271.9-1

OWNERS AND CONTRACTORS PROTECTIVE (OCP) LIABILITY COVERAGE FORM SAMPLE INSURANCE PROPOSAL LANGUAGE

(November 2007)

REPRINT PERMISSION

All PF&M subscribers are permitted to reprint the following insurance proposal sample language when preparing insurance presentations for their commercial insurance customers. Other uses require permission by The Rough Notes Company, Inc.

PROPOSAL DISCLAIMER

The following paragraph or similar language needs to be included in all insurance proposals:

Consult the policy for definitions and limitations. The terms of this proposal do not represent contract terms. The policy is subject to company underwriting practices.

TIPS FOR USING THIS PROPOSAL LANGUAGE

This proposal language is not intended to be an entire insurance proposal. A client specific section including the name and address of the insured, the insurance company(s) and the agent, and information about them, a list of locations, limits, deductibles, and similar customer specific items are not included and should be prepared.

The intent of any insurance proposal is not to be a reproduction of the insurance policy, but to give a summary of possible coverages.

Paragraphs explaining coverages unique to this policy form may be the most important addition to your insurance proposal and sales effort. Coverage examples can be tailored to your individual customer. Be careful when altering any proposal language not to expand coverage beyond what the policy intends.

This proposal should be combined with proposals for other lines of business, such as commercial property, general liability, workers compensation and umbrella liability, for a complete account proposal.

Please refer to PF&M 271.4-3, Owners And Contractors Protective (OCP) Liability Coverage Form Available Endorsements and Their Uses, for a listing and brief description of endorsements that may be attached to the Owners And Contractors Protective (OCP) Liability Coverage Form. You may also want to include PF&M 271.7-3, Owners And Contractors Protective (OCP) Liability Coverage Form Endorsements Checklist, for a checklist and quick reference of all endorsements available for use with the Owners And Contractors Protective (OCP) Liability Coverage Form.

SAMPLE PROPOSAL LANGUAGE FOR THE INSURANCE SERVICES OFFICE (ISO) OWNERS AND CONTRACTORS PROTECTIVE (OCP) LIABILITY COVERAGE FORM

INTRODUCTION

The Insurance Services Office (ISO) Owners and Contractors Protective Liability Coverage Form–Coverage For Operations Of Designated Contractor (OCP) is an unusual coverage form and was developed for a single, specific purpose. It is a separate insurance contract that covers the named insured, being either a property owner or a general contractor, for its liability arising out of operations performed for the named insured by the contractor at the specified location, or the named insured's own acts or omissions in connection with its general supervision of the operations. The named insured must be the owner of property, a tenant of the property or another contractor for whom the designated contractor is performing operations. The liability protection provided ends when the project is finished or operations are completed. The coverage is also limited to the specific project and/or location.

The primary exposure is from vicarious liability. This is when one party is liable for the negligent actions of another party, even though the first party was not directly responsible for the injury. In the OCP coverage form, it is when the named insured, either as a property owner, project owner, general contractor or other contractor, is ultimately held liable for the acts of a hired contractor, sub-contractor or independent contractor working for or on behalf of the insured.

Vicarious liability is usually the result of injury or damage caused by an employee under a strict employer and employee relationship. However, under certain circumstances, the liability exposure for acts by non-employees, such as independent contractors, may also be attributed to the owner or general contractor. The circumstances usually involve three situations:

• Work that is inherently dangerous;
• Projects that impose non-delegable duties on the project owner under federal, state or local laws; or
• Negligence of the organization in hiring incompetent contractors.

The OCP coverage form is written as a stand-alone, monoline policy and contains its own set of policy conditions. It is not written or combined with any other coverage part or policy. Coverage is written on an occurrence basis and a claims-made version is not available.

BODILY INJURY AND PROPERTY DAMAGE LIABILITY COVERAGE

INSURING AGREEMENT

The insurance company agrees to pay for damages for covered occurrences of bodily injury and property damage that the named insured becomes legally obligated to pay up to the limits of insurance. It has the right and the duty to defend any suit for those damages and may investigate or settle any claim or suit at any time and at its sole discretion. The company's obligation to pay ends when the limits of insurance are exhausted by the payment of judgments and settlements.

EXCLUSIONS

Exclusions must be examined carefully, since many of them have conditions, exceptions, limitations or restrictions not shown below. Coverage does not apply to:

• Expected Or Intended Injury

Damages for bodily injury or property damage expected or intended by the insured are not covered, except for bodily injury resulting from the insured using reasonable force to protect persons or property.

