Federal and local government contracts often have tight compliance windows. This, in addition to the often time-consuming process of procuring insurance, can leave risk managers with little time to shop the markets and meet contract requirements. On the local level, the District of Columbia, known for its stringent standards, goes a step beyond its federal neighbors. They not only require higher limit thresholds but also the purchase of additional insurance coverage not usually listed in standard contracts.
Insurance for DC Government Contractors
The DC Government often requires contractors to procure the following policies:
- Commercial General Liability: A standard building block of business insurance which for smaller start-up organizations can be bundled with property insurance in a “Business Owner’s Package Policy.” As a rule of thumb, these policies offer $1M limits.
- Intellectual Property Coverage: In the age of innovation, safeguarding intellectual property is paramount. Policies may need specific endorsements to protect against claims of infringement, ensuring that creative and inventive work remains protected.
- Automobile Liability: Even if a business does not “own” automobiles, there can still be a “Hired/Non-Owned Auto Liability” exposure when owners/employees use their own vehicles (or rental cars on trips) for business travel. HNOL limits typically match the general liability limits provided above $1M.
- Employer’s Liability: Not to be confused with the above-referenced Employment Practices Liability, the Employer’s Liability limit noted in District of Columbia contracts pertains to Workers’ Compensation coverage.
- Umbrella Liability: This is a policy that provides higher limits of liability insurance when the contract requirements are not satisfied by the $1M limits offered by the above Commercial General Liability and Hired/Non-Owned Auto Liability limits above.
- Employment Practices Liability: An insurance policy that provides indemnity and defense to businesses for certain employment claims related to wrongful termination, discrimination, harassment or failure to provide reasonable accommodation. DC requires limits of $1M to $3M.
- Cyber Insurance: This policy responds to losses and threats related to cyber breaches, social engineering fraud losses and ransomware attacks. DC can require limits as high as $3M.
- Professional Liability: A form of specialized coverage that helps to indemnify and defend professional organizations when claims arise related to professional errors or omissions. DC can require limits ranging from $1M to $3M or higher.
- Sexual Abuse & Molestation Insurance (SAM Insurance): SAM Insurance which provides defense and indemnity for insureds accused of SAM offenses is particularly vital for organizations working with vulnerable populations such as schools, childcare centers, religious institutions and social service agencies; though DC Gov officials extend the requirement to many vendors beyond the above categories. DC Gov will typically require limits starting at $1M for this specialized policy.
The Challenges of Procuring SAM Insurance
Among the mandatory insurances, Sexual Abuse & Molestation insurance is one of the most sensitive and often expensive policies. SAM is a specialized liability insurance policy designed to protect individuals and organizations from claims related to sexual misconduct, abuse or molestation. This coverage provides financial protection in the event that an insured party such as a business, nonprofit organization or individual is accused of sexual abuse or molestation.
Typically, the policy covers legal defense costs, settlements and judgments associated with such claims. It’s important to note that the specific coverage details can vary between insurance providers and policies so it’s crucial for individuals and organizations to carefully review their policy documents and understand the scope of coverage provided.
Additional Endorsements and Wording Required
In addition to the mandated coverage limits, DC Government can require specific endorsements tailored to the unique needs of contracted projects. These endorsements add layers of complexity and sophistication to the insurance policies.
- Additional Insured Endorsement: The DC Government often requires to be added as an additional insured extending liability coverage to the government entity itself ensuring a comprehensive financial shield against potential liabilities.
- Waiver of Subrogation: This endorsement, a common requirement, prevents insurers from pursuing legal action against other parties involved in the project.
Working with “Claims-Made” Forms
Understanding the intricacies of “claims-made” insurance policies is important to avoid potential coverage gaps. For policies like Cyber Insurance, Professional Liability and Abuse & Molestation Insurance, the trigger for coverage isn’t the occurrence of the incident but the filing of a claim. Consequently, paying attention to the retroactive date and ensuring timely reporting of incidents is of paramount importance.
Retroactive Date Requirement
DC Government mandates that the retroactive date in “claims-made” policies must precede the effective date of the contract. Failure to adhere to this requirement can render the policy inadequate potentially jeopardizing the contractor’s compliance status.
The Primary Non-Contributory Requirement
Adding another layer of complexity, the DC Government can require that certain policies in the contractor’s portfolio be “primary non-contributory.” This means that the contractor’s insurance policy must be the first to respond in the event of a claim and it should not seek contribution from any other insurance held by other participants on the contract.
Tips to Make Insurance Procurement Easier
- Early Policy Review: Conduct a thorough review of insurance policies well in advance of signing any contract with the DC Government to verify compliance. Ensure that the policies not only meet the coverage, limit and retroactive date requirements but also adhere to the special language stipulations found within the contract.
- Engage Experienced Insurance Advisors: Collaborate with insurance advisors experienced in government contracts. Their expertise can prove invaluable in ensuring that the policies provide you with robust coverage while also aligning with the specific requirements of the DC Government. An experienced advisor can also ensure that you are not paying too much for the insurance needed for compliance.
- Schedule Regular Policy Updates: As projects evolve, it is important to review your coverage portfolio to be assured it is in tune with your risk. Most insurers also require that you provide them notice when your operations extend beyond the data you provided in the initial applications.
- Sexual Abuse and Molestation Risk Protocols: Implementing stringent safety measures can lead to substantial savings on premiums. Background checks and thorough vetting of employees and volunteers reduce the risk of potential incidents. Regular training programs focusing on appropriate behavior, reporting mechanisms, 1:1 meeting protocols, field-worker safety and overall awareness campaigns create a safe environment and minimize the chances of abuse or molestation incidents or allegations.
In conclusion, it is important to keep in mind that while the focus may be on getting the necessary products and limits in place to be compliant by the deadline, the greater objective is to protect your organization from potential losses, many of the above potentially business-ending. To achieve both objectives, it is important that you have a trusted, experienced agent working on your behalf.
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