PRODUCT: Materials Transparency Consultants Professional Liability

COMPANIES: Victor O. Schinnerer & Company

BEST RATING: Coverage is written through CNA, which carries a Best rating of A (Excellent).

AVAILABILITY: Coverage is available on an open-brokerage basis.

FOCUS: In the 1990s, the Leadership in Energy and Environmental Design (LEED) rating system was developed to ensure buildings adhered to specific safety and environmental standards.

Over time, as more project owners seek LEED certification, a new professional segment has emerged: materials transparency consultants, who work with architects and engineers to select building products that contain lower levels of the substances that commonly appear on public health or environmental impact lists, such as formaldehyde, lead, mercury and hexavalent chromium.

“There is a growing group of materials transparency consultants who are highly specialized in recognition, testing and compilation of specified materials through the product manufacturer,” explains Kevin Collins, underwriting manager, senior vice president, Victor O. Schinnerer & Company, Inc. “These consultants advise an architect or engineer of what’s in the materials and how best to meet the owner’s requirements based upon the broader need for the project.”

Until now, the only insurance option for a materials transparency consultant was a miscellaneous professional liability policy. “But as an independent agent, you want to have the comfort level of a program-type policy that addresses more broadly the needs of each specific firm,” Collins says.

Schinnerer’s new Materials Transparency Consultants Professional Liability policy is “tailored to the marketplace,” Collins says. “Agents can feel comfortable knowing they’re addressing a lot of the major concerns and coverage issues of this industry.”

COVERAGE DETAILS: Because the materials transparency profession is so new, consultants starting out in the field may or may not be professionally licensed—which is why the policy does not require professional licensure.

“What we look at instead is the résumé for the individual,” Collins explains. “We would expect three to five years with a scientific, toxicology, industrial or chemical engineering background, catered toward the construction industry.”

Schinnerer overlays that “very broad acceptance of risk” with a similarly broad definition of “professional services,” Collins adds: “A lot of programs will use the phrase ‘in your legal capacity as,’ which bases the definition of what’s covered on legal qualification. Recognizing that many of these firms may not be professionally licensed, that standard can be burdensome.”

Instead, Schinnerer uses the phrase “in your practice as a materials transparency consultant.” “That helps us say, ‘We recognize what you do, but we also recognize the industry is growing exponentially every month, so we’re not going to predefine what types of services you can perform under the coverage versus those that you can’t,’” Collins explains.

Finally, insureds can also choose to add prior acts coverage—an appealing option in a space where historically, coverage has not been readily available. “We recognize a lot of these firms have been in business two years, five years or for the early adopters maybe even 10, but a lot of them are buying this coverage for the first time,” Collins says.

After a year in the program, insureds become eligible for coverage “for the prior services they rendered on projects in the past from the time that their doors opened,” Collins explains. “That’s a quick turnaround to provide them with retroactive coverage so they can fully insure their entire practice faster.”

UNDERWRITING: Collins says Schinnerer is working on simplifying the application process, which currently requires information about a consulting firm’s revenues, project types and location of the practice. “If you have a firm that has not purchased before or is fairly new in the industry, including a résumé for the principal or the partners within the firm helps get us to a bindable quote faster,” Collins suggests.

Collins also notes that the three to five years’ experience requirement is at the individual level—not the level of the firm. “We are able to write new firms,” he says. “A lot of programs tend to stay away from those types of accounts, but our experience more broadly within the design industry shows that the likelihood of loss is driven more at the individual’s level of experience rather than where the firm is in their cycle.”

Finally, smaller firms are also eligible for a multiyear policy. “A lot of these firms are new buyers to the marketplace, so agents are often selling against the value of having the coverage rather than a competitor’s form,” Collins points out. “To help with that, we have the ability to write up to a three-year policy with a guaranteed premium and a reinstating limit.”

MINIMUM PREMIUM: $2,000 for $1-million limits, which satisfies most contractual requirements. Lower limits are available for a lower minimum premium.

TARGET: Materials transparency consultants with a background in the construction or manufacturing industries, such as industrial hygienists, chemical engineers and toxicologists.

“The only risk that doesn’t tend to work very well is the generalist who’s involved in multiple industries, rather than specifically aligned with the construction industry,” Collins explains. “Where we’re seeing most of our declines is when somebody has a toxicology background but is supporting multiple industries and is more heavily involved with looking at cells or infectious diseases.”

COVERAGE TERRITORY: U.S. and its territories.

CONTACT: Kevin Collins, underwriting manager, senior vice president; Victor O. Schinnerer & Company, Inc.; 2 Wisconsin Circle – Suite 1100, Chevy Chase, MD 20815; 301-951-5412.

Jacquelyn Connelly is IA senior editor.