The One Issue EVERY Insurance Carrier Should Agree To – Taking Care of the ‘Little Guy!’

I chose April 1 to publish this article because so many are expecting a joke; well this is no joke. In fact, I can’t be more serious.

Three days ago I published an article about the “primary and noncontributory” requirement found in most construction contracts. In the article I explained the protections available to an upper tier contractor without the need for a “primary and noncontributory” (P & N). I further discussed why, regardless of the reason, the P & N requirement is unreasonable and should disappear.

However, this requirement will NEVER disappear until the insurance industry collectively agrees to no longer dignify the contractual requirement with policy wording. Yes, I am recommending something just short of an armed uprising – the agreement among all industry players to NO LONGER offer primary and noncontributory wording.

The insurance industry CAN affect contractual wording. If no one allows the wording it will eventually disappear. Think about it, if no one (and I mean no one) allows or offers the endorsement, then the agent can’t say, “You are the only company refusing this.” Further, the upper tier contractor can’t say, “Well I’ll just refer the subcontractor to a company I know provides it.”

Basically the upper tier is stuck. If they can’t get P & N anywhere the requirement goes away.

“Well,” you say, “what about the fact the upper tier won’t pay the lower tier until the policy provisions are met?” I have three answers to that somewhat reasonable question:

1. Many state statutes specifically say that the upper tier cannot withhold payment if the work has been done. Yes, there is a lot of law breaking happening but no one challenges it.
2. My bet is the upper tier already violated its contract and the principle of estoppel prevents it from holding the lower tier to the contract. Most construction contracts state that proof that the lower tier meets all contractual insurance provisions must be provided BEFORE they begin work. Many contracts are signed after the work has already begun, thus the upper tier violated its own contractual language but expects the lower tier to comply. That is against public policy. Again the issue is no one challenges this.
3. If the upper tier can’t get the P & N from any sub or from any source, what are they going to do? They have to accept what they can get.

The insurance industry needs to take control of this situation and bring back reasonable extensions of protection. The primary and noncontributory requirement is unreasonable (see the prior article).

Yes, some might consider this collusion, but we are actually helping our insureds by agreeing to stand up against tyranny. Taking a stand is NOT collusion. What should be our battle cry?

• “Make everyone financially responsible for their own actions!”
• “We want reasonable contracts and we want them NOW!”
• “Keep your contracts out of our coverage!”
• “Take this requirement and shove it!”
• “We thought about it, laughed about it, and forgot about it.”
• “You can’t always get what you want, but if you try real hard sometimes you get what you need.”

What say you? Let’s stand and fight!!

Topics Carriers Market