On demand 1h 35s Basic

Tenders: How to Ensure All Parties Pay Their Fair Share

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Tenders: How to Ensure All Parties Pay Their Fair Share

This course will examine the nuts and bolts of a successful tender. Whether your client is tendering to another entity and/or carrier or whether your client has been tendered to, this course will walk you through the process. This course also examines contractual indemnity provisions commonly found in many contracts and the impact said provisions may have on the tender.

Transcript

Oh, good afternoon. My name is Sarah Ziolkowski. I am a partner in Milber Makris Plousadis & Seiden Coverage team. I specialize in coverage. I also co-chair of the firm's appellate team. And I think you all for attending. And my colleague Russell McBrearty, I think actually might have led a Cle last week for you guys as well is here as well to to help with this course. Hi, I'm Russ McBrearty. I'm in the Woodbury office here at Milber Makris and generally deal with labor law cases and cases in general. Um, I'm part of the department with Dave Laurie, who was with us a couple of weeks ago with regard to the Labor Law Seminar. Um, and today we're going to discuss tenders and basically risk transfer opportunities that arise out of, out of cases where there's opportunities to transfer the risk to proper tortfeasors. So usually when we get a claim in, we have an overall analysis of the claim coming in. He usually begins with looking at what plaintiff's claims are and we look at the liability and the damages issues with that. But after that's done and we've we kind of have that under control. The next thing we look at is to whether there's any other potential tort feser's that, um, that we can try to pass the risk to or if, or perhaps we're a tortfeasor uh, our client, your insured is a tort Feser that may be someone is seeking to pass the risk to and we have to analyze those. And so this is, this is a way this seminar is going to kind of give an overview of how we analyze that and what we do at the beginning stages and throughout the litigation to successfully pursue tortfeasors through tenders and third party claims or how we respond to tenders and third party claims that come our way. Our initial analysis for claim to determine whether we have we can transfer the risk to other parties comes when we get the complaint in or some some kind of letter or document showing a claim. So when it comes in, we should gather the information to determine the viability of the risk transfer. So and this depends on on who the party is that insured? So this could be a determination of looking to transfer the risk and how to respond to a potential transfer. And there's two parties that we that we look at. We define here we have the upstream party and that is the party that is going to be looking to transfer the risk to somebody else. And the downstream party, which is the party that the risk is being transferred to or sought to be transferred to. And these two these two are important because they're obviously two different parties. And how they how you view a claim, depending on who you are. And that is different. So if we are the upstream party, we will look to tender to a downstream party, right? And if we're the downstream party, of course, we will look to determine when we receive a tender, whether we will accept that tender or whether it will be challenged. And that would be, as Sarah said, it would be challenged on two different views, one on indemnity, contractual indemnity, and one on additional insured status. So do you want to. Go over some examples of an upstream party versus a downstream party? Sure. I'm I think I have a couple of that in here, but I'll go through it on this here. So so once we once we get a risk, you know, once a risk transfer issues identified, we can collect documents here. So for example, um, leases, construction contracts, management agreements, service agreements and as Sarah just alluded to, there's to determine upstream parties and downstream parties. An upstream party may be a lessor who someone who is the owner of a building and their tenant is doing some kind of work and or something happens in their tenant space and the landlord or the lessor is sued. They would be the upstream party here. They would be looking to transfer any risk that they would have in the lawsuit down to their lessor. And the same for construction contracts. You can have owners that are looking to that are upstream parties looking to push the risk down to their contractors. You could have a general contractor who would look to push his risk down to subcontractors and so on and so forth. Management agreements and service agreements would be the same. It would be whoever, whoever the party is that is is in the contract or agreement, who would be seeking the indemnity is is the upstream party and the one that is the indemnity is being sought from would be the downstream party. Um, now, when we're collecting these documents, I note that sometimes when we're collecting documents from our clients or or contractors, whoever it may be, they might not have all the documents. So we. We'd have to look through. We may have to look to other sources to get those documents. I've had situations where I've had an owner as a as a. As a client and they had contracted with with somebody to do work, but they don't have a copy of the contract. So now I would have to try and chase down the person, the company that has the contract and that may be done through phone calls. It may be done through subpoena. But, you know, once I'm able to get those documents, then I can look through my risk transfer potential. And it's very important to make sure that you have complete copies of the documents. Sometimes, especially larger contracts, they'll reference numerous exhibits, and you want to make sure that you have all of those exhibits. You have a complete understanding of what each party's obligation is and what the scope of work to be performed is before you go about determining whether or not to attend or accept the tender. Right. And that Segways well into this is, you know, once once we get the document, we want to look at it, right? So as Sarah said, we want to make sure that we have all the documents that are within the or within the the framework of our risk transfer, because sometimes there's. Potentially, you know, important things missing. So we want to look at certain things when we get the document. We want to know if it predates the accident or is it contemporaneous with the accident. Wherefore, um, so when