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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!

risk management
Risk Management

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

Just Don’t Do It!

retention
Retention
  • 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
  • Trying to “be safe.”
  • Organized programs for inspection and prevention.
loss reduction
Loss Reduction

Lower the severity of losses that may be unavoidable.

Band aid after the fact.

duplication of safeguards
Duplication of Safeguards

Belts and suspenders

contracting the loss exposures to others
Contracting the Loss Exposures to Others
  • Control of the premises or the work
  • Delegating the means and methods to independent contractor
  • Indemnity provisions
insurance
Insurance
  • Assure contractor’s financial responsibility.
  • Make the contractor buy insurance for agency.

Risky Projects

To the rescue!

contractual protection
Contractual Protection
  • 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

Allocate the risk of loss to those

who are best able to prevent it

contractual indemnity
Contractual Indemnity
  • 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
  • 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

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…
  • 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…
  • 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.
insurance the dark side1
Insurance: The Dark Side
  • 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
  • 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 SideDenial 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 SideDisclaimer of Coverage
  • After a claim, if….
  • Claim is “excluded.”
  • Denial must be timely (10-30 days).
  • Pollution.
  • Not arising from “work” or “operations.”
types of insurance for public entity contracts
Types of Insurance for 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)
  • 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) 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”
  • The public entity engaged in contracting activity.
  • Your employer.
insurance analyst
“Insurance Analyst”
  • Recommends insurance language and/or requirements for use in contract documents
  • Evaluates and approves proof of insurance.
contractor
“Contractor”

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 OrganizedChapter 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 OrganizedChapter 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 OrganizedChapter 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 –

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 OrganizedChapter 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 OrganizedChapter 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 OrganizedChapter 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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