CASE STUDY – FAILURE TO MONITOR COMPLIANCE COULD WAIVE A RAILOAD’S RIGHT TO MAKE A CLAIM
An employee of a railroad’s contractor performing transload services suffered a serious bodily injury. The injured employee sued the railroad seeking $10,000,000. The railroad in its agreement with the transload contractor had required the contractor to provide a Certificate of Insurance as evidence of compliance with the insurance requirements in the agreement. Relying upon this requirement the railroad sought defense and indemnification from the contractor’s insurer. The contractor’s insurer denied the claim because it had not provided the railroad with the required evidence of insurance, a Certificate of Insurance. The insurer sought relief in court stating that the railroad had waived its right to make a claim by its failure to monitor for compliance with the contract insurance requirement citing: “Geier v. Hamer Enters., Inc., 589 N.E.2d 711 (Ill. Ct. App. 1992)”. In this case, the court concluded that a waiver of the insurance clause had occurred as a matter of law. The owner was presumed to know what it could have discovered in the exercise of reasonable diligence, namely, that the contractor failed to purchase the requisite insurance and failed to provide the requisite certificate of insurance. Courts have disagreed on whether or not failure to monitor for proof of insurance waives a contracting party’s right to make a claim. However, regardless of who prevails, this type of litigation is very costly. However, in this case, the railroad had implemented the CRTC10TN Certificate of Insurance Monitoring System that enabled the railroad to defeat the insurers coverage denial. The system documented that the railroad was actively seeking the required Certificate of Insurance. The court ruled that because the railroad had exercised reasonable diligence to obtain the Certificate of Insurance it had not waived its right to file a claim.
This case study illustrates a common occurrence. Too many parties do not consider providing evidence of insurance a high priority item, and they do not respond to requests for evidence of compliance until they are forced to do so. Therefore, it is important to monitor for and enforce compliance with required insurance requirements.
As a result of having a certificate of insurance monitoring system in place the railroad defeated the insurers denial of coverage and received full indemnification, which they otherwise likely would not have received.
The cost to vigorously enforce insurance compliance using the CRTC10TN Certificate of Insurance Monitoring System can be less than $2.00 per agreement per month or less depending on volume.
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