an accident happens, we get a contract. We want to see that the contract was dated prior to the accident because that's going to be whether it actually controls over the situation. Uh, is it still applicable? Sometimes there's expirations in contracts, whether it's a year from today or six months from today or at the end of the project. So maybe a project ends and then two days later there's an accident, right? Um, therefore, that would, that would be an issue. Um, and we want to know if it's executed by both parties. Now, it doesn't necessarily need to be signed, but this could become a contention if, if some of the parties say, Well, I never signed it, I didn't agree to this agreement, but there's workarounds on that which would take litigation because you'd have to question the person with regard to the work that was performed or their their, you know, what they did as a lessee in order to determine whether they did it pursuant to the agreement or not. Um, is and as Sarah said, is it a complete document? A lot of our documents have, you know, a lot of leases and a lot of contracts will have addendums, they'll have riders, they'll have modifications. Um, I've seen leases, you know, that are the original lease is 30 years old and there's seven modifications that change parties, that change terms, that take terms out, put terms in. And it could be you know, it's, it's, it's a web to try and figure out exactly what the new provisions are. You know, when after 30 years, maybe it would have been easier to write a new lease without having 12 modifications. Um, but, you know, there it is. We have we have to comb through that and determine, you know, what language from the original lease is still there, what language is not. For example, I had a contractual indemnity case where someone was seeking contractual indemnity from me as a subcontractor and in the in one of the riders or the Second Amendment to the contract, they removed the indemnity provision completely and added a new one which left out the which actually left out the indemnity provision that would have that they were trying to use against me. So I was able to to win that case and, and get the contractual indemnity dismissed because they actually removed the complete indemnity agreement, whether it's by mistake or not, it was it was their contract. And they're they're they have to abide by it. Um, and then there's a catch. Of course, there's always documents referenced, as Sarah said, for example, contracts for construction usually referenced a general conditions, which is a whole different document. And a lot of times when we get the contract contract, um, we don't get the general conditions with it. And then usually within those general conditions are the insurance and contractual indemnity provisions that we that we really have to look at and refer to. Okay. So then when we have our documents and we're able to see them all, um, what we want to do is determine, you know, does this document contain risk transfer provisions? There's a lot of times where we will get contracts or leases and, you know, to a shock and dismay or depending if you're a upstream party or to your happiness, if you're a downstream party, there's no risk transfer provisions. There's no, um, insurance or indemnity provisions. And this could be a good or bad, you know, depending on where where you sit. And usually when when get at least when I'm a lessor or landlord, I'm not happy to not see a contractual indemnity provision or an insurance procurement division. And then, of course, if on the other side. I am happy. So, um, so we want to look at to see if there's both of these. And if the answer is no to both, then the risk transfer. Contractual risk transfer analysis ends if the answer is to one or both of these is yes, the analysis continues and depending on if it's both or just one, we do some different things. And it's really important to have an open line of communication with your with the insured during this period of time to ensure that you have a complete picture of what's going on. Sometimes the two parties, the insured and whoever you might be tendering to or accepting a tender from might have a series of contracts or a series of agreements or a series of emails that you have to piece together, but you want to make sure that you have a full picture of what your obligations are with respect to whether you're tendering or whether you're accepting a tender. And it just made me think of something. Sarah. Sometimes when there's companies that work together, especially in construction, when they work together for a long time, instead of having a single contract for each job, they might have a master contract that covers all the jobs. And it can get dicey because it might be references to purchase orders or different type of things. And, you know, depending on the lawsuit and the job that's being done, if if some prerequisite documents are not there, then it might be harder to prove that the master contract applies to it. That I've just I've dealt with that in a couple of situations. And it always it always seems to be a problem. Um, okay, so let's talk about contractual indemnity. Contractual indemnity provisions. Regardless of the type of the agreement to be analyzed, usually require the downstream party to agree to indemnify the upstream party for any claims and losses arising out of some type of incident. Right? So we usually deal with bodily injuries or property damage. Those are those are two examples. There's others, but that's mostly what we deal with. So that's what we're going to discuss. Um, and these indemnity provisions have what we call different triggers that require the indemnity. So they're things that have to happen or things that have to arise in order to have the indemnity even apply. So here's three of, of the most common that we see in leases and in construction contracts. So we have an arising out of which is quote unquote, and this is a very broad provision which which opens the door for a large swath of indemnity. The next one is a less broad one, which is arising out of the axonal missions. And I'll discuss what those mean in a bit. Those are odd terms. Um, and then the last one is arising out of the negligence, which would require a showing of negligence of the party to do the indemnifying. So this is an example here in a construction contract in New York of an arising out of broad indemnity provision. And I'd just like to kind of go through some of it because it's it there's a lot of different parts to this. And this is one that is a pretty good example. So in the first part here, we have