BIIAv6

Underwriting Procedures

Table of Contents

* Membership Requirements
* Criteria for Acceptable Risk
* Unacceptable Classifications
* Liability Underwriting Considerations
* Out of State exposures
* New Business Submissions
* Rewrites and Reinstatements
* Payment Option
* Premium Audits
* Loss Control

Attachments

Non-Voting Member Agreement/VBRP Agreement
Management of Risk and Loss Control Program
BIAI Supplemental Application
Indemnification Agreement
BIAI Contractor Renewal Application

Membership Requirements

It is a requirement of Builders Insurance Association Inc (BIAI) that all participant firms:

Be a member of (VBRP) and a member in good standing of National Association of Home Builders (NAHB) through a local Home Builders Association. Prospective members may apply for membership in VBRP and NAHB at the same time they apply for coverage. If the insured is not a member at the time of application, a completed copy of both membership applications must be attached along with the appropriate payment. An executed copy of the VBRP agreement must remain in the underwriting file.
Owner or office must meet with BIAI Loss Control Specialist.
Provide proof of positive net worth (via Balance Sheet) and financial stability (through a consumer credit service i.e. NACM report)

Criteria for Acceptable Risk

Builder must:

build less than 10% small commercial structures no heavy commercial exposure
purchase a 10 year home warranty policy on each and every unit built or signed indemnification agreement
have on file an executed approved sub-contractor agreement
attach "Exhibit A" to all sales contracts with the home buyer
appoint a designated warranty specialist in your office to handle homebuyer warranty and defect issues
exhibit a 40% loss ratio or better
maintain membership in VBRP and NAHB
entity shown as a named insured must have been in business three years or exhibit three years management and trade experience and exhibit strong financial position

Unacceptable Classifications

Insureds with the primary general liability codes of:

Alarms and alarms system installation
Asbestos Abatement Contractors, Consultants or Inspectors
Boiler inspection, installation, cleaning
Building structure – raising or moving
Cleaning – outside surfaces of buildings
Contractors (subs) – bridge, tunnel, elevated street, highway
Contractors (subs) – oil and gas fields
Crop spraying – by contractors
Dam or reservoir construction
Dike, levee construction
Electric light or Power line construction
Elevator or Escalator inspecting, installation, service
Excavation and Tunneling
Fire suppression systems – installation, servicing or repair
Gas main or connections construction
Hazardous materials contractor
Metal erection – steel lock gates, water towers
Oil or gas wells, servicing- by contractor
Painting exterior – spray application exceeding three stories
Painting steel structures or bridges
Prefabricated building
Railroad construction
Roofing
Sandblasting
Sewer cleaning
Sewer mains – Construction (not including connections by Plumbing Contractors
Steam mains or connections – construction
Swimming Pools – installation, service or repair
Tank construction, installation
Telephone, telegraph or cable television line construction – above ground
Water mains – construction
Waterproofing
Waterproofing – by pressure
Window cleaning – above 3 stories
Wrecking – building or structures
Wrecking – dismantling of prefabricated dwelling not exceeding three stories
Risks that derive more than 15% if their revenue from the GL class codes listed in unacceptable classifications
Risks with use of explosives
Farms or farming exposures
Ready Mix operation
Any account that has had a pollution claim

Liability Underwriting Considerations

Residential builders are involved in more than one kind of operation, either intermittently or continually. They utilize trade subcontractors to perform many phases of construction. The underwriter must determine the scope of the contractor’s operations in order to identify the hazards and assure adequate premium development. Consideration should be given to qualifying the builder’s ability to properly supervise and control the trade contractors operations. Attention should also be given to identification of any incidental operations to the main exposure that may be more hazardous than the residential construction classifications. Entry of an insured into a new area of operation may create a completely new exposure to loss. The contractor’s qualifications in this new area of operation should be evaluated closely.

Specific information on how well the account performs may be obtained from an evaluation of the insured’s qualifications

Years of experience
Reputation
Employees
Loss information

Sources of information to assist the analysis include premium audit records, loss runs, and licenses.

Proper record keeping and a record retention system (for the anticipated life of the work) is vital to providing claim defense material to prove correct materials were used, properly installed, inspected when required and engineer approved plans and specifications were followed for each completed job.

With respect to completed operations, the analysis should confirm quality work is performed. The builder should have on file an executed agreement with all trade contractors guaranteeing that the trade contractors work meets codes and standards usual to their specialty and that quality materials that meet plan specifications are used.

