How to Wite a Letter to the Insurance About Work Has to Be Done by spx12209

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									          FIRE AND WATER RESTORATION CONTRACTORS

                          UNDERWRITING GUIDELINES


Century has an opportunity to write fire and water restoration contractors on an occurrence form
throughout the country with a special form. We are able to give the mold abatement coverage
they might need on an occurrence basis if they fit our mold abatement underwriting guidelines. At
first we are anticipating offering this just through Selected CIG general agencies.

The mold abatement coverage on an occurrence basis for qualified mold abatement operations
will be a big selling point.

The focus of the program is on the fire and water damage clean up and repair. There should be
no substantial construction activities. At first business will be written on a brokerage basis by
submitting to the CIG underwriter.


MAXIMUM LIMITS

$1,000,000 per Occurrence
$2,000,000 General Aggregate
$1,000,000 P/CO Aggregate
$1,000,000 PI/AI
$50,000 Fire Damage (higher limits available on request)

No excess limits are available

SIR/DEDUCTIBLE – also see options below to increase or decrease

See deductible section below. Program contemplates a minimum $2,500 for a surcharge.
However in construction defect prone states the minimum is a $5,000 SIR per claim.


APPLICATION AND RATING

Use the CIG standard application material for contractors. Note that all new construction and
remodeling are excluded. This is not for builders or artisan contracting exposures. Contractors
who have a significant amount of carpentry or installation work should be referred to VP of
casualty.

If the insured is seeking mold abatement coverage the CIG mold abatement contracting
guidelines must be followed and complied with.

The Fire and Water Restoration mold abatement supplement must be completed and signed by
the insured and be submitted with all attachments


QUALIFICATION:

Insured must have been in the fire and water restoration business for a minimum of three years
with acceptable loss experience. Insureds that are not currently insured will not be considered for
the program. Hard copy loss runs from prior carrier must be submitted for three years. Some
other detail to consider:



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HISTORY OF COMPANY

                a.      Knowing how long they have been in business gives you a history and
                        perspective on the account. If the agent tells you something has never
                        been a problem and they have only been in business a few years this
                        does not carry much weight when compared to the same statement from
                        a twenty-year veteran.
                b.      For mergers, acquisitions, consolidations, and the like you are concerned
                        with the completed operations exposures you might be picking up on
                        non-homogenous operations.
                c.      If the firm has a subsidiary or parent or sister company that is not being
                        considered for insurance you must exclude all claims arising out of
                        operations or premises of those entities.

        Prior Coverage Details: This is not essential, but can help to compete. Also, if we are
        asked to give prior acts or retroactive coverage, this section must be completed.

        Total Personnel: Use this to check the veracity of projected receipts. (Obviously you
        cannot pay a staff of 30 with only $200k in business.) It also will indicate to the
        underwriter if the insured is capable of much more. (An asbestos contractor with a few
        engineers on staff might start doing much more than contracting at any time.) The
        resumes of key people and professionals are especially important when considering E&O
        coverage.

        Past Disciplinary Actions: If there are any violations, or notices of violation, full details
        will need to be obtained, including copies of all correspondence between the insured and
        the regulatory agency. Companies who have had violations in the past but remained
        clean for the last several years will be questioned to determine what steps were taken to
        clean up their operations.

        Use of Subcontractors: If the insured’s cost of subs are over 20% of their gross sales
        additional consideration should be given. Further if they do not get certificates of
        insurance from their subs, the account must be declined. This means that the agent
        must complete both sides of the ACORD General Liability application. Subcontracting
        operations do not include transportation or disposal costs of debris.

        Workers Compensation Insurance: Any applicant that does not carry statutory workers
        compensation must be declined. There may be an allowance made for a consulting sole
        proprietor or partnership that has no partners or volunteers such as family members or
        friends, that help out in the office, but it must be referred to the home office underwriting
        manager.