these words to the fullest extent permitted by law. And and it says, and except where indemnity would be precluded by the New York State General obligations Law Section five three, two, two, one. Now, what general obligations law does and it does this for several different types of contracts, it actually has a several different sections where it doesn't allow a party to be indemnified for their own negligence. And if there's an indemnity provision that provides for that, it will be deemed void and unenforceable. And I'll just give you some examples within the general obligations law other than contract general construction contracts where this is applicable. So less leases in regards to lessors can't be indemnified for their own negligence. Caterers and caterers. Catering establishments always find that one strange building and service contractors, architects and engineers and surveyors the liability of cause or arising that are caused by and arising from defects in maps, plans, designs and specifications. And another strange one found here is for parties who maintain garages, parking lots for hire, and there's a couple others. But so basically, if if in any of those categories in here, we're talking about construction contracts. If the party who seeks to be indemnified says you indemnify, indemnify me for everything, including my own negligence. Courts will find that to be void and unenforceable. And as with all, you know, what seemed to be clear statutes courts chain tend to chip away at them or change what their meanings are. So what has come about in case law here is that courts will say, okay, depending on the language of the contractual indemnity agreement will allow for what's called partial indemnity if the correct language is put in. And that correct language is terms savings clause or savings language. So this, to the fullest extent permitted by law is what we call savings language and will allow if if a contractual indemnity provision seeks to have an indemnity for someone to be indemnified, for their own negligence to get. Partial indemnity, meaning that they would be indemnified for their portion of negligence. So, for example, if it's found that an owner is 20% liable and a contract is 80% liable, the owner will be indemnified up to 80%. So going on here, it has that to go to the rising out of triggering language and have a highlighted portion that says damage or destruction of property, including loss thereof or any other economic loss caused by or arising out of resulting from or occurring in connection with the breach of this subcontract or with the performance of the work by subcontractor, etcetera. Um, I'm sorry I left out the bodily injury part in the beginning. Um, now, this is very broad, right? This could be anything that, that results from the work that's being performed. If somebody steps on a nail that is was brought to the site by the contractor. That's the indemnity is there. Okay. And then just looking down here a little bit. You'll see. And this kind of goes back to my savings clause. Subcontractors duty here under shall not arise if such injuries, sickness, disease, death damage or destruction is caused by the sole and exclusive negligence of the party to be indemnified here. Now, if there wasn't the fullest extent permitted by law language, the savings language, this would be deemed void and unenforceable because it it tries to say that it would only be the sole and exclusive negligence. That would be that would be the the exception here instead of just negligence in general. If it was just that they wouldn't be identified for their own negligence, that would satisfy it. But it's the sole and exclusive language that would that would be a problem. But again, the savings clause is there. So they would. They would they would get it. Now, one more thing with regard to indemnity provisions, especially as it comes as it refers to attorney's fees. Um, the indemnity provision has to explicitly provide for attorney's fees and expenses or else the court will not read that into it. And that's important, of course, for risk transfer when, when you know, you're seeking to get attorney's fees back in a case which can be quite exorbitant at times when the litigation goes on for a very long time. Okay. This next one is a rising out of the acts or omissions and you'll see the highlighted language down here. Up top, you'll see again there's that to the fullest extent permitted by law. That's the savings clause. And then it's the arising out of the act error or omission or breach of contract or infringement. Looks like it got cut off. In any event, that's the basically the act or omissions language. And in New York, this is this is something that in case law it's kind of still being determined what this actually means. Right. What what is something arising out of the act or omission. And the biggest thing for me is what's an act, Right. The an act could just. Is it just the fact of you being on on a work site or the act of leasing a space that would trigger this indemnity? I would say no, because. Because then why wouldn't it just be an arising out of the work or rising out of the lease? Right. This is this is different language. And because it's put in there, it should have meaning. And the laws are really all over the place with this. And I've done several motions and actually have an appeal right now with regard to this language, because the appellate divisions really haven't set out what it means. I know there's one case in the first department that basically says, you know, routine. It was a it was a it was a it was a it was a job site where plaintiff was walking and at like a fish market. And he slipped and fell on some fish that was dropped on the ground. And the the lessee was was sought to be indemnified the owner for this. But they found that the routine performance of the work by the plaintiff was not enough of an act or omission and that it must be more so likely something like malfeasance or nonfeasance. And that would be kind of go to the error or omission. Right? There have to be something more than just a simple act. But we'll see how the courts decide on that coming up. Maybe. Maybe my case will will set it, set it forth. But we're waiting on a oral argument for that, which has been over a year and a half now. And finally, with regard to contractual indemnity provisions, we have the arising out of the negligence. Again, at the top, you see that there's that savings language to the fullest extent permitted by law, and this would require a indemnification arising out of the downstream parties. Or in whole or in part