Construction defect litigation remains a real threat to this class of business. Residential builders must agree to absolutely follow loss control procedures relative to documentation of in-process operations and adherence to tight construction quality control standards. They must have on file:

An executed contract with each trade contractor that indemnifies and holds the builder harmless and names the builder as a named insured on the trade contractor's policy.
The contract must also provide that the trade contractor’s policy becomes primary in the event of a claim. BIAI provides sample contracts for use by its builder members.
A certificate of insurance must be obtained from all trade contractors that verifies the above information and provides proof of a minimum of $300,000/$600,000 limit.
Each builder must provide the homebuyer with a 10-year home protection warranty policy at closing, must provide signed indemnification agreement

As a minimum, Residential builders must:

Document all phases of construction in writing and through photo documentation
Keep records of approved deviations to engineered drawings or building plans
Develop and maintain detailed records of change orders or additions not shown on plan specifications
Document in writing and photographically any work done by a homeowner, or additions or changes to construction by a homeowner or other general contractor or trade contractor may provide.
Keep record of failed inspections conducted by city, county or other governmental inspection agencies. Records should include the date, time and name or number of the inspector. Additional records should be maintained as to the resolution of the issue and the approved inspection records.
Implement corrective actions against employees or trade contractors that incur repeated phase inspection "turn-downs" to include retraining, counseling or if necessary termination.

Out of State Exposures

It is not the intent of BIAI to provide coverage for firms domiciled outside the Commonwealth of Virginia.

New Business Submissions

A completed new business submission includes the following items:

Completed Commercial Insurance Application (Accord 125) and Commercial General Liability Section (Accord 126)
BIAI Supplemental Application
3 years hard copy loss runs evaluated within 60 days**

If any of the above items are missing, the Assistant underwriter will secure the items before passing submission to the underwriter for consideration.

**Underwriter may use discretion in accepting a statement of losses pending hard copy loss runs. File must be suspended for follow up to ensure loss runs are received and that they correspond with the loss statement.

Effective date of coverage will be determined by the date all originals; Accord applications, BIAI supplemental application, VBRP Membership Application, Confirmation of NAHB membership, loss information and down payment check are postmarked.

If a down-payment check is sent with an incomplete new business submission, the check can only be held for 5 days. If all required information to make an underwriting decision is not received, the down payment check must be returned via registered return receipt mail. The effective date of coverage will then be determined when all required information is received and the check is received by BIAI.

Rewrites and Reinstatements

If:

a cancelled member wishes to be rewritten, a new application and all other required documents must be secured. In order to consider rewriting a file, the final audit must be completed and any monies due must be paid in full.
an account has been cancelled twice for non-payment; it is BIAI’s policy that they may not be rewritten for a one-year period.
an account has cancelled and is within 10 days of the termination date the account may be reinstated.
the account is more than 10 days past the termination date refer the account to the underwriter.

Payment Option

Payment in full, or applicable payment plan with 40% down payment is required with the Application to bind coverage

Premium Audits

All policies will be physically audited at the expiration of each policy term.

Insured must make the following documents available to the Auditor upon request:

Certificates of Insurance for the period all sub-contractors have provided materials or labor/services (Originals will be collected by the auditor and sent to the BIAI offices)
Copies of the approved sub-contractor agreement signed by the sub-contractor, supplying labor/services or materials, and the Builder/Remodeler.
Exhibit A – Attached to the sales contract at the point of sale
Payroll Reports
Quarterly Reports
General Ledger
Vendor List

Loss Control

Inspection Guidelines

It is mandatory that all BIAI new members must be referred to Loss control for a safety and loss control inspection within 90 days of the inception of the coverage
The following risks will require follow-up site visits during the policy term
Risks with an estimated modified annual premium exceeding $50,000
Any project that exceed $5,000,000 or projects with longer than 24 month duration
After any claim with reserves exceeding $50,000
When the initial loss control report indicates
o Poor maintenance of premises or equipment
o Underground work
Certificates of Insurance are required on each sub-contractor doing work on your behalf. Failure to maintain a current certificate on your files will result in a surcharge being applied to your premium.

Each policyholder must implement and maintain an aggressive loss prevention program. To facilitate the application of these programs, the policyholder must appoint a full or part time safety/loss control representative. The safety representative must possess sufficient knowledge of the operation to be able to identify deficiencies and the authority to carry out corrective action. Each policyholder will ensure that the highest standards of quality control are maintained. This will be validated through work site inspections conducted by the BIAI loss control engineer at least annually and by the safety representative on an ongoing basis. Documentation of periodic inspection results will be maintained with follow-up action taken to correct any noted deficiencies. The safety representative will ensure that these inspections are conducted and follow-up is documented.

Inspections must include:

Compliance with State and Municipal Construction Codes (Uniform Building Codes, National Electrical Code, National Fire Protection Association, etc.
Quality workmanship
Proficiency of workers
Compliance with State and Federal workplace safety standards
Written inspection reports and photo documentation of completed work through each phase of construction. The inspection results and the photo documentation will be maintained in a project file for a period of not less than 5 years.




