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I have a general question I'd like to get your opinions on with respect to the "occurrence" wording in various contractor liability forms. I'm in California so this relates a bit to the "Montrose" decision. I have a customer who came to me, a small artisan contractor, who is mainly involved in repair/handyman type services for property managers but also some light remodeling of kitchens/baths etc. He is currently insured on a "modified" occurrence form. This wording basically uses a manifestation clause. The modified occurence form says that the policy will pay for damages for which the insured is legally obligated...as the result of an "occurrence" which first manifests during the policy period. Damage or injury is manifest when it is diagnosed or apparent to any person. I would like to place him with a carrier that has regular occurrence wording. Most of the carriers with appetites for smaller contractors (Navigators Insurance as an example) contain a prior work exclusion (even though loss runs are provided and there have been no prior losses). This makes no sense to me. If there have been no prior losses and the carrier is asking about prior activity on their application anyway, then they should cover an occurrence that occurs during their policy, regardless of when the work was completed. Granted, the completed operations exposure on a risk of this type is much smaller than a contractor who is actually building from the ground up, so it may not be an issue, but I still see it as a potential coverage gap. Other carriers are available but this contractor is price conscious and I'm not even asking for this particular customer but just in general because it seems like quite a conundrum. So two questions: If the only options available are to move to a policy with a prior work exclusion in order to have an occurrence form moving forward or stay put in a modified occurrence form, which seems like the better choice? If presented to the customer in this fashion, and he/she chooses the option with a prior work exclusion (and signs off on it), do you feel this is doing the right thing for the customer (assuming he has rejected any other higher priced options). Thank you for time in reading this lengthy post.

Rob

Rob, I think I can help with a market, that I would not normally give out. They have both verison available. And can answer that question. I think in time you will see this manifest clause to be the norm. Send me a private email, need to know what city your from before given out this market. You may already have any how..

In Arizona we are seeing some form of the "prior work exclusion" attached to almost all policies for small contractors going to the excess/surplus lines marketplace.

This is a horrible exclusion and is a real problem. It is going to continue to be a problem if/when you need to move the account to another carrier two years down the road and they want their own prior work exclusion. If the carrier you place him with now pulls out or stops writing the particular trade, then you have to move him and he will get a new exclusion.

Some of the carriers have better prior work exclusions than others. One of the Lloyds exclusions excludes "work completed prior to inception" which is a little more liberal than most.

I think you are better of with the "modified" form. At least the carrier that was on the risk at the time the occurrence first manifests would provide some coverage. The prior work excluded policies will not cover any prior work. If your contractor completes a kitchen remodel the month before the new policy (with prior work excl) takes effect, then he will have no coverage for any occurrence arising out of that work. Not good!!

Good luck!

The modified occurence form says that the policy will pay for damages for which the insured is legally obligated...as the result of an "occurrence" which first manifests during the policy period. Damage or injury is manifest when it is diagnosed or apparent to any person. I would like to place him with a carrier that has regular occurrence wording.

What do they mean by "apparent to any person?"

This endorsement is a very strange animal indeed! And I bet it's not an ISO form. How did the folks we pay at the insurance departments approve this one!

If your insured does not wish to pay for a true occurrence form, then hopefully he will stick to little repair jobs where difficulties
will manifest themselves quickly, i.e. installing a cabinet which falls fall to the new ceramic tile floor, gravity related issues. Does any insured know for a fact that anything that may go wrong, will go wrong, visibly wrong, within the next 365 days? What a creepy endorsement.

Who was asleep at the wheel at the Insurance Departments??

No wonder some insureds think we insurance people are a bunch of bums.