by the negligent acts or omissions of the subcontractor, which is the downstream party. So here there would have to be a showing at the very least, of some negligence on on the subcontractor or the downstream party in order to obtain contractual indemnity. And that, of course, would take litigation. Right. So the the indemnification, that's just a simple broad rising out of um, you know, may may be easy easier to deal with. But when you come to negligence, it has to be prudent. And we'll just look at quickly some additional insured requirements. So let me take this. Ross Yeah, sure. Go ahead. Okay. I'll give you give you a break there. So separate and apart from contractual indemnification provision is a provision in a in a contract to provide coverage, provide insurance coverage both for the contractor and for the entity that the contractor entered into the contract with. So you're going to want to review the contract to make sure that there is a specific requirement that the parties who have entered into the contract maintain the insurance. So if you are an upstream party, you're going to be looking to make sure that the downstream party, whether it's your tenants, whether it's your subcontractor, has an obligation to maintain insurance. And specifically you're going to want to make sure that that provision contains a requirement that the upstream party be named as an additional insured under that policy. So what you're going to look for is the type of insurance that was supposed to be procured, whether it be worker's compensation, whether it be general liability, excess auto or or umbrella. You're going to look to see what the contract required. What were the policy limits that were supposed to be provided? Sometimes the contracts are very specific and they require $2 million in general liability and $10 Million in umbrella. Or they'll say that it could be a combination of both. They'll just ask for a general $10 Million coverage and it could be dispersed between general liability and umbrella. You're going to be looking at the provision to see who is supposed to be named as an additional insured. You want to make sure that the if you're tendering that this contract specifically provides, that your client or your insured was to be named under the contractor's policy as an additional insured. And oftentimes, if for say, you're the general contractor, you're also going to require that the subcontractor name the owner as an additional insured as well. And then finally, you're going to look to see whether or not that insurance procurement provision requires that the coverage be primarily non-contributory. That way, if you are able and get a successful tender, you no longer have an obligation to provide the coverage. The primary level of coverage. And next week we'll go into a little bit more about the different levels of insurance coverage. And I've just put up here a couple of examples of insurance procurement provisions. This first one is in a lease, and this one just provides, if you look at here, one here, general and general liability insurance and the amount of $1 million liability, including the owner and its agents as additional insureds. So that's that's just an example of a lease here. There's no seeking for excess insurance. It's just one policy. And I don't believe this. That provision actually specifically required additional insurer coverage. So I think that next. Next slide. Will Right. Yeah. So this one is an example of a construction contract and it lays out different types of insurance, worker's comp, comprehensive or automotive automobile liability and excess coverage here. Um. Now going to. So here, looking down at the bottom of the commercial general liability provision, it has the less sentences contractors insurance is to be primary to any insurance with the general contractor, owner manager or any other additional insured may have, which is what Sarah was talking about before in the primary and non-contributory. And then, of course, the excess here would be 2 million. So this this would require the downstream party to obtain at least $3 million in insurance to cover their contractual mean, their additional insured procurement. And again, that first sentence on the commercial general liability provision does require the general contractor, owner, managing agent and their respective officers directors to be named as additional insureds. So that's that's what you're looking for. It differs from the slide before where it was just with respect to what the tenant was obligated to maintain for themselves here. Here there's an obligation that's been undertaken by the subcontractor to maintain insurance not just for itself, but also for the upstream parties. And sometimes just that to make things more complicated for us and all of us in this, um, controlling agreements may have two or more indemnity or insurance procurement provision. They sometimes they mirror each other, you know, sometimes there might be one in the rider and there might be one in the main lease or contract. And sometimes they mirror each other, but sometimes they're not. So we have to determine if they're different, which one of them is going to be the controlling provision that that we're going to look at and use. Um, now, if sometimes the the agreement is clear as to which one would be controlling, a lot of times in riders, two leases or contracts, there's always like a first clause that says if there is, you know, if there's an issue or or contradictions between the main agreement and the rider, the rider prevails. Um, but sometimes it's not there and we have to determine which one is the one. Um, so if we can't determine, we have to look at whether the, uh, whether the, the agreements, one of them can said to be controlling over the other and they might, you know, they might create an ambiguity as to what the intent of the drafter is, which would nullify the provisions. Um, which is an argument I made as part of the argument I made in the motion I was talking about before when the rider seemed to have the rider of the controlling agreement seem to have deleted the indemnity provision and the new indemnity provision didn't provide for the indemnity that the original rider, the original contract did. So if, you know, if the other party said, well, we intended it to, it wouldn't matter, it would be ambiguous and that would go against the drafter. Um. So. I'll give you an example here, an agreement. They have an indemnity provision. The main agreement that provides for a broad arising out of trigger and one of the rider that provides for a more narrow negligence