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		General Liability Agent Guide Underwriting Procedures Table of Contents * Membership Requirements * Criteria for Acceptable Risk * Unacceptable Classifications * Liability Underwriting Considerations * Out of State exposures * New Business Submissions * Rewrites and Reinstatements * Payment Option * Premium Audits * Loss Control Attachments Non-Voting Member Agreement/VBRP Agreement Management of Risk and Loss Control Program BIAI Supplemental Application Indemnification Agreement BIAI Contractor Renewal Application Membership Requirements It is a requirement of Builders Insurance Association Inc (BIAI) that all participant firms: Be a member of (VBRP) and a member in good standing of National Association of Home Builders (NAHB) through a local Home Builders Association. Prospective members may apply for membership in VBRP and NAHB at the same time they apply for coverage. If the insured is not a member at the time of application, a completed copy of both membership applications must be attached along with the appropriate payment. An executed copy of the VBRP agreement must remain in the underwriting file. Owner or office must meet with BIAI Loss Control Specialist. Provide proof of positive net worth (via Balance Sheet) and financial stability (through a consumer credit service i.e. NACM report) Criteria for Acceptable Risk Builder must: build less than 10% small commercial structures no heavy commercial exposure purchase a 10 year home warranty policy on each and every unit built or signed indemnification agreement have on file an executed approved sub-contractor agreement attach "Exhibit A" to all sales contracts with the home buyer appoint a designated warranty specialist in your office to handle homebuyer warranty and defect issues exhibit a 40% loss ratio or better maintain membership in VBRP and NAHB entity shown as a named insured must have been in business three years or exhibit three years management and trade experience and exhibit strong financial position Unacceptable Classifications Insureds with the primary general liability codes of: Alarms and alarms system installation Asbestos Abatement Contractors, Consultants or Inspectors Boiler inspection, installation, cleaning Building structure – raising or moving Cleaning – outside surfaces of buildings Contractors (subs) – bridge, tunnel, elevated street, highway Contractors (subs) – oil and gas fields Crop spraying – by contractors Dam or reservoir construction Dike, levee construction Electric light or Power line construction Elevator or Escalator inspecting, installation, service Excavation and Tunneling Fire suppression systems – installation, servicing or repair Gas main or connections construction Hazardous materials contractor Metal erection – steel lock gates, water towers Oil or gas wells, servicing- by contractor Painting exterior – spray application exceeding three stories Painting steel structures or bridges Prefabricated building Railroad construction Roofing Sandblasting Sewer cleaning Sewer mains – Construction (not including connections by Plumbing Contractors Steam mains or connections – construction Swimming Pools – installation, service or repair Tank construction, installation Telephone, telegraph or cable television line construction – above ground Water mains – construction Waterproofing Waterproofing – by pressure Window cleaning – above 3 stories Wrecking – building or structures Wrecking – dismantling of prefabricated dwelling not exceeding three stories Risks that derive more than 15% if their revenue from the GL class codes listed in unacceptable classifications Risks with use of explosives Farms or farming exposures Ready Mix operation Any account that has had a pollution claim Liability Underwriting Considerations Residential builders are involved in more than one kind of operation, either intermittently or continually. They utilize trade subcontractors to perform many phases of construction. The underwriter must determine the scope of the contractor’s operations in order to identify the hazards and assure adequate premium development. Consideration should be given to qualifying the builder’s ability to properly supervise and control the trade contractors operations. Attention should also be given to identification of any incidental operations to the main exposure that may be more hazardous than the residential construction classifications. Entry of an insured into a new area of operation may create a completely new exposure to loss. The contractor’s qualifications in this new area of operation should be evaluated closely. Specific information on how well the account performs may be obtained from an evaluation of the insured’s qualifications Years of experience Reputation Employees Loss information Sources of information to assist the analysis include premium audit records, loss runs, and licenses. Proper record keeping and a record retention system (for the anticipated life of the work) is vital to providing claim defense material to prove correct materials were used, properly installed, inspected when required and engineer approved plans and specifications were followed for each completed job. With respect to completed operations, the analysis should confirm quality work is performed. The builder should have on file an executed agreement with all trade contractors guaranteeing that the trade contractors work meets codes and standards usual to their specialty and that quality materials that meet plan specifications are used. Construction defect litigation remains a real threat to this class of business. Residential builders must agree to absolutely follow loss control procedures relative to documentation of in-process operations and adherence to tight construction quality control standards. They must have on file: An executed contract with each trade contractor that indemnifies and holds the builder harmless and names the builder as a named insured on the trade contractor's policy. The contract must also provide that the trade contractor’s policy becomes primary in the event of a claim. BIAI provides sample contracts for use by its builder