BELT & SUSPENDERS
Problem: A railroad wanted to be sure that it would have the insurance coverage it was relying upon from their contractors when they performed work on their property. To do so they required their contractors to include the railroad as an insured, Additional Insured, in the contractor’s “Commercial General Liability” (CGL) insurance. To be “SAFE” they also required their contractors to provide them with a “Railroad Protective Liability” (RRPL) insurance policy. They recognized that the cost of the RRPL policy would be included in a contractor’s bid. But, felt that the cost was worth the extra protection. After all the RRPL policy would be issued to them, not the contractor, and they, not the contractor, are the named insured. Their solution: the so-called “Belt & Suspenders” approach.
Some time after one contractor had completed their work a loss occurred as result of that contractor’s negligence. The railroad submitted a claim to both the contractor’s CGL insurer, and the RRPL insurer. They were surprised when both denied coverage.
The contractor’s CGL insurer denied coverage because the policy excludes coverage on or within 50 feet of a railroad. The RRPL insurer denied coverage because: 1. The policy excludes coverage for products or completed operations. Products and completed operations insurance encompasses liability arising out of an insured’s products or business operations conducted away from the insured’s premises once those operations have been completed or abandoned. 2. RRPL coverage ends when either the job is finished or the policy expires, whichever occurs first.
Is here a better way to obtain “SAFETY” against such an uninsured loss? Yes, but how:
- Obtain a certificate of insurance (COI) from the contractor before work begins.
- Assure the COI states the contractor’s commercial general liability policy has been endorsed deleting the exclusion for work on or within 50 of railroad property. The CGL policy includes products and completed operations, and such coverage in the CGL is not dependent on the location or duration of the work.
- If the work will endure beyond the policy’s expiration date, obtain another COI at renewal. Ensure that the endorsement to the CGL deleting the exclusion for work on or within 50 of railroad property remains in force.
When fully understood, RRPL coverage is an important tool railroads can use to transfer risk of loss to others. When not fully understood, RRPL coverage is mostly ineffective at providing the “SAFETY” this railroad was seeking. Why? Because RRPL Policies contain numerous other exclusions that greatly limit its effectiveness compared to commercial general liability coverage, and in most circumstances better coverage is attainable without the cost of a RRPL policy.
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