Análisis PESTLE

occurrence repo rting requirements.

2. The NI's employees, executive officers, and directors are insureds.

3. Certain ex clusions app ly only to the NI (e.g., property damage).

4. The NI must reimburse the amount of any deductible paid by the insurer.

5. The first NI is required to pay premium. 6. The first NI receives any premium return. 7. The first NI may ca ncel the po licy. 8. The first NI receives cancellation notice.

Source: The Additional Insured Book, 4th _{ed., International Risk Management Institute, Inc., 2000}

Another feature of some requests for additional insured status is the stipulation that the indemnitor's policy, to which the indemnitee is being added as an insured, be modified to provide "cross-liability" covera ge. Cross-liability refer s to the loss exposure created wh en one insur ed under a policy sues a nother. Standard general liability policies in use today provide "cross-liability" coverage–without the need for any modification–by virtue of the "separation of insureds" condition. This con dition of the p olicy states that co verage will ap ply "separ ately to each insured against whom claim is made or suit is brought." For this reason, it may be a legitimate precaution to include in contract language a stipulation that liability insurance a s required b y the contract p rovide cro ss-liability coverage, but not a demand for a cross-liability endorsement, which is unnecessary when the standard CGL form is being used.

b. Business Auto.

Antiquated Terminology Current Terminology

Comprehensive auto liability insurance

Additiona l insured or co insured status (u nless a vehicle lease)

Cross-liability endorsement

Comb ined single limit

Business auto coverage form Insured status

Cross-liability coverage as provided under standard ISO forms' separation of insured s clause

c. Workers Compensation.

The standard workers compensation and employers liability policy used in most states was substantially revised in 1984 a nd again to a lesser extent in 1 992. As comp ared to the p revious 19 54 policy, these revisions included some slight changes in terminology and coverage approa ches that shou ld be reflecte d in contract insurance requirements. One of these was a change in the name from "workmen's compensation" to "workers compensation." Another more important change was the inclusion of "other states coverage" in the basic form and the elimination of the "broad form a ll states" endorsem ent, which was p reviously used to provide this coverage .

Antiquated Terminology Current Terminology

Workmen's compensation insurance

Borrowed servant endorsement

All states coverage/broad form all states coverage In rem endorsement

Work ers comp ensation and employer s liaiblity insurance

Alternate employer endorsement Other states coverage

Maritime coverage endorsement

A very problematic requirement sometimes included in contracts is one for additional insured status. The workers compensation policy covers injuries to its insured's employees. If additional insu red status were to be pro vided to another party, the policy would cover injuries to that party's employees, and the insurer would be entitled to a commensurate additional premium.

d. Property Insurance.

One error sometimes made by financial institutions is to require insurance equal to the loan amount. The loan amount is often not reflective of the insurable value of the prop erty. It could be higher, as wou ld be the ca se when it includes property that would not be covered under the policy, such as the value of the land. Conversely, the loan amount may be significantly less tha n the value of the property, sinc e it would no t recognize increases in the propety's value over time. For this reason, the amount of insurance required should relate to the valuation basis (replacement cost or actual cash value) o f the insurable p roperty rathe r than the loan a mount.

Another problem that sometime s arises is a requ irement of additio nal named insured status. There are no advantages provided to a party who is not an owner o f the prope rty to be a named insured on the policy, and commercial property insurance underwriters have no endorsements in their forms portfolios to comply with such a contractual requireme nt. For most c ontracting situa tions, addition al insured status, a loss payee c lause, a le nders loss payab le endorsem ent, or a mo rtgage clause is quite sufficient for p rotecting the c ontracting p arty's interest in the pro perty.

Outdated terminology requiring that the policy provide "fire and extended coverage" is often used in contracts. "Extended coverage" refers to an endorsem ent that was once added to a standard fire policy to cover the perils now insured under ISO's basic causes of loss form. Since this endorse ment is no lon ger used, a b etter appro ach to requiring this coverage would be to refer to the ISO basic causes of loss form.