• Contractual Liability

Damages for bodily injury or property damage in cases where the insured must pay damages based on assuming liability in a written contract or agreement are excluded. Coverage does apply to liability for damages the insured has without a contract or agreement or liability assumed in an insured contract or agreement if the injury or damage occurs after the contract is executed.

• Work Completed Or Put To Intended Use

Damages for bodily injury or property damage that occurs after the designated contractor completes its work on the project are not covered, except for any subsequent service, maintenance or repair work expected of the contractor.

• Acts Or Omissions By You And Your Employees

Damages for bodily injury or property damage resulting from any act or omission by the named insured or its employees, except for general supervision of work performed by the named insured or the contractor, are not covered. This exclusion also applies if the named insured or its employees perform any activities, work or operations on the project itself, other than supervising the designated contractor.

• Workers Compensation And Similar Laws

Damages resulting from any requirement or obligation of the insured imposed by any workers compensation, disability benefits, unemployment compensation or similar law are excluded.

• Employers Liability

Damages for bodily injury to an employee of the insured arising out of his or her employment or performance of duties connected with the named insured’s business are excluded. This includes bodily injury to the spouse, children, parents, brothers or sisters of that employee as a consequence of the bodily injury to the employee. This exclusion applies whether the insured is liable as an employer or in any other capacity, or whether the insured must share damages with or repay someone else who must pay damages because of the injury.

• Damage To Property

Damages for property damage to any property owned, rented or occupied by the named insured are not covered. This includes costs or expenses incurred by the named insured or any other party to repair, replace, improve or maintain that property for any reason, including preventing injury to persons or damage to property. This exclusion also applies to property loaned to the named insured, personal property in the insured's care, custody or control and work performed by the contractor for the insured.

• War

Damages for bodily injury or property damage caused in any way by war, undeclared war and civil war, including warlike action by a military force and actions taken by a government to prevent or defend against attacks involving military personnel or agents are excluded. This includes rebellion, revolution, insurrection or unlawful seizure of power and actions taken to prevent or defend against these acts.

• Mobile Equipment

Damages for bodily injury or property damage caused by or due to the use of mobile equipment when the injury or damage is from participation in, practice or preparation for racing, speed, demolition or stunt events are not covered.

• Pollution

Damages for bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at or from any premises, site or location at any time owned, occupied by, rented or loaned to any insured are not covered. This exclusion also applies to any loss, cost or expense arising out of any request, demand, order, law, requirement or claim or suit by a government entity to test for, monitor, clean up, remove, contain, treat, detoxify, neutralize or in any way respond to or assess the effects of pollutants. This exclusion has numerous exceptions and conditions that must be reviewed carefully and in their entirety in the context of the exclusion.

• Damage To Impaired Property Or Property Not Physically Injured

Damages for property damage to impaired property or property not physically injured due to a defect, inadequacy or dangerous condition in the work performed by the contractor for the named insured, or a delay or failure by the insured or those acting on its behalf in performing the terms of a contract or agreement, are excluded. This exclusion does not apply to loss of use of other property arising out of the sudden and accidental physical injury to work performed by the contractor for the insured.

• Electronic Data

Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access or manipulate electronic data are not covered. Electronic data is information, facts or programs used with computer software or other media used with electronically controlled equipment.

SUPPLEMENTARY PAYMENTS

With respect to claims it investigates or settles, or suits against the insured it defends, the insurance company pays:

• All expenses it incurs in doing so
• The cost of bail bonds, up to $250, required because of traffic law violations or accidents as a result of using any motor vehicle covered by this insurance
• The cost of bonds to release attachments, limited to bond amounts within the limit of insurance that applies
• Reasonable expenses the insured incurs when the insurance company requests assistance in investigating or defending a claim or suit, up to $250 per day in lost earnings if the insured must be away from work
• Court costs from a suit for which the insured is responsible, excluding attorney fees or expenses for which the insured is responsible
• Prejudgment interest for which the insured is responsible on the part of any judgment the insurance company pays
• Interest that accrues on the full amount of any judgment after it is entered and before the insurance company pays, offers to pay or deposits with the court the part of the judgment within the limits of insurance and for which it is responsible
• Expenses the insured incurs for first aid administered to others at the time of an accident for bodily injury covered by this insurance

If an indemnitee of the insured is named in a suit against the insured that the insurance company defends, it also defends the indemnitee, subject to the following conditions:

