With the continued development of the Marcellus and Utica Shale, businesses in West Virginia, Pennsylvania and Ohio are experiencing rapid growth and facing many issues related to this growth they had not previously experienced. One important consideration is whether and how to insure these growing assets. While myriad issues may arise regarding insurance, this article will address some general types of insurance coverage growing businesses should consider. Insurance issues are often complex and the following discussion is not all-inclusive. Thus, it is important to address any concerns or questions you might have regarding insurance purchases with your agent, or counsel, as he or she should be familiar with your business needs and can help you decide which coverages are best for your business.
Many types of insurance coverages are applicable to business needs. One important type of coverage is a commercial general liability policy (“CGL policy”) and an umbrella/excess policy. These policies protect businesses against claims for bodily injury and property damage, as well as advertising and personal injury claims. In addition, consideration should be given to purchasing a policy to cover any property owned by the business, such as equipment or building materials. An equipment endorsement can be added to the CGL policy or a property policy may be purchased and a CGL endorsement added.
The benefits of each type of policy/endorsement depend on the size of the business. For example, if a business has only a few employees but a large amount of property, it may be more beneficial to purchase the property policy and add a CGL endorsement. Alternatively, if a business has only a small amount of property but many employees, it would most likely benefit more from a CGL policy with a property endorsement.
Many contractors enter into “master/servant” agreements or contracts that contain an “indemnification and contribution” provision. Each state’s laws vary in regard to whether they will permit business indemnification agreements. Pennsylvania has an anti-indemnification statute that is limited in scope; it only invalidates agreements entered into by owners, contractors, subcontractors or suppliers under which architects, engineers, or surveyors are indemnified for damages or defense costs related to the preparation or approval of maps, surveys, drawings, etc. or directions/instructions that are the primary cause of the damages or defense costs. Ohio also has an anti-indemnification statute which makes unenforceable any indemnity provision in a construction contract that attempts to shift responsibility to another contractor or subcontractor for one’s own negligence for personal injury or property damage.
On the other hand, West Virginia law allows insured contracts and recognizes that where such a contract exists, the indemnitee stands in the same shoes as the indemnitor for coverage purposes under the policy.1
However, West Virginia’s limited anti-indemnification statute invalidates for public policy reasons indemnification agreements that indemnify against the sole negligence of the indemnitee without an appropriate insurance fund, bought pursuant to a contract, for the express purpose of protecting all concerned.2
So, before entering into a master/servant agreement, seek advice about the law in this regard for the business’s particular state. Also, when drafting such an agreement, choose counsel with experience in the business’s state laws regarding indemnification agreements.
If the business enters into such an agreement, the CGL policy should contain an “insured contract” provision. In addition, prior to commencing work, a Certificate of Insurance should be in place evidencing that coverage is effective. If the CGL policy does not have an “insured contract” provision, the business’s insurance agent should be consulted to see if an endorsement can be added to include the other party to the master/servant agreement as an additional insured under the CGL policy. Or, if the other party cannot be added as an additional insured, the business should confirm that party has its own policy in place and has added the business as an additional insured. Both businesses should be added as an additional insured on each other’s CGL policies.
Additionally, if the business is the contractor or owner of a large construction project, an owner-controlled insurance program (“OCIP”) should be considered. OCIP coverage is beneficial for large construction projects because it provides coverage for all contractors and subcontractors working on the project. OCIP coverage provides high liability limits and is beneficial in construction projects where costs exceed $50 million. This type of coverage includes general liability insurance, workers’ compensation insurance, builders’ risk insurance, and typically, an excess or umbrella coverage matching the primary coverage. Purchasing an OCIP will also lower the bids the business receives as owner of the project because the cost of insurance will not be included in the contractors’ and subcontractors’ bids.
Another important type of insurance coverage to purchase is workers’ compensation coverage. This coverage will provide immunity for the business from negligence actions should an employee be injured on the job. If the business is conducted in West Virginia, “deliberate intent” coverage will also need to be purchased because such claims are excluded from the standard workers’ compensation coverage.
“Deliberate intent” coverage may be purchased as a broadform endorsement or employers’ liability endorsement on a workers’ compensation policy. It may also be purchased as stop-gap coverage or an endorsement on a CGL policy. This type of coverage is essential for West Virginia employers because West Virginia is the only state that allows employees to bring “deliberate intent” claims (also known as “Mandolidis
” claims from the case Mandolidis v. Elkins Industries, Inc.
, 161 W. Va. 695, 246 S.E.2d 907 (1978)) against employers.
Also, before purchasing any policies, the business’s insurance agent should be consulted to determine if the business will be able to choose its own counsel with the policies the business is considering should a claim arise under the policy. Even if the business already has policies in place, the agent should still be consulted to determine if the business’s policies afford the right to choose counsel if a claim is experienced during the life of the policy.
Marlin v. Wetzel Co. Bd. Of Edu., 212 W. Va. 215, 569 S.E.2d 462 (2002)
W. Va. Code 55-8-14 and Dalton v. Childress Serv. Corp., 189 W. Va. 428, 432 S.E.2d 98 (1993)
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