members. A certificate of insurance must be obtained from all trade contractors that verifies the above information and provides proof of a minimum of $300,000/$600,000 limit. Each builder must provide the homebuyer with a 10-year home protection warranty policy at closing, must provide signed indemnification agreement As a minimum, Residential builders must: Document all phases of construction in writing and through photo documentation Keep records of approved deviations to engineered drawings or building plans Develop and maintain detailed records of change orders or additions not shown on plan specifications Document in writing and photographically any work done by a homeowner, or additions or changes to construction by a homeowner or other general contractor or trade contractor may provide. Keep record of failed inspections conducted by city, county or other governmental inspection agencies. Records should include the date, time and name or number of the inspector. Additional records should be maintained as to the resolution of the issue and the approved inspection records. Implement corrective actions against employees or trade contractors that incur repeated phase inspection "turn-downs" to include retraining, counseling or if necessary termination. Out of State Exposures It is not the intent of BIAI to provide coverage for firms domiciled outside the Commonwealth of Virginia. New Business Submissions A completed new business submission includes the following items: Completed Commercial Insurance Application (Accord 125) and Commercial General Liability Section (Accord 126) BIAI Supplemental Application 3 years hard copy loss runs evaluated within 60 days If any of the above items are missing, the Assistant underwriter will secure the items before passing submission to the underwriter for consideration. Underwriter may use discretion in accepting a statement of losses pending hard copy loss runs. File must be suspended for follow up to ensure loss runs are received and that they correspond with the loss statement. Effective date of coverage will be determined by the date all originals; Accord applications, BIAI supplemental application, VBRP Membership Application, Confirmation of NAHB membership, loss information and down payment check are postmarked. If a down-payment check is sent with an incomplete new business submission, the check can only be held for 5 days. If all required information to make an underwriting decision is not received, the down payment check must be returned via registered return receipt mail. The effective date of coverage will then be determined when all required information is received and the check is received by BIAI. Rewrites and Reinstatements If: a cancelled member wishes to be rewritten, a new application and all other required documents must be secured. In order to consider rewriting a file, the final audit must be completed and any monies due must be paid in full. an account has been cancelled twice for non-payment; it is BIAI’s policy that they may not be rewritten for a one-year period. an account has cancelled and is within 10 days of the termination date the account may be reinstated. the account is more than 10 days past the termination date refer the account to the underwriter. Payment Option Payment in full, or applicable payment plan with 40% down payment is required with the Application to bind coverage Premium Audits All policies will be physically audited at the expiration of each policy term. Insured must make the following documents available to the Auditor upon request: Certificates of Insurance for the period all sub-contractors have provided materials or labor/services (Originals will be collected by the auditor and sent to the BIAI offices) Copies of the approved sub-contractor agreement signed by the sub-contractor, supplying labor/services or materials, and the Builder/Remodeler. Exhibit A – Attached to the sales contract at the point of sale Payroll Reports Quarterly Reports General Ledger Vendor List Loss Control Inspection Guidelines It is mandatory that all BIAI new members must be referred to Loss control for a safety and loss control inspection within 90 days of the inception of the coverage The following risks will require follow-up site visits during the policy term Risks with an estimated modified annual premium exceeding $50,000 Any project that exceed $5,000,000 or projects with longer than 24 month duration After any claim with reserves exceeding $50,000 When the initial loss control report indicates o Poor maintenance of premises or equipment o Underground work Certificates of Insurance are required on each sub-contractor doing work on your behalf. Failure to maintain a current certificate on your files will result in a surcharge being applied to your premium. Each policyholder must implement and maintain an aggressive loss prevention program. To facilitate the application of these programs, the policyholder must appoint a full or part time safety/loss control representative. The safety representative must possess sufficient knowledge of the operation to be able to identify deficiencies and the authority to carry out corrective action. Each policyholder will ensure that the highest standards of quality control are maintained. This will be validated through work site inspections conducted by the BIAI loss control engineer at least annually and by the safety representative on an ongoing basis. Documentation of periodic inspection results will be maintained with follow-up action taken to correct any noted deficiencies. The safety representative will ensure that these inspections are conducted and follow-up is documented. Inspections must include: Compliance with State and Municipal Construction Codes (Uniform Building Codes, National Electrical Code, National Fire Protection Association, etc. Quality workmanship Proficiency of workers Compliance with State and Federal workplace safety standards Written inspection reports and photo documentation of completed work through each phase of construction. The inspection results and the photo documentation will be maintained in a project file for a period of not less than 5 years.