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ON THE MOVE ISG DES MOINES ADDS DESIGN PROