| Profax 1/4/2010 - 1/4/2010 | |
| YOUR INSURED’S CONTRACTUAL GAP: Contractual liability is getting to be a bigger problem for any contractor due to the shifting or assigning of responsibility to the contractor. For example, your local contractor agrees and signs a contract to complete a certain project with certain materials to meet building code requirements. There is a time line to meet - “Time is of the essence” in order to circumvent certain building code changes. There is a penalty section in the contract on your contractor. Contractors enter these agreements every day promising they will deliver buildings or projects that meet the contracted specifications. Often these contractors give a “hold harmless agreement” within the contract. When things go awry, does the CGL contractual liability provide any cover? Is there coverage for the “contractual penalty”? Does a contractor’s Performance Bond provide any cover? What about the exposure that your contractor shifted under a second contract to his “independent subs”? Warranties, workmanship, penalties and many obligations shifted to the “insured contractor” are not normally covered in the CGL even with an “insured contract”. More and more lawsuits are expected to surface due to a new phenomenon of expansion of tax credits, government deadlines, government ordinances, and government incentives which shift much of the legal burden to the private sector. Will the insurance industry provide coverage products to meet these rapidly expanding requirements? Some recent examples placing the burden of performance on private sector include, the “cash for clunkers” [auto dealers], “$8000 first time home buyer tax credit” [realtors, builders and repairmen], “stimulus packages” [construction contractors] and the pending health care reform mandates on hospitals, doctors, clinics, employers . . . etc. How do the various industry exclusions play into the new government requirements---such as pollution, delays, construction defects, ordinance & law limitations etc.? Will the industry meet these challenges or will problems continue as with asbestos, underground tank leakage, pollution and flood/hurricane issues? PELOSI POWER!! Americans do not realize the power of the Speaker of the House and the abuse than can result. Case in point—a new report on the “Judicial Hellholes” was released Dec. 15th which cites the nation’s worst cities, counties or states to suffer from rampant lawsuit abuse. Speaker Pelosi OPPOSES any health care tort reform and matter of fact in her bill [Section 257] she punishes states IF they implement any tort reform by capping or limiting the amount of “non-economic damages” awards. Her bill [House version] actually encourages even more speculative lawsuits that will drive up health care and insurance costs whether it is run by the government, private enterprise or the European Union! The annual “hellhole” report by the American Tort Reform Foundation shows that President Obama’s own Cook County, Ill., is the nation’s third-worst place for lawsuit abuse. South Florida, West Virginia, Atlantic City, New Mexico, and New York are the “hellholes” along with Cook County, IL. In October 2008, the Department of Commerce released a report noting that lawsuit costs as a percentage of gross national product are two to three times higher in the United States than in any other developed nation! Several other studies reveal that “European companies doing business in the United States rank ‘fear of legal liability’ among their top concerns. It appears the “judicial hellholes” will continue to burn with Obamacare and Speaker Pelosi. ACRE UPDATE: According to data released by the USDA’s Economic Research Service, only 8% of farmers elected to participate in ACRE - the Average Crop Revenue Election program. The eight percent enrollment represents 13% of eligible based acres and is less than expected in the first round enrollment. ACRE payments are triggered when a farm’s revenue and the State revenue [price multiplied by yield per planted acre] fall below a calculated guarantee by crop. If ACRE had been available during crop years 1996-2008, the report shows that farmers would have benefited MORE from the old 2002 Farm Act programs than in the new ACRE program. The second round of new sign-ups will be this spring. Once a farmer signs-in for ACRE—he is locked in for the remainder of the 2008 five-year Farm Bill. NOT GOOD NEWS IN “AG COUNTRY”: For the first time in 20 years, farmer assets and equity declined in 2008 with forecasts for further decline. According to the USDA’s Economic Research Service report, the farm sector asset and equity values [net worth] increased by 300% [$722 billion in 1986 to 2.1 trillion in 2007]. However, last year the farm sector assets decreased and will continue to decrease according to the report. What does this mean in “ag country”? Ag lenders need to be vigilant because this trend has a direct impact upon farm solvency, declining cash flow and tighter credit conditions. Equipment and implement dealers had better be prepared for a downturn in sales. Landlords can expect roll-backs on cash rents while local and state governments can expect losses in tax revenue. Farm land values will recede affecting real estate taxes, while local and state sales taxes will decline and state income taxes will become minimal from the ag sector. The only good news is that the U.S. Ag Sector is still on firm financial footings and is in better financial shape than in the 1980s farm crisis. |
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