Insurance, Bonding, and Risk Management Flashcards

What is 'subrogation' in the context of contractor insurance?

Answer: An insurer's right to recover from a negligent third party after paying a claim

Subrogation gives an insurance company the legal right to pursue a third party that caused an insured loss, after the insurer has compensated the insured for that loss.

What is a 'waiver of subrogation' clause in a construction contract?

Answer: A clause where parties agree that their insurers cannot seek recovery from each other after a covered loss

A waiver of subrogation clause contractually prevents each party's insurer from suing the other party after paying a covered claim, avoiding disputes between project participants.

Which of the following is a key difference between insurance and a surety bond?

Answer: Insurance protects against unknown risks; bonds guarantee contract performance with the principal expected to repay the surety

Insurance covers unknown risks with premiums pooled across many policyholders; surety bonds are credit guarantees where the principal (contractor) is expected to repay the surety if a claim is paid.

How does a contractor's 'experience modification rate' (EMR) affect workers' compensation premiums?

Answer: A higher EMR (above 1.0) increases premiums; a lower EMR (below 1.0) reduces them

The experience modification rate compares a contractor's actual loss history to expected losses; an EMR above 1.0 increases workers' comp premiums, while an EMR below 1.0 reduces them.

What is 'contractual liability coverage' in a contractor's general liability policy?

Answer: Coverage for liabilities assumed by the contractor through written contracts, such as indemnification agreements

Contractual liability coverage protects a contractor against liability assumed through written contracts, such as indemnity agreements that require the contractor to hold harmless another party.

Which OSHA standard requires contractors to implement a written hazard communication program covering chemical hazards?

Answer: 29 CFR 1910.1200 (Hazard Communication Standard, HazCom)

OSHA's Hazard Communication Standard (29 CFR 1910.1200), also called HazCom or the Right-to-Know standard, requires written programs, safety data sheets, and employee training on chemical hazards.