trigger. So again, we look at whether the language in the agreement or the rider, which one is which one is going to control. And we look to whether there's ambiguity between the two, whether there is some kind of provision that allows that sets forth which one it is that would be controlling and and which one actually puts forth the true intent of the parties here. And then there might be some extrinsic factors. You know, we might there might be communications between the parties or there might be testimony that says, no, we when we you know, when we sign the the rider, we knew that that was what, you know, that was what was going to control here. And that's that may make it easier to determine may make it worse if the two parties say two different things and and it's going to be, you know, that's just going to rise to more litigation in that. And that might not become an issue so much with contractual indemnification as it would with additional insurer coverage, because sometimes there are policies that require the written contract be executed prior to the accident. And if you have a situation in which there is an accident on the premises and then the parties say, Oh, we didn't have a signed agreement. Could you go ahead and sign this agreement that might not stand up in court if you were to test it on a on a coverage aspect? Because then the written contract was not executed prior to the accident in question and then the additional coverage would not actually be in place. So sometimes when when you have when you have a situation, when you think there might be an issue in terms of the timing of when the contract was signed, you need to explore that as well. Okay. So once we once we have all our ducks in a row here and we know which which, you know, agreements or applicable and what the provisions, which provisions prevail and which ones we want to prevail. Um, we're ready now to prepare our tender right to, to, to put together some kind of letter to the downstream party and or its insurance carrier to say, Hey, it's time for you to pick up our defense and indemnity. So some, you know, preliminary matters on it. So the, um, I always send a tender letter to obviously the proposed antenna tour. Um, and if I know who the insurance carrier is, if I have some kind of information, perhaps a certificate of insurance, and I, and I know who the carriers are, I will certainly send it to them as well, because at the end of the day, they're likely the ones well, they will be the ones making the decision whether to accept the tender or deny it. And it also makes things faster instead of sending it just to Indemnitor or the downstream party. And, you know, they may just ignore it as sometimes happens and not send it to their to their insurance carrier. And then, you know, then you have to wait until you get the third party complaint out and an answer. And it could be, you know, months when you're now, uh, you know, getting legal fees or rising and litigations are moving forward and lots of things are happening. Um, and I'd. So if the carrier isn't known, I always try to put in bold at the end of the letter, you know, send this to your insurance carrier as soon as possible. And this way the I'm kind of laying out for them in bold what they should do and what I what I would like to have is that the insurance carrier received the letter. Um, and one thing I didn't put in here is that the, the letter, a tender letter, especially when it's on additional insured provision, should be sent out as early as possible. And I say that with the additional insurers because, uh, the reimbursement of legal fees on an additional insured requirement is from date of tender. So the problem could be is if you wait too long, you know, you could go start going through litigation, obtaining, you know, higher litigation costs. And then if the tender sent, you're not going to be able to recoup those legal fees that were that were incurred prior to the tender. So when I get a case in and I look at the complaint, I talk to to the client, I obtain the lease or the contract, determine the tender. And really, before I do anything else, I shoot out that tender letter and then I start working on the case. This way I get a full recruitment as possible of of the attorney's fees. Um. I always send the letter multiple ways. It might. Might be just seem intuitive, but a lot of people will just send it one, you know, regular mail, which could just get lost. I always send it certified return receipt and regular mail. And if I have an email, I'll send it that way. So I could send out the same letter for different, you know, three different ways or, you know, six different letters depending on who's going to. Um, and this way, you know, if someone doesn't sign the return receipt, they should get the mail. Um, and then, of course, if I get the return receipt back, I know they've received it and I can, you know, I can say you can argue. No one can argue that they didn't receive the tender. And I always try to place a time limit for response 20 or 30 days so that action will be taken this way. I know I can calendar those that time in order to make my next steps, which may be a, you know, a filing, a third party complaint or sending a further letter or making a phone call to try and get get a response as soon as possible. And I always try to make the letter as short as possible. No extraneous or accusative language arguments. I've seen letters where, you know, it's just it'll just place blame, it'll, it'll present facts that are just extrinsic and unnecessary. I like to keep it just a very simple here's what happened. Here's the language you owe us indemnity and then I'm going to show you some example. For example, I'm sorry. I would also recommend when you when you send a tender, if you're relying on some sort of documentation, whether it be a certificate of insurance or a contract or a lease, enclose it, make it easier for the recipient to be able to come to their conclusion and do it in the fastest manner possible. You don't want to delay. You don't want to email exchange going back and forth, waiting for responses. Just just provide them with everything. You have to support your position. Yep. All right. So here's kind of just going through a letter. And like I said, this may seem self-evident, but it's just it's always good to kind of just go through it. So you have the red line, which would be the name of the action date and location of the of the act. The loss if to the carrier and you know the policy number, I always put the policy and claim number in because it always moves through the chain