Theory vs. Reality: Does Default Insurance deliver a better claims process and result?
Willis Construction Risk Management ConferenceNew Orleans - September 11, 2013
Bill Noonan, VP of Risk Management at StructureToneDavid Dekker | Pillsbury Winthrop Shaw Pittman LLPLuke Nolan, SVP WillisBrian Carpenter, SVP Willis
AGENDA1. Claims Comparison2. Notice of Default3. Proof of Loss4. Proof of Loss Administration of Claim5. Payment of Claims6. Subrogation
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DefaultInsurance
Carrier
Premium
Traditional Surety
Three Party Surety Relationship
Default Insurance
Subrogation
Subcontract rights
GeneralContractor
Policy
S
ubco
ntra
ct
Two Party Insurance Relationship
Claim PMT.
General Contractor
S
ubco
ntra
ct
Bond
Surety forSubcontractor
Premium
Indemnity
DefaultInsurance
Carrier
Subrogation
Subcontract rights
GeneralContractor
Policy
S
ubco
ntra
ct
Two Party Insurance Relationship
Default Insurance
Proof of Loss
Proof of L
oss
Claims ComparisonZurich Arch XL
Loss Trigger Default Termination Default
Claims Handling In-house TPA In-house
Notice of Loss 180 days (30 days)
180 days5 days waive co-pay
30 days
Claims Reporting Earlier of 10 years or statute
Earlier of 5 years or statute (up to 10 years available)
Earlier of 10 years or statute
Claims Payment 30 days of POL;No payment if any deficiency
30 days of POL;Pays non-deficient portion
30 days of POL;Pays non-deficient portion
Subrogation Carrier recovers full loss first
Insured receives 5% of recovery
Carrier recovers full loss first
Notice of Default“Default” is triggering event
Subcontract terms guide“Formal” notice of default issue (not a “threat)
Carrier notice periodWithin 180 (5) days of becoming “aware”Carriers have been soft in enforcing
Contesting of a defaultCarrier cannot contest“as determined by you (insured) or a legally binding authority”
REALITY
Proof of Loss - Defined
Direct Loss:•Completing scope•Correcting defects•Professional expenses•Insured’s costs
Indirect Loss:
•Not directly attributable to subcontract/PO
•LDs, acceleration, extended OH
“Written description and supporting evidence that document a claim is a covered loss and quantifies
the amount of the loss”
Proof of Loss - Administration
Indemnity policy – insured has burden of proof
Earlier of 10 years (generally) or statute
“Deficiency” in proof of lossMay or may not hold up entire claim30 days to cure deficiency
Interim proofs of loss
Documentation is the key!
Payment of ClaimsPayment within 30 days of satisfactory proof of loss
Interim proofs of loss paid les 5%
Subrogation & recoveryCarrier will pursue the subcontractor
10
QUESTIONS?Thank you for your time!