What do I need as an Attorney or Legal Office?
Well, lets start off with Professional Liability Insurance.
This policy indemnifies the insured against liability damages (and the cost of defense) based on alleged or real professional errors and omissions or mistakes when acting on behalf of another. Those that may benefit from this type of policy would be: architects/engineers, physicians, attorneys, law enforcement officers, realtors, escrow agents, accountants, stockbrokers, directors and officer of corporations.
Admitted vs. Non-Admitted
Most people believe that it is preferable to use an insurance company which is 'admitted' in California (as opposed to non-admitted) but the truth is, it is not always necessarily better. Insurance companies which are California 'admitted' carriers are required to place a certain amount of funds in to a special account, governed by the California Insurance Guaranty Association (CIGA), to protect policy purchasers (you) if the carrier were to go out of business, and/or file bankruptcy, and/or just plain flake out.
Insurance companies which are not California 'admitted' carriers do not place funds in to this special account, therefore you are not protected by CIGA if the insurance company has problems however, sometimes new employers with no business experience, and/or particular types of subcontractors, may find it difficult, if not impossible, to find an admitted carrier to write their liability policy.
Surplus lines (or non-admitted) carriers fill this "need" for many attorneys. It is the agent/broker's responsibility to offer coverage from well respected, financially stable insurance companies, whether they be admitted or non-admitted. It could be better to be insured by an A++, non-admitted company, than a B+, admitted company. If the B+, admitted company goes 'belly-up', CIGA would only pay up to $500,000 of a liability claim - with the subcontractor/ contractor left, uninsured, for any additional liability.
Employment Practices Liability Insurance (EPLI)
EPLI is an essential for Attorneys, Offices and Legal Practices. This insurance policy provides coverage for employment discrimination, sexual harassment, and wrongful termination. Coverage includes defense costs as well.
Umbrella/Excess Policies
Some attorneys may find the need of additional coverage for their business. The Commercial Umbrella policy provides additional layers or limits of coverage and extends the occurrence and aggregate limits of the Primary insurance policies. Typically, Commercial Umbrella policies provide additional limits over Commercial General Liability policies, Commercial Auto policies, and Garage policies. Commercial Umbrella policy limits range from $1 Million up to $100 Million with Self-Insured Retentions typically set at $10,000. Commercial Umbrella policies are offered by many admitted and non-admitted insurers. It is recommended that the Commercial Umbrella policy period be written on a concurrent basis with the underlying policies.
Similarly, the Commercial Excess policy provides additional layers or limits of coverage and extends the occurrence and aggregate limits of the Primary insurance policy. Typically, Commercial Excess policies provide additional limits over Commercial General Liability policies, Commercial Auto policies, and Garage policies, but only on an individual basis. Commercial Excess policy limits range from $1 Million up to $100 Million with Self-Insured Retentions of $10,000. Commercial Excess policies are offered by admitted and non-admitted insurers. It is recommended that the Commercial Excess policy period be written on a concurrent basis with the corresponding underlying policy.
Workers Compensation
Worker’s compensation for California contractors can be quite complicated. Often times we find that the classifications are incorrect for employees who conduct work beyond the most basic classification.
There are several different classifications that most contractors don’t realize they can use to receive a better rate on their insurance. This can be a problem for demolition contractors, sheet metal contractors, plumbers, grading and other construction employees who work in more than one trade.
With our extensive experience and thorough understanding of the construction industry and worker’s compensation rating systems, we can often reduce insurance premiums for our clients by hundreds and even thousands of dollars. We have been very successful in lowering overall worker’s compensation insurance costs by ferreting out the most competitive classifications that apply to individual contractors. At the same time, we have served our clients by going back to prior insurance policies and getting substantial refunds by correctly presenting the exposure for worker’s compensation to the insurance carrier.
Surety Bonds
Surety bonds are an effective tool for shifting the risk of subcontractor failure to a surety company or companies. Surety bonding is a careful, rigorous, and professional process in which surety companies prequalify the subcontractor, providing the general contractor the assurance that the subcontractor will perform according to the terms and conditions of the contract. This essential assurance is provided by the performance and payment bond. The Performance Bond protects the general contractor (obligee) from financial risk should the subcontractor default or fail to perform the job according to the terms and conditions of the contract. The Payment Bond guarantees that the subcontractor will pay laborers and suppliers associated with the project.
Law is a risky business. In spite of their prequalification efforts, surety companies paid out $514 million in losses last year alone and over $7 billion dollars since 1985! These losses would have otherwise been borne by law offices- and in some cases, by owners if they led to default of the Attorney.
Many sureties encourage, or may even require attorneys to bond subcontractors, especially on large, complex projects or one where a few subcontractors represent proportionally large or critical segments of the work.
Sureties favorably view attorneys who have an established policy of bonding subcontractors over a certain threshold. Of course, this is only one of many underwriting considerations, but it can be a very important one when the surety is asked to consider a stretch situation. Does the subcontract bond reduce the attorney's bond exposure on a dollar-for-dollar basis? Keep in mind that each bond is specific to a contract. The attorney's bond is specific to the subcontract. Therefore, in the eyes of the attorney's surety, there is no such correlation. The attorney and his or her surety are still obligated to the owner for the terms and conditions of the contract. The owner is not a party to the subcontract and does not benefit directly from the subcontract bond.
Many attorneys, especially larger companies managing numerous projects with several different subcontractors, have an established subcontractor bonding policy. The most common thresholds are $50,000 to $100,000 with exceptions to meet the realities of the marketplace. On hard-bid public work projects with listed subcontractors, the low bidder often must list subcontractors that may be unable or have limited capacity to provide subcontract bonds. Other considerations, such as type of work, duration of the subcontract, bid spread, size, financial strength, and reputation may provide reasons to waive the requirement for subcontract bonds.
But size alone is not a reason to waive subcontract bonds. Many large, well known contractors have failed. A little research may uncover important information about the financial condition of the subcontractor. Your professional surety agent is an excellent source of information about subcontractors and their ability to provide bonds.
If you are in need of any information not listed here, please visit our Frequently Asked Questions page, or Contact Us and we will be happy to assist you with any information you need.
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