials here are offered to assist in that process.


How this manual is organized chapter 6 exhibits reference purposes
How This Manual Is Organized known to the public entity. Chapter 6 & Exhibits- Reference Purposes

  • These materials are offered for your reference.

  • The Glossary is not all inclusive, nor is it limited to those terms that are included in this manual.

  • Rather, it covers a wide variety of terms that are used in the insurance industry.

  • Sample policy and endorsement forms are also included, as well as materials produced by the NYS Workers’ Compensation Board.


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