FAQ
What is the Risk Retention Act and what
does it mean?
See Federal
Liability Risk Retention Act
Why was TCIC RRG set up and by whom?
TCIC RRG was set
up by Texas Construction Partners in order to
provide a reasonably priced insurance alternative for standard admitted
Commercial General Liability Coverage on home builders in the State of Texas in the absence of
such a competitive facility. We believe that the current coverage that is
available from a very limited number of carriers is overpriced and
unnecessarily restrictive.
Is TCIC RRG accessible?
No
Where and why is TCIC RRG domiciled?
TCIC, RRG is
licensed in the State of Nevada and registered
in Texas and
surrounding states.
Who is Texas Construction Partners, LLC?
Texas Construction
Partners is a Limited Liability Corporation which acts as the Program Marketing
arm for Texas Construction Insurance Company, Risk Retention Group.
Who is Risk Services, LLC?
Risk Services is
the company that serves all operational needs of TCIC RRG including
Underwriting, Accounting and Regulatory Reporting Requirements as well as
Reinsurance Placement and Coordination
What is Capitalization?
TCIC, RRG is a
licensed insurance carrier and as such, as with any other licensed insurance
carrier, it must maintain a certain level of Capital and Surplus in order to
remain in compliance with the insurance regulations of its domicile, the State
of Nevada. As
a Risk Retention Group, it is required that every insured be a shareholder and
every shareholder be an insured, and as such every member joining TCIC, RRG
must make a required capital contribution.
What is Contribution to Capital?
Contribution to
Capital is one of the requirements in becoming a Member/Owner of any Risk
Retention Group. In the case of TCIC RRG
it is 50% of the first years premium paid either (1) at inception in full, or
(2) paid out over 3 years at 25% the first year, 15% of the second year premium
and 10% of the third year premium.
What happens to the capitalization-where
does it go?
Capitalization is
retained by TCIC, RRG in its Capital Account, only to be used in the event
premiums are insufficient to cover claims and other operating expenses.
What is the minimum Capital and Surplus?
The State of Nevada requires $
500,000 for approved Risk Retention Groups.
How many shares of stock do Members get in
return for the Capital
Contribution?
Founding Members
receive one share for every dollar ($1).
Members who join after the Founding Member offering is closed will
receive one share for every $5.
What is the reinsurance structure and
attachment points?
Specific excess of
loss reinsurance attaching at $250,000 per claim, up to policy limits.
Who is Reinsuer-Imagine Re?
Imagine Insurance
Company Limited
AM Best Rating : "A-" Excellent
Financial Size: X ($500 Million to $750 Million)
Does TCIC RRG have an A M Best Rating?
Texas Construction
Insurance Company Risk Retention Group is not currently rated by AM Best.
Who are the Service Providers for Claims
and Loss control?
U S Risk has been
contracted to provide Claims, Legal and Loss Control Services
Please explain the mechanics of selling an
account?
(Hyperlink the
"Get a Quote" page from the web site.)
http://www.texas-construction.com/articles/obtain_quote___bind
How do you securitize Capital
Contribution?
Rather than paying
in Capital, some Builders prefer to secure the requirement through use of a
financial instrument or bank.
How do you securitize by LOC if you do not
want to use cash?
By obtaining a
irrevocable Letter of Credit from your bank which will be maintained on file
with the State of Nevada Insurance Commissioner and appear on the books of
TCIC, RRG as an asset and capital and surplus.
What is the length of Agreement?
Effective as long
as coverage remains in force.
What happens if you need to leave the Risk
Retention Group?
Your contribution
equal to 100% of initial cost or the current par value, whichever is greater,
can be returned to Founding Members after 3 years and to Non-Founding Members
after 5 years.
(See Section 5.11 of Articles of Incorporation and Bylaws.)
Why are Builders Contract Provisions with
Subcontractors so important?
Contract
provisions between the Home Builder and the subcontractor are vitally important
because they spell out in writing, in a legally enforceable format, who will be
responsible for what. Everything from
operations to legally imposed requirements is covered. In this process, there are expressed
warranties as to who will be responsible for providing insurance coverage. There are also agreements that the
subcontractor will provide certain indemnities and hold harmless clauses, as
respects the builder, to keep the builder separate from and protected from
operational issues and acts on the part of the subcontractor that could create
liability. The expressed warranties in
that contract have been tested in court and will withstand scrutiny by the
court system. This eliminates the need
to place restrictive warranties, as regards those subcontractors operations,
onto the Builders insurance coverage.
What Expressed Warranties in the builders
contract with subcontractors do you rely on and why?
We rely upon the
subcontractors expressed warranty that he will provide insurance coverage for
his operations in stated minimum amounts as well as the companion indemnities
and hold harmless language.
What is the Texas Residential Construction Liability Act
(RCLA) and what does it mean?
http://www.jtexconsumerlaw.com/V7N1pdf/V7N1construction.pdf
What Commercial General Liability Form is
utilized?
The Standard ISO CG OO 01(12-04) Commercial General Liability
Occurrence Form
Forms
and Endorsements
Is TCIC RRG a Standard Admitted Company or
a Non-Standard Surplus Lines Company?
TCIC, RRG is a
captive insurance company licensed in the State of Nevada
and operating as a Risk Retention Group, and registered in Texas and adjacent states. No Surplus Lines
Tax or Stamping Fee's are applicable.
How can we insure the builder for acts of
subcontractors and not audit subs?
Because the
expressed warranties contained in the Builders Contract with the sub contractor
clearly place the responsibility for providing insurance as well as supporting
indemnities and hold harmless clause's to protect the builder from the acts of
the subcontractor and the liability that may emanate from his operations at the
work site.
How is Subsidence claims treated?
Subsidence and
Earth Movement are excluded.
How are Mold claims treated?
Mold claims are
excluded.
How Are Construction Defects Treated?
The policy
contains several exclusions that will protect the insurance company from
certain construction defect claims – i.e. those resulting from damage to work
performed by subcontractors, Wrap-ups, multi-unit residential projects,
contractual liability, prior work, etc. However, it is important to understand
that the policy will respond to construction defect claims resulting from our insured's work completed during the
policy period. In the instance that faulty
workmanship on the part of our
insured is the issue, the policy will exclude that portion of the
insureds work that is deemed faulty – policy will respond for resulting damage
of a construction defect. As evidenced in the recent ruling for Lamar vs. Mid
Continent, the company is not able to deny entire claims based solely on the
stance that faulty workmanship cannot be considered an "accident" or
"occurrence". Defective work as an "occurrence" is a continuous issue – there
are many coverage issues – i.e. trigger, existence of property damage,
allocation, legal obligation, occurrence, property damage, insured's work
exclusions, impaired property exclusion, etc – surrounding defective work
claims. Because of this, a "simple" claim can result in inconsistence opinions
from courts.
Does TCIC RRG participate in the Guarantee
Fund?
No. Risk Retention Groups are not allowed
participation in State run Guaranty Funds.
After three years will Members get
dividends?
The ultimate
payment of dividends will be dependent on the profitability of TCIC, RRG and be
subject to approval from the Board of Directors and the State of Nevada.
Do all the listed endorsements on the
website apply to every policy or
are they selectively applied? Which ones are mandatory?
All endorsements
listed on the website are applicable under our standard contract offering. Terms and Conditions may always be modified
or changed by the underwriters depending on the situation and individual needs of the member.
Is the Punitive Damages Exclusion applied
in Texas to
all policies?
Yes. In Texas
the Court has the final decision as to "if or not" punitive damages may be
funded by insurance. The nature of
punitive damages is intended to be punishment for wrongful acts and, therefore,
is not typically allowed to be funded by insurance in the State of Texas.
What is your time estimate of when excess
will be available?
We believe that
Excess Liability Coverage (Umbrellas) will be readily available after we obtain
critical mass in the form of $1,000,000 in annual written premium. We have
ability to secure excess now - - but Umbrella availability may remain
problematic?
What are the basic disqualifying
attributes for membership? Who will we
NOT accept?
Builders without
acceptable subcontractor agreements and Builders who do not try and follow the
RCLA Guidelines are generally not acceptable.
Once those operational issues and practices have been addressed the
Builder will generally be acceptable. Any builder with a five year loss record
in excess of 60%.
Who is the underwriter and where are they
located?
The Underwriters
are located at Risk Services, LLC in Sarasota,
Florida.
http://www.captive.com/service/RiskServices/index.html
Please explain the purpose of Endorsement
TX-2005-004 (08-05) Products or Work Exclusion
In the instance
that a project was begun prior to inception, the Products or Work Exclusion
(Form #TX-2005-004) will only exclude that portion of the work that was
completed prior to inception of the policy. Any ongoing operations during the
policy period will be covered. (The prior policy year will respond to any
portion of the work that was completed prior to policy inception.) The intent
of the exclusion is to preclude coverage for any completed projects and/or that
portion of current projects that was completed prior to policy inception. We
show the current inception date on the Products or Work Exclusion for each
policy that is issued as each policy will respond only for claims involving
work that was completed during that policy period. Moving the date forward only
ensures that the renewal policy will respond only work that is being completed
during the renewal policy period & not the work that was done prior to
renewal. The expiring policy will still respond for work completed during that
time of the expiring policy was in force.
Will this exclusion (TX-2005-004 (08-05) Products or Work Exclusion) eliminate coverage for an “occurrence” or claim that occurs while I am insured by TCIC,RRG or if I ever leave the group?
No. That is not the intent of the endorsement. The endorsement is designed to make it clear what policy and what policy period is applicable on a claim depending on how the Court interprets the meaning of “occurrence” which can vary in three basic ways.
If the courts interpret “occurrence” as the date of manifestation, the policy in force on the date of manifestation would respond.
If the courts interpret “occurrence” as the date of discovery, the policy in force on the date the damage was discovered would respond.
If the courts interpret “occurrence” as the date the work was completed, the policy in force on the date the work was completed would respond. (This is the interpretation that we have seen the most in construction defect cases.)
Regardless, whichever policy is in force on the date the courts deem to be the “date of occurrence”, that policy would be called upon, subject to all the terms and conditions of the policy.
What is the impact of Endorsement CG 22-94 on
Completed Operations as opposed to carriers that do not attach the CG 22-94 ?
The CG 22-94 is designed to eliminate claims for property damage
to the work product done on behalf of the homebuilder by sub-contractors. The Homebuilders CGL
Policy has excluded property damage to the work product for over 40 years. The endorsement simply clarifies and
re-states this exclusion. The theory
being that faulty workmanship is not covered by the CGL
Policy. Ensuing damages as a result of the faulty workmanship, however, are not
excluded.
The reason for this exclusion is three fold.
First, it is because the CGL Policy is not a Warranty. Warranties are another form of insurance and do not involve negligence to trigger their coverage.
Secondly it clarifies the fact that CGL Policy is a Liability insurance policy and not a Property insurance policy. Damage to property is intended to be covered by a property insurance policy like the Builders Risk or Home Owners insurance policy.
Lastly, the CGL policy is written to respond to Bodily Injury and Property damage to the property of others for which the Named Insured is liable due to negligence on their part, and that the damage is the result of an incident, definite in time and place which is neither intended nor anticipated by the Named Insured.
There is still coverage present in the CGL Policy for Bodily Injury and ensuing property damages to others even if the CG 22-94 is attached to the policy.
There are Agents in the State of Texas who represent a carrier who does not attach the CG 22-94. They would have you believe that its use eliminates all coverage of any kind for the Homebuilder from a CGL Policy. This is not true. When those Agents make statements to that effect they are engaging in a serious misrepresentation of the facts. While their particular carrier may not attach the CG 22-94 to their policy, they do exclude roofing and plumbing exposures for ALL Completed Operations coverage. This includes Bodily Injury and Property Damage to the property of others which is what the CGL Policy IS designed to cover.
Ninety five percent of all property damages to the work are merely "punch" list items that are corrected before closing. The real exposure that the CGL Policy is designed to respond to is when a natural gas leak causes an explosion that kills a family of four or when a hot water heater explodes or causes a fire that destroys a home after closing. The CG 22-94 allows these valuable and intended coverage's to remain present under an occurrence policy form to protect the Homebuilder from the catastrophic results. A CGL Policy that has the plumbing hazard totally excluded will not respond to these types of losses.
As a Homebuilder would you rather have coverage for a bad paint job and not have coverage for a gas leak explosion?