faster and always put our claim number or file number in the red line as well. And it's just information that to make the processing of of the claim go through, you know, the tender go through faster without someone having to look or, you know, something is lost. Um, and then I always provide, you know, enough background and facts to show the entitlement to the risk transfer. Just a quick this is the, you know, the date of the accident. This is what happened. This is what's being claimed stuff of that nature. Um. So I always want to put forth, you know what, who the upstream parties are you're seeking risk transfer for. Right. So here, I'll give you an example. If you're a lessee or hired a contractor, uh, plaintiff's injury may arise out of the subcontractors work and the plaintiff sues the landlord, the lessee and the contractor. Right? So now we have multiple layers of potential tenders from owner down to, uh, to a to a subcontractor. So if we're the lessee here, um, and the lease with the upstream party landlord requires the lessee to broadly indemnify the landlord, um, who is, who has or is expected to tender to you, you have to take that into account. And then if we have a, we have a broad indemnity provision with the contractor below, we'd want to tender not only the lessee's indemnity to the sub to the contractor, but we'd also want to tender the owner's, uh, indemnity to the contractor to kind of get that contractor, that fully downstream party to pick up not only for our client, but who, who our client would be required to indemnify as well. So there's, you know, there could be multiple layers to to the to the tendering process. And you can be your client or insurer could be both an upstream and downstream party. Um, so it could get, you know, complicated in the sense that we have to determine, try to get the best risk transfer for for the client as possible no matter where they are within the chain. And again, just from a coverage standpoint, also when you're tendering at this stage in the litigation, if you are somewhere in the middle, if you say the general contractor and you know you might owe coverage to the owner down the line when you're tendering, I would also indicate, as Russ said, that you're specifically who you're tendering on behalf of because again, that the defense the to recover defense fees begins when that tender comes in. So. Okay. And then next we'll set forth the triggering language of the indemnity provision set forth the type of insurance under which we're seeking the additional insured status, the required limits, whether such is assurances, primary non-contributory, and again, putting a time limit for the response so that we can take action when needed. And Sarah jumped in earlier before What we want to do with the tender, as she said, was to attach all the documents where we're relying on in order to in order to get that tender accepted. Like Sarah said, we don't want to we don't want to get to a situation where we send out a letter and then get a phone call from someone. Well, where do you have a copy of the lease? Do you have a do you do you have didn't see the complaint that you referred to. What about this incident report that you discussed? Something like that. So if if everything you know or maybe the we sent the someone sent the lease but forgot to put in a rider that has the provision we're referring to. So you just want to make sure that all the correct documents are sent with the with the with the tender in order to get the quickest response possible so that we know what our next steps would be. Um, so here I just provide a just to go with what I just discussed tender that I sent out that was successful. Um, a lot of it is of course redacted because it's actual clients and work. Um, but you know, here I sent it by return receipt requested. And I'll just note that the first one was for the Indemnitor. Um, and then the second was for their carrier. Um, and then have the reline there with all the information so that the person receiving it could understand exactly what, what claim it is and dates of loss and where it occurred. Um, I have here the background, the allegations, the connection between the individual's actions and the plaintiff's accident. So we represent this party. Um, the plaintiff, when the plaintiff commenced the action. And then, of course, here I have that a copy of the complaint is enclosed. Um, and then kind of like a quick specifics of what the plaintiff is alleging, Right? So here it's, it's one, two sentences. Um, you know, on the date that he was saying he was employed by the, I would say this would be the indemnitor, um, was seeking indemnity from, um, and what he was doing and, and how the accident occurred and what his allegations are. It's simple. Two sentences is not much more to get into. Um, and then next would be the controlling agreement. So here, discuss what when the contract was entered into and what the contractor what the contract was for and that a copy of the agreement and the proposal are enclosed. So. They're both enclosed. They have all the documents they need. And then I'll just briefly set out just so it's easy in the letter, you know, just so it's not just referred to, you know, C section 14 of the contract for the indemnity provision. I'd like to I like to lay it out so that it's in the letter and I can refer to it at any time in the future without having to just look at the contract, you know, grab the contract and then look through it. It's right here. So this was a provision here. Um, I believe it was a rising out of. This might have been a negligence trigger here. So anyway, I would go through that. And then of course, I'd say that the attorney's fees are in there. And then here is a copy of the insurance procurement language of the of the contract and the situation. The proposed Indemnitor was to carry a $1 million primary and an excess of 5 million and then naming owner and another party as an additional insured on a primary non-contributory basis. I also included, had the certificate of insurance for this. I included it. This way, you know. It'll the certificate of insurance is going to have all the correct information and the claim numbers and all that kind of stuff. So the just another reference to be able to assure that they have everything they need. And of course just on certificates of insurance in general, they're not evidence of of insurance. They're just they're just for informational purposes only. And, you know, because a lot of times I'll have a client say, well, I have a certificate of insurance. And, you know, I have to say to