• The suit against the indemnitee must seek damages for which the insured has assumed the liability of the indemnitee in an insured contract or agreement;
• The insurance provided by the OCP coverage form applies to the liability assumed by the insured;
• The insured has assumed the obligation to defend or the cost of defense in the same insured contract or agreement;
• Based on what the insurance company knows about the occurrence and the allegations contained in the suit, there is no conflict between the respective interests of the insured and the indemnitee;
• Both the insured and the indemnitee ask the insurance company to handle the defense of the indemnitee in the suit and agree that the same legal representative handle the interests of both parties; and
• The indemnitee agrees in writing to cooperate with the insurance company in investigating, defending or settling the suit and to promptly send it copies of any demands, notices, summonses or legal documents it receives related to the suit. It notifies any other insurer having coverage available to the indemnitee and cooperates with the insurance company regarding coordinating other insurance available to the indemnitee. It provides the insurance company with written authorization to obtain records and other information related to the suit and to conduct and control the defense of the indemnitee in the suit.

If these conditions are met, attorney fees and all litigation expenses are paid but the payments do not reduce the limits of insurance. The insurance company's obligation to defend the indemnitee ends when the applicable limit of insurance is exhausted by the payment of judgments or settlements or when the conditions and agreements outlined above are not met.

WHO IS AN INSURED

If named or designated as an insured on the declarations:

• Individual means the individual and the individual's spouse are insureds.
• Partnership or joint venture means members and partners of the insured, as well as their spouses are insureds, but only with respect to their duties as partners or members of a joint venture.
• Limited liability companies means members of the company are insureds but only to the extent of their duties as members of the limited liability company. The named insured's managers are also insureds but only to the extent of their duties as managers.
• Any other organization means executive officers and directors are insureds but only to the extent of their duties as such. Stockholders are also insureds to the extent of their liability as stockholders.

The following are also insureds:

• Any party acting as the named insured's real estate manager.
• Any party having proper temporary legal custody of the property of a deceased named insured but only with respect to liability arising out of or caused by maintenance or use of that property and until a proper legal representative is appointed.
• A properly appointed legal representative has all the named insured's rights and duties in the event of the insured's death but only to the extent of its duties as a properly appointed legal representative.

No party is an insured concerning conduct of any current or previous partnership, joint venture or limited liability company not indicated on the declarations as an insured. Employees are not included as insureds.

LIMITS OF INSURANCE

The limits apply separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the coverage inception date shown on the declarations, unless extended after issuance for any additional period of less than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

• The most the insurance company pays are the limits of insurance indicated on the declarations, regardless of the number of insureds, claims made or suits brought and number of parties making claims or bringing suits.
• The most the insurance company pays for all bodily injury and property damage from any one covered occurrence is the Each Occurrence Limit indicated on the declarations. This is subject to the Aggregate Limit.
• The most the insurance company pays for the sum of damages for all bodily injury and property damage is the Aggregate Limit indicated on the declarations. If more than one project is designated on the declarations, the Aggregate Limit applies separately to each designated project.

CONDITIONS

• Bankruptcy

The insurance company is not relieved of its obligations in the event of the insured's or the insured estate's bankruptcy or insolvency.

• Cancellation
• The first named insured indicated on the declarations can cancel coverage at any time by providing the insurance company with advance written notice of its intent to do so.
• The insurance company can cancel coverage at any time by providing the first named insured and the contractor with advance written notice of at least 10 days before the cancellation effective date if the cancellation is for non-payment of premium or 30 days before the cancellation effective date for any other reason.
• The insurance company mails or delivers its notices to the first named insured's and contractor's last known mailing addresses.
• The notice of cancellation states the cancellation date. This is the date that the policy period and coverage ends.
• In the event of cancellation, the insurance company sends the contractor any return premium due. If the insurance company cancels, the refund is calculated on a pro rata basis. If the insured cancels, the refund may be calculated on a different basis. In any event, the cancellation is effective even if a refund has not been made or offered.
• If the notice of cancellation is mailed and not delivered, proof of mailing is sufficient proof of notice.
• Changes

The OCP coverage form includes all agreements concerning the insurance coverage provided between the insured, the contractor and the insurance company. The insurance company must agree to any changes requested by either the first named insured or the contractor and policy terms can only be changed by endorsements to the policy issued by the insurance company.

