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Snow and ice insurance risk

- Posted: November 13, 2012
By Cheryl Higley

With 25 years in the industry and a nearly flawless insurance history, the last call Dan Wagner expected to receive last month was one from his agent telling him he had been dropped. But with winter looming, Wagner—owner of Wagner Contracting Inc. in Grand Rapids, MI—is faced with trying to obtain coverage before his policy expires on Jan. 1.

"We manage a military-style operation with a published operations and procedures manual and safety and training programs. We have no paid claims. If they can't insure us, I don't see how they can insure anyone," he says.

From what he can discern in conversation with his agent—who refused comment for this story—Wagner believes the cancellation may stem from two factors: his work for a large retailer and a reluctance by the insurance industry to insure companies who use subcontractors. WCI's business model uses a network of 48 contractors to serve the greater Grand Rapids market.

According to insurance agents, those two factors very well could have played a role in the cancellation—despite Wagner's outstanding safety record.

Too much risk
Greg Botson, CIC, president of Botson Insurance Group, Inc., in Avon, Ohio, says his company works with about eight insurance companies that will write policies for snow contractors but there are several in the industry who are not renewing accounts because of the increasing amount of liability being placed on contractors.

“Some companies are using contracts to shift all the liability—regardless of fault. Some insurance companies are starting to push back," he says. "You can sign any contract you want but the insurance company will only pay per the policy coverage."

Botson said his company will review most of the insured's contracts to make sure the contractor isn't assuming too much liability—a lot of which centers around the use of subcontractors.

Subcontractor issues
Sam Rolph, an Oak Brook, Ill.-based agent with American Family Insurance and a SIMA insurance partner, said companies such as the large retailer may be asking for specific endorsements that insurance companies are getting away from, such as CG 2010 85 Edition and CG 2010 01 Edition.

CG2010 (85): Provides additional insured protection for on-going operations. This protection includes free defense costs for the additional insured.

CG2010 (01): Provides additional insured protection to the person/organization shown on the schedule for liability arising for ongoing and completed work insured by or for the contractor. Once complete coverage continues to the additional insured until the statue expires.

"We will look at how much work is subcontracted out before we agree to insure," he says. "We are finding a lot of subs are procuring the required insurance and then don't pay the premium, which forces the liability back on the contractor's insurance. Or, and this is becoming much more common, they will present bogus certificates of insurance," Rolph says.

Botson says it is essential that contractors require subcontractors to carry auto and general liability, worker's compensation and name the contractor as an additional insured. In addition, he insists his clients require subcontractors to have a subcontractor agreement signed and enforced.

"I am amazed at how many small and medium contractors don't have these sub agreements in place. Too many accept just the certificate of insurance, which doesn't spell out the terms of liability and doesn't provide the indemnification. Subcontractor agreements are readily available—ask your insurance agent or SIMA."

Be a better risk
Protecting your company from subcontractor liability is only one part of making your company a better risk for insurance. Documentation and risk management programs typically are assets in your quest for the best insurance you can buy.

"We look for loss control and risk management and the safety standards that are in place," Rolph says. "We require documentation for two years prior. If they don't have accurate records, we have no way to defend them. Why would we want to represent someone who can't document their operations?"

When it comes to claims, he says insurance companies can't underwrite for severity but can underwrite for frequency and companies see contractors who have above-average claims as those who have "no control and no risk management."

Botson agrees but adds that at the end of the day, insurance companies look at what they're taking in and the money that they've paid out: "You may have a great safety program but if you still have a lot of claims you're going to find it harder to get insurance. It's important that snow companies work with companies who know their business and the industry and have access to multiple carriers."

SIMA has created a network of insurance providers to help snow & ice management professionals navigate the intricacies of insurance. Learn more at

Cheryl Higley is Editor of Snow Business magazine.
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