them, well, that's not helpful to me, you know, because it's not it doesn't it doesn't allow for additional insured status. It's just saying it's just showing that, hey, this company has insurance. It says it might not say it names you as an additional insured in the certificate, but it's not itself evidence of insurance. Right. The certificate of insurance really just helps you identify which carriers to be tendering to and possibly the policy number and the policy terms and limits. But I would not rely entirely on a certificate of insurance when seeking additional coverage. Okay. And then, you know, at the end I just put the tendering language, um, you know, just kind of encapsulate everything together that was put above, you know, the accident, the provisions and that we're tendering on, you know, under both insurance procurement and the indemnity provision. And there's the bold language of forwarding the tender to your insurance carrier. And I think I noted last time I did this that I didn't put in here in this in this letter a time frame. So my bad on that one. But but it's good to put it in a time frame. It's not necessary, but it just kind of puts locks into someone's mind. Oh, I have to do something. I have to do something within a certain amount of time. Um, and then of course, I just put that the enclosures are there. This way if someone sends the letter back to me and says, I need the summons and complaint in the agreement and the certificate insurance, I said, Well, they were enclosed, but you know, here's a courtesy copy. Okay. So after the tender is sent out, we want to look at what our next steps are going to be. Right. So if no response is received within the time limit you put forth or within a reasonable time limit, which I would say is no longer than 30 days. Um, we want to commence a third party action, Right. Unless, unless one's, if the suit's been filed already. Um, and then I always, whenever I commence a third party action, I will send a follow up tender, um, with, with third party action. So I'll follow third party action. I'll have it served. And then once I have the affidavit of service, I will send a follow up tender. And now included in that follow up tender is the third party summons complaint. This way I know that if there is a if there's an insurance carrier that I know of for the now third party defendant, this way I'm assured that they'll get a copy of the complaint so that I'll get an answer at least to the complaint, if not an answer to my tender. Um, if if we get a denial of a tender within the 30 days, that that makes things a little easier for us in terms of knowing what to do. We will commence a third party action right away. And and then, of course, send, you know, discuss with, with the with you. Um and that's and coverage counsel if necessary whether what what actions you would want to take or as the carrier. Um for a declaratory judgment action against the downstream carrier. Yeah. We'll talk a little bit more about that in next week's Cle. But determining, determining whether or not to commence a coverage action requires a review, a little bit more documentation. Right? Okay, so let's go over situations where here would be if we received, thankfully a letter that accepts accepts the tender to the downstream party. Um, that's all well and good to get the acceptance, but you want to make sure that you're covered fully for the for the acceptance of the tender and there's certain things you want to look at. So um, we want to look at whether the letter contains all necessary terms for a complete risk. Risk transfer, Right? We want to ensure that the pickup is for both defense and indemnity. Sometimes you'll just get a letter saying that we'll, you know, we will pick up the defense of your client, but we reserve rights on whether it's going to be indemnity or not. We want to determine whether the acceptance is pursuant to the indemnity agreement and or the additional insured obligation. Usually it's just the additional insured obligation. Discussed that in a bit. And we want to ensure that the acceptance is on a primary non-contributory basis so that we know that the policy that is issued to the client is going to is is not going to be looked at until such time as the as the insurance of the accepting tender carrier is is subsumed. Right. And if the acceptance is only with respect to defence and non indemnity, especially if it's on the IE provision generally in New York, the tendering party then gets the right to choice of counsel because there's inherent conflict between the carrier and the additional insured. So unless it's a complete pickup, just bear in mind that they're entitled to choice of counsel in the state of New York. Now acceptances. Tender acceptance on the indemnity provision are rare. It's usually when you get a tender pick up, it's usually based upon the initial insured status because and this is this is rare for several reasons. One, early on in the case, there might be no determination of the potential negligence of each party. So because of what we were talking about before, where there's to the fullest extent the law, there might be a determination of negligence percentages between the upstream and downstream parties. So there no one's going to say, Yeah, I'll accept your full indemnity until there's really a determination of the extent. If there is a pickup on the indemnity vision that is very expansive and is is is broader than additional insured status. And it means that the indemnity will provide funding for a potential full settlement and verdict value. And of course, the ability of that may depend upon the insurance limits of the indemnitor or their or their assets. Now tender acceptance is pursuant to the additional assured endorsement or more typical. Right. But they're going to be limited to the amount of insurance that the that the provision provides for. So, you know, for example, I'll give an example in the next page. Um, so depending on the the limits of the overall exposure, there may be an issue of the indemnity policy of the, the Upstream party's policy being exposed as excess insurance. And this would require continued monitoring of the litigation, even where another policy is providing defense indemnity in order to assure that the limited excess exposure and determination, the extent of that exposure to set reserves. So I do hear kind of a simple example, you know, putting everything else aside of pickups on demand versus pickups of an additional insured. So let's say that a suit arises where the upstream party is either statutory liable or is a non-delegable duty. So here