2003 Issue No. 1     Inside: • Construction Related Nosocomial Infections • Changes to the Contaminated Sites Regulation • Insurance Exclusions • Staff Updates & News • Staff in the News • PHH Foundation Updates • Training Course Schedule Insurance Exclusions by John Ashton, CIP In the approximately 18 months since "September 11", the insurance industry has changed dramatically, quite possibly forever. Most insurers are making changes to their Liability policies that will be of considerable importance to insurance buyers. For example, most Commercial General Liability (CGL) policies being issued or renewed in 2003 will include some form of the following restrictions, either by endorsement or by inclusion in the basic policy wording: Data Exclusion: Some insurers are replacing the "Misinterpretation of Date" exclusion with this broader exclusion, which typically eliminates losses arising from erasure, destruction, corruption, misappropriation, or misinterpretation of "data", or erroneously creating, amending, entering, deleting, or using "data", including any loss of use arising therefrom. War and Terrorism Exclusion: This extends the War risks exclusion to include acts of terrorism, defined (for example) as "an ideologically motivated unlawful act or acts, including but not limited to the use of violence of force or threat of violence or force, committed by or on behalf of any group(s), organisation(s), or government(s), for the purpose of influencing any government and/or instilling fear in the public or a sector of the public." Mould and Fungi Exclusion: Mould has always been considered a maintenance issue, and therefore not insurable. However, toxic mould claims in the southern U.S. have become a serious issue for the insurance industry so fungi-related litigation is now of interest to most of us. It was never an insurer's intent to respond to mould claims, unless the mould resulted directly from an insured peril (e.g., an insured water damage loss). Recent public attention, combined with an escalation of activity in the southern U.S., has raised concerns that Canadian courts might begin to interpret insurance policy wordings more broadly than the insurance industry ever intended. Responding to growing industry concerns, the Insurance Bureau of Canada (IBC) formed an Advisory Group consisting of insurers and reinsurers to study the subject of mould. After much consideration, including input from both the legal and scientific community, the Advisory Group determined that existing IBC advisory policy wordings needed to be amended. Suggested texts for the advisory endorsements were drafted and subsequently approved by the IBC Board of Directors. Asbestos Exclusion: Insurers are now applying an absolute asbestos exclusion to all liability policies; Canada is one of the few countries not already adding the exclusion to most liability contracts. There is no question that it is becoming increasingly difficult and expensive to obtain certain types of insurance coverage. We are finding that the Commercial General Liability and Professional Liability markets have hardened their rates, and most markets have increased their rates by 20% to 45%, if an insured is claims free. If there have been any claims made under the policy since the last renewal and the account loss ratio exceeds 25%, Insurers have increased rates from 30% to 100% or, in some cases, simply declined to renew. Buyers of Professional Liability insurance who are claims-free should have their insurance broker check markets to ensure that their renewal premium indications are within acceptable limits. However, we caution our clients not to change insurers for minor premium savings; if there is no longevity with the new insurer and they are presented with a claim situation, they will most likely not offer renewal terms next year. Should the decision to change Insurers be irresistible, we stress that all incidents that could present a future claim have been reported to the existing Insurer before the expiry date of the current policy. This would avoid being caught in "no man's land" with regard to possible future claims, due to the "claims made" nature of Professional Liability insurance. Most Professional Liability insurance policies differ in the wordings offered by each Insurer, so ensure that the coverage being offered under any new Insurer is equal to or better than the coverage presently enjoyed. Lastly, ensure that any changes to policy terms and conditions do not infringe on any contractual obligations with any existing clients. We are now living in a Global market place in which your working environment is rapidly expanding, and projects are being sought all over the world. Many policies only cover work in Canada. Some wordings provide world-wide coverage, subject to suit brought in Canada, while other policies provide coverage for suits brought anywhere in the world, or can be written to provide world-wide coverage on an indemnification basis. However, some insurers (e.g., those based in the USA) face restrictions imposed by the USA Senate and cannot provide cover in certain countries or regions, e.g., Cuba, Libya, etc. The utilisation of contract employees to avoid incurring the costs associated with full-time employees is increasingly becoming a business reality. The definition of the Named Insured should automatically extend to cover work done by the "Contract Employees" who may be retained from time to time, as well as to those employees on loan from other firms. Despite the "gloom and doom" picture being painted in recent months, there are some bright spots, if you know where to look. Now more than ever, a qualified insurance broker, with a dedicated Professional Liability department, is your best resource. Some Insurers are able to offer the following enhancements under their Architects and Engineers professional liability policy wordings: The Pollution exclusion is deleted in its entirety (except for firms with high-risk exposures). Policy coverage can be world-wide, with a duty to defend in the USA. Full Design/Build cover can be added to the policy by endorsement. The Libel & Slander exclusion can be deleted under some of the wordings. Reimbursement of costs for attendance at Discovery or Trial (Sub-Limit $20,000) can be added to the policy by endorsement. Coverage for defence costs up to a sub-limit of up to $25,000 for charges under an Occupational Health and Safety Act can be provided at no charge. Coverage can be provided for up to $15,000 of coverage for Loss of Documents. Some insurers will delete the Patent, Trademark and Copyright exclusion. Some insurers will provide for the difference in limits and conditions between dedicated project policies and practice policies. Full Pollution Coverage with no Prior Acts restriction date is now available to eligible firms. Limits of up to $50,000,000 per claim are available, and in certain situations, policies with a higher "per claim" limit have been negotiated. On January 21, 2003, the "Globe and Mail" ran two very timely articles, one titled "Insurance Hikes Hitting Small Firms", the other titled "Mould Worries Real Estate Sector". Both are "recommended reading" for anyone who buys insurance, or relies on the insurance policies of others. John Ashton, CIP Vice President Jardine Lloyd Thompson Canada Inc. John Ashton has worked in the insurance industry in Canada since 1977, prior to which he spent several years as an Insurance Representative in South Africa. John obtained his AIIC degree in 1984 and has held various marketing and servicing positions with insurance brokerage firms. John is currently working with the Professional Division of Jardine Lloyd Thompson Canada Inc. (Calgary) providing insurance services on many large commercial and professional client accounts in Alberta and British Columbia.