• Duties In The Event Of Occurrence, Offense, Claim Or Suit

The named insured must perform certain duties if a claim or demand for coverage occurs:

• Inform the insurance company of any occurrence that may result in a claim as soon as possible. At a minimum, include information concerning how, when and where the event took place and the names and addresses of all injured parties and any witnesses. Include the nature and location of any injury or damage as a result of the occurrence.
• Immediately record the details of the claim or suit, the date it was received, notify the insurance company as soon as possible and provide it with written notice of the claim or suit on a timely basis.
• Every insured involved in or with the claim must immediately send the insurance company copies of demands, notices, summonses and legal documents it receives in conjunction with the claim or suit and authorize and grant approval for the insurance company to obtain records and other needed information. Every insured must also cooperate with the insurance company in the investigation or settlement of the claim or defense against the suit and assist the insurer in enforcing any rights against any person or organization that may be liable to the insured for injury or damage covered by this insurance.
• No insured may voluntarily make any payments, assume any obligations or incur any expenses other than first aid without the insurance company's consent, unless it does so at its own cost or expense.
• Examination Of Your Books And Records

The insurance company may examine and audit the books and records of the named insured or the contractor that relate to the coverage provided during the policy period and for up to three years after the policy expires.

• Inspections and Surveys

The insurance company may make inspections and surveys at any time, report its findings to the insured and recommend changes it feels should be made but it is not obligated to do so. These inspections and surveys relate only to the insurability of the risk and the premiums to charge. It does not make safety inspections or perform the duties of parties that provide for the health or safety of workers or the public. It does not warrant that conditions are safe or healthful or comply with any law, regulation, code or standard. This condition does not apply to inspections or recommendations concerning certification of boilers, pressure vessels or elevators under any state or municipal statute, ordinance or regulation.

• Legal Action Against Us

No party has the right to join the insurance company in any manner, bring the company into a suit claiming damages from an insured or sue the company unless all the terms and conditions of the OCP coverage form are completely met and complied with. The insurance company can be sued to recover on an agreed settlement or on a final judgment against the insured but it is not liable for damages not subject to payment under the terms of the OCP coverage form or that exceed the applicable limit of insurance. An agreed settlement is a settlement and release of liability signed by the insured, the insurance company and the claimant or the claimant's legal representative.

• Other Insurance

The OCP coverage part is primary insurance. The insurance company does not seek contribution from any other insurance available to the insured, unless provided by a different contractor than the one indicated on the declarations for the same operation and job location. It then shares with the other insurance on the basis of one of two options.

• If the other policy permits contribution by equal shares, this insurance does as well. Each insurance company contributes equal amounts until it exhausts its limit of insurance or the loss is paid, whichever occurs first.
• If the policy does not include contribution by equal shares, contribution is by limits. With this approach, each company's share is the ratio of its applicable limit of insurance to the total applicable limits of insurance by all insurance companies.
• Premiums

The contractor pays the premiums and also receives any return premiums paid by the insurance company.

• Premium Audit
• All premiums are calculated according to the insurance company's rules and rates.
• The premium indicated as an advance premium is only a deposit premium. At the end of each audit period, the insurance company determines the actual earned premium for the period and notifies the contractor. The premium due date is indicated on the billing notice. If the advance and audit premiums exceed the earned premium, the company refunds the excess to the contractor.
• The contractor must keep the records and information the insurance company needs to do the premium calculations and send copies to the insurance company when it requests.
• Audit periods may be monthly, quarterly, annually or any reasonable period agreed to by the contractor and the insurance company.
• Separation Of Insureds

Other than the limits of insurance and any rights and duties that apply specifically to the first named insured, the insurance provided applies to each named insured as if it was the only named insured and separately to each insured against whom claim is made or suit is brought.

• Transfer Of Rights Of Recovery Against Others To Us

Any rights the insured has against others to recover all or part of any payment made by the insurance company are transferred to the insurance company. The insured must preserve those rights and do nothing after the loss occurs to impair them. The insurance company can request that the insured bring suit or transfer those rights to it and help the company enforce them.

• When We Do Not Renew

If the insurance company decides to not renew, it mails or delivers written notice to the first named insured at least 30 days before the expiration date. If the notice is mailed, proof of mailing is sufficient proof of notice. The company is not required to notify the contractor, even though the contractor pays the premium. This paragraph is subject to requirements in most states concerning the number of days of advance notice of non-renewal required, what is considered acceptable as proof of mailing and the valid reasons to terminate or not renew coverage.

DEFINITIONS

Refer to the policy for a list and description of policy definitions.