under Labour law, 240 or under the administrative code of the City of New York, 7 to 10, which regards sidewalks, right. So in New York City, as I'm sure you're all aware, if you're the owner of a commercial building that the sidewalk abutting it, even though the city is the owner of the sidewalk, the commercial owner is responsible for the maintenance and repair of that sidewalk. Now, of course, and that's a non-delegable duty, of course, within a lease they could delegate that duty down to the lessee, but they would still be responsible and liable to a plaintiff who gets hurt as a result of a of tripping on a hazardous condition on the sidewalk. And um, so let's say that that happens and the tender is made downstream to a to a lessee pursuant to the broad arising out of indemnity provision and an additional insurer endorsement that provides that the downstream party is required to obtain a policy of $1 million. Uh, and but the downstream party actually has $2 million in limits. So the, the contract or the lease requires only 1 million. But the downstream party has say, a million primary and a $2 million excess policy. And that ultimately, at the end of the day, there's a verdict of $2 million. Right. So putting aside the litigation issues in any kind of anything else, all things being the same. If the pickup is pursuant to the indemnity provision, there's absolutely no exposure to the upstream party as the provision would allow through for a full pass through liability because there is no negligence on the upstream party and the Downstream party has all the necessary coverage to pay the verdict. Right. So. So that that would be on indemnity because you would be the upstream party would be entitled to full indemnity regardless of rig, regardless of what the contract said in terms of additional insured. Of course, the the downstream party's excess policy would have to agree to coverage for them. But I'm putting that aside. Um, if the pickup is only for additional insured provision, there would be exposed. So that additional insured provision only provided for $1 million in coverage. There would be exposure to the upstream party, um, of $1 million because the only insurance that would have been provided by the downstream party would have been for $1 million and therefore the upstream party would be exposed because they would be the not, they would have the non-delegable duty. And of course litigation could prove the applicability of the indemnity provision to avoid disparate exposure. But I'm just putting aside that, let's say that the indemnity provision isn't there or wasn't wasn't triggered. Okay. So let's look quickly, because I think we're actually running out of time here. Um, at determining what happens when we're the downstream party and the tender comes into us. Um, so of course as when a tender goes out, when it comes in, the tender has to be determined whether it will be accepted or denied. And after reviewing the letter, we want to ensure that all the information is provided or available to make a well-reasoned decision. And as we said before, when tendering out, we want to look at the letter to see is the complaint in there is is the applicable documents in there, the contract, the lease, whatever it may be, so we can actually review the provisions instead of just the provisions as set forth in the letter. I received tender letters before where, you know, it'll be very vague about what they're talking about and they'll just say, Oh, there's a you know, you're required to provide us with insurance and there's an indemnity provision. Um, you know, here's a tender. We tender your defense indemnity to you. And then when looking at the documents, you're like, Well, where's the provisions you're referring to? They may not be there. Maybe one's there. Um, or they're just there. They're talked about in a way that doesn't make sense. You know, maybe they say it's an arising out of, but when you actually look at it, it's a it's a negligence trigger. So it's very important to have the documents that make the decision. That's that's what you want to really look at. And then again, if if there's issues that you think may arise where you have to make a decision, there may be other documents, you want to look at photographs Ensign reports discussions with with with the insured to really determine, you know, what what your decision is going to be. Because, of course, if you're picking up a tender, it's going to be it's going to be for a large amount of policy limits. So we want to contact the insurer to determine the validity or applicability of the documents provided and get any other documents that the insurer might have. Of course contact the tendering party documents referenced are not included so we can get the further documents to really make an informed decision before anything is made. And that, of course, gives you more time. And as Sarah will talk about in responding next time, responding to tenders, you know, there may be time issues, time limits with regard to when we make assessments, what parts of the the policy may be applicable, endorsements and things of that nature. Right. We're running short on time. So I'm keeping keeping my commentary. Yeah. For next week. For next week. Um, so we want to review the tendering agreement regarding the indemnity and insurance procurement language. What is the, the, the language of the, the triggering language, As we discussed before? Who are the signatories? Who are the parties to be indemnified? What are the insurance procurement requirements? The type of insurance limits required parties to be named as additional insured where the insurance is to be primary and contributory. These these are things we really want to look at in order to make the correct decision in responding to the tender. And. And that's it. Unless you want to add anything. Sarah. Now, I think you did a great job really honing in on contractual communication, touching a little bit on additional insured requirements. The email addresses for Sarah and Russ are both there. If you have any questions that come up after today as the next claim comes in and you're sitting at your desk and scratching your head, feel free to reach out. Yeah, I was actually just going to say, feel free to email us with any further questions you have. I'd be happy to try and answer them. Thank you, everybody. Thank you, everybody. Thank you.

Presenter(s)

RM
Russell McBrearty
Partner
Milber Makris Plousadis & Seiden, LLP
SZ
Sarah Ziolkowski
Partner
Milber Makris Plousadis & Seiden, LLP

Course materials

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