        Contract: In the event of a mishap it is imperative that the insured have a good working
        relationship with the project owner. This is very important on these risks as many times
        the project owner has other construction work to do after the restoration contractor leaves
        the premises, or in the case of mold abatement the project owner may have higher
        expectations than are possible to complete. On mold abatement it is mandatory that we
        have a sample contract or engagement letter.




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                           MOLD / MICROBIAL REMEDIATION
Restoration contractors will routinely do specialized cleaning and disinfecting after sewer
backups. These jobs are relatively light in nature and should not cause any particular problem
except for the use of strong disinfectants like bleach or ammonia. Some may do crime/death
scene clean up or infectious waste clean up – those exposures should be referred to underwriter
to decide if they belong in the CIG environmental program. Over all, mold remediation is the
most likely area of underwriting concern on these contractors.

Mold remediation has much the same characteristics as asbestos and lead abatement. The
containment aspect, personal protective equipment and equipment needed affect the safe
conduct of the job are very much the same as lead abatement. Surfaces must be cleaned,
carpets, furniture and plus objects can not be completely cleaned of mold spores, and the firs
time the outside environment is allowed to interact with even a sterilized area new mold spores
will enter. The single technical difference is that mold was not applied or put in the building. It is
a biological agent that actually grows and that growth is certain to occur if the reason for a mold
infestation or colonization – moisture - is not eliminated. Many of the mold contractors today
were established as fire restoration contractors taking care of fire damage and water damage for
insurance companies. They have naturally branched out into mold. In the mold abatement
business they also compete with traditional environmental contractors.

The first risk control is performed well before any abatement work begins.

Contractors responding to insured losses like fire, plumbing breaks, and storm damage routinely
have cleaned up water damage they have become adept at mold remediation. The process of
mold remediation is identification, determination of causation, solving/stopping water intrusion,
removal of damaged building components and contaminated contents, remediation and
specialized cleaning, replacement of damaged components, clearance sampling, and release of
project for re-occupancy.

There are also times when a firm is called in to assess what is thought to be a likely mold problem
in a structure. On these jobs there is the consulting aspect which is really identifying the types of
mold present, and the source of the moisture that allows the colonies to survive.

The four critical areas of the insurance risk for a contractor are pre-contract in the information
phase, drafting and signing of the contract for services and/or engagement letter for consulting,
performance, and final release of the project.


PRE-PROJCET EDUCATION OF CONSUMER
During the time prior to work beginning it is critical that the insured adequately educate the
property owner that it is impossible to rid any structure of mold spores anywhere on earth.
Further no matter how much they clean, if moisture persists, including humidity and
condensation, mold will re grow. The job owner must be told that there are many items that once
contaminated cannot be cleaned adequately and should be discarded such as, books and
papers, wall paper, ceiling tiles, cellulose insulation, and fiberglass insulation. Other components
such as drywall, framing timbers, and other porous surfaces that have either been damaged
beyond repair or are so infested that they cannot be adequately cleaned may be determined to be
unable to be saved after remediation starts. Changes in building construction in the 1970s
resulting in lack of ventilation of some areas have been linked to moisture and humidity problems
in buildings. Therefore the contractor must have adequate handouts for prospective clients
indicating these difficulties and facts of mold and mold abatement.




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THE CONTRACT AND/OR ENGAGEMENT LETTER
The mold abatement contractor must indicate in their contract that the project owner will hold
them harmless for any claims arising out of or related to the re-growth of mold or the fact that
mold spores and mold is not completely eradicated from the structure. They need to sign an
information sheet indicating they know that mold will come back if moisture levels continue or
rise, and that there is nothing that the contractor or consultant can do about it. The project owner
must agree that mold levels in every structure can not be contained with any degree of certainty
to levels much lower than that in the surrounding exterior environment. And in fact in many
instances due to the natural containment of the structure they can indeed be even higher. The
object should be an improvement.


