1. Forms
2. IL
3. IL-09-20

What the Form Is

The IL 09 20, Retrospective Premium Endorsement - Long Term Construction Project - Multiple Lines, is an endorsement used to modify insurance policies by implementing a retrospective rating plan. This plan is specifically tailored for construction projects that have a significant duration, often spanning multiple years. Instead of a fixed premium determined at the beginning of the policy, a retrospective plan adjusts the final premium based on the insured's actual loss experience during the defined project period. This endorsement allows for the application of such a plan across various lines of insurance coverage pertinent to the construction project. A 1998 revision of this form specified its applicability for the Employment-Related Practices Liability Coverage Part in the context of these long-term projects.

Classes of Business It Applies To

This endorsement is primarily designed for large-scale, long-term construction projects. Examples of where this form would be utilized include:

• Major commercial building construction (e.g., skyscrapers, large office complexes)
• Significant infrastructure projects (e.g., bridges, tunnels, highways, airports)
• Extensive residential developments (e.g., large housing tracts built over several years)
• Industrial construction projects (e.g., new manufacturing plants, power generation facilities)

Essentially, any construction endeavor with a prolonged timeline and substantial insurable risks across multiple coverage lines could be a candidate for this endorsement. The 1998 revision highlighted its use with Employment-Related Practices Liability for such projects.

Special Considerations

• Project Duration: The key factor is the 'long-term' nature of the project. This endorsement is not typically used for short-term construction jobs.
• Retrospective Rating Formula: The successful implementation of this endorsement hinges on a clear and mutually agreed-upon retrospective rating formula. This formula will include components like a basic premium, loss conversion factors, and specified minimum and maximum premium limitations.
• Multiple Lines: It is designed to consolidate the retrospective rating across several lines of insurance (e.g., General Liability, Workers' Compensation, Commercial Auto, Employment-Related Practices Liability) involved in the project, providing a more holistic approach to risk financing.
• State Applicability: While a multistate form, its use may be restricted or modified in certain states. For instance, it has been noted as not applicable in California. Insurers and agents must verify state-specific rules.
• Employment-Related Practices Liability: The 04 98 edition specifically adapted this endorsement for use with the Employment-Related Practices Liability Coverage Part, indicating a need to address employment-related risks within the retrospective rating of long-term construction projects.

Key Information for Agents and Underwriters

• Risk Assessment: A thorough evaluation of the construction project's scope, potential hazards, the contractor's experience, safety programs, and past loss history is crucial. Underwriters need to assess the stability and predictability of potential losses over an extended period.
• Pricing and Parameters: Determining the appropriate basic premium, loss limits, tax multipliers, and minimum/maximum premium factors requires careful analysis. The goal is to create a plan that is fair to both the insured and the insurer, reflecting the unique risk profile of the long-term project.
• Cash Flow Implications: Both the insured and insurer need to understand the potential for premium adjustments (either upward or downward) at the end of the rating period or at interim adjustment dates. This can have significant cash flow implications.
• Claims Handling: Efficient and accurate claims handling is vital, as incurred losses directly impact the final premium. Clear communication and reporting protocols are essential.
• Underwriting Guidelines: Insurers will have specific underwriting criteria for offering a retrospective rating plan on long-term construction projects. This may include minimum premium thresholds for the project, financial stability of the insured, and the types of coverage lines that can be included.