MOISTURE PROBLEM
If there is a moisture problem that is not from a sudden occurrence like a burst pipe, the insured
contractor must find the problem and correct it, or cause it to be corrected. This must be done
prior to the abatement if the continuing problem will continually re-wet the contaminated area. A
surface that remains damp more than 48 hours will easily re-grow mold. This is especially true of
surfaces that had gross mold contamination recently removed. In many instances this is done
simultaneously as many mold problems are the result of moisture from high humidity such as in a
basement, but not particularly the result of a leak that can be identified. It is important that the
contractor or consultant have moisture meters ready to test surfaces for degree of moisture.


THE ABATEMENT PROCESS
The performance of the mold investigation, sampling, analysis and abatement is obviously critical
to the safe completion of the job. The investigation should include both visible and non visible
surfaces. Moisture can be detected behind walls with various instruments. Make certain that the
mold investigator has humidity and other moisture detection equipment. They should also
sample under wall paper and carpeting. Suspected mold must be sampled and analyzed to be
sure it is mold. Several physical samples should be taken for analysis. After a water damage
claim from sewage back up there will be other biological agents that are also present that need to
be treated much the same as mold as they are removed. Those agents should be
acknowledged.

Air sampling should not be used as a primary means of assessment of a mold contaminated site.
It can be used after a site is fully cleaned for confirmation that the concentrations of mold in the
air are like the outside air. While air sampling is a part of clearance procedures, the EPA states
that the presence or absence of the musty smell is also key. These issues are dealt with in the
supplemental application.

The mold remediation plan should cover the containment and removal techniques used to
remove and avoid the spread of mold, clean up and removal of mold, use of PPE and steps that
were taken to eliminate the moisture problem. Mold can usually be removed from hard surfaces
by damp wiping and then may be disinfected, but that is not required as it is difficult to kill mold
spores. HEPA vacuuming is important for removal of remaining spores to the extent possible. All
damaged items should be removed and discarded. As quickly as possible the area cleaned
should be thoroughly dried. Electric dryers can be a fire hazard and should be cautiously used.
De-humidifiers and normal fans are preferred. The underwriter should check to make sure the
contractor has adequate drying equipment. The EPA mold abatement Guidelines for Schools
and Commercial Buildings should be followed.




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CLEARANCE AND RELEASE
In order for a job to be released the following facts must be confirmed:

1.      The moisture problem is completely fixed
2.      Mold and mold damaged materials are removed and the moldy odor is no longer present
3.      The kinds and concentrations found inside the building are the kinds and concentrations
        found outside
4.      48 to 72 hours after remediation the site is re-visited and shows no sign of water damage
        or mold growth

There are no clear standards for mold clearance so ultimately this is a judgment call. Century
requires that the contractor confirm all four above prior to releasing a job to qualify for coverage.
Further the contractor must keep in touch with occupants to see if allergic reactions have re-
emerged. If they moisture problem is not completely repaired the job should not be released as a
completed mold abatement project. Rather the contractor should document the hazardous
condition that will cause mold re-growth and infestation and notify the owner in writing.

At no time should an abatement contractor or consultant certify or guarantee that a home or
building is free or “mold safe”. The only thing that should be communicated is the clearance
methodology and the facts of the mold levels recorded prior to release of the job.


MOLD CLASS SPECIFIC UNDERWRITING:

1.      Does the insured only do mold abatement in conjunction with a greater water damage
        cleanup? If so eligible for a 15% credit, but need to use CIG underwriting standards for
        fire and water damage restoration.

2.      Does the insured have adequate pre project educational materials? Get copies.

3.      Does the insured use a contract per our requirements above on every job?              If not,
        decline.

4.      Does the insured follow the EPA guidelines for mold remediation cited above? Have they
        submitted an appropriate manual?

5.      Has the insured ever had any claims arising out of mold abatement activities? If so, get
        full details and submit to underwriting manager.

6.      Does the insured do clearance air sampling on every job? If not, decline.

7.      Does the insured use subcontractors for any mold work? If so, decline.

8.      How long has the insured been doing mold abatement work. If less than five years they
        are only eligible for claims made coverage and should be referred to the underwriting
        manager.




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PRICING – these accounts are to be rated according to ISO methodology except for the
classes that are covered on mold microbial abatement endorsement. Those classes are
rated with a CIG base rate adjusted with a state relativity factor.

For other classes they are rated at ISO with a 2.0 LCM due to the enhanced pollution
coverage.

SUBCONTRACTORS
Subs with insurance are in at 1% of cost for $1/2/1

Subs cost without insurance are rated as payroll for mold or microbial abatement, but may
be declined for poor management

More than 20% subs - decline

Step One: Rate ISO classes develop premium

Step Two: Rate Mold and other microbial classes, develop premium.

Composite rate based on sales by dividing the sales into the total premium developed in step one
and two. Express rate as a percent of sales (per hundred)

Premium X 100 = % of sales composite rate
Sales


Step Three: Check for minimum rate:

Minimum percentage rate is determined by deductible/SIR adjusted by state relativity factor

Less Than $5,000        2%

        $5,000          1.5%

        $10,000         1.5%


MOLD / MICROBIAL RATING:
Base Rate X Increased Limit Factor X State Relativity X IRPM X Exposure Base = Premium

Base Rate = 45.76

State Relativity Factors

 .90    ID, IN, IA, NE, ND, SD, SC
 .95    AR, KS, MT, NC, OK, TN, UT
1.00    KY, OH,
1.05    GA, MO, OR, VA, VT, WA
1.10    AL, IL, WY, NM
1.15    CT, DE, MD, ME, NH,
1.20    CO, MI, MN, NY, NJ, PA
1.25    AZ, DC, HI, TX, WI
1.30    CA, FL, LA, NV
1.40    AK, MS, WV



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Not available in MA or RI as CIG has no status in those states


IRPM SCHEDULE:
In admitted company maximum of 25% debit or credit; in surplus lines company maximum of
35%.
        criteria                  debit         credit
        scope of work              25%          15%
        experience                 25%          15%
        loss history               25%          10%
        job type                  25%           20%



CONTRACTOR COVERAGE CHANGES:

1. To increase Medical Payments - Flat Charge

Increased limit charges are as follows:

                     Limit                                          Surcharge
                    $2,500                                            $100.00
                    $5,000                                            $150.00



2. Additional Insureds (CG 2010 11/85 not ever to be used)

        Per CIG contractor guidelines



3. Waiver of Subrogation

                    Basis                                           Surcharge
                Blanket Basis                                         10%
                 Specific Basis                                  Refer to Jim Murphy
                  Landlords                                      Refer to Jim Murphy



4. Primary Insurance Wording – Per CIG guidelines




06/07                                                                                  Page 7 of 8
5. SIR/Deductible Options

                 Deductible                                          Charge
           $2,500 Per Occurrence                                     +7.5%
              $2,500 Per Claim                                       +5.0%
           $5,000 Per Occurrence                                       +0%
              $5,000 Per Claim                                        -2.5%
           $7,500 Per Occurrence                                       -5%
              $7,500 Per Claim                                        -7.5%
           $10,000 Per Occurrence                                     -10%
             $10,000 Per Claim                                       -12.5%

An SIR must be used of at least $5,000 per claim in: AK, AZ, CA, CO, FL, LA, MS, NV, TX, WV
No credit for this option in those states, but the regular credit does apply for an increase to
$10,000… but an SIR instead of a deductible must be used.


TRIA – 2% Mandatory

Minimum Premium: varies by deductible level
Less than $5,000:       $10,000
         $ 5,000:       $ 7,500
         $10,000        $ 5,000

Commission 21%

Policy Issuance: By CIG




06/07                                                                                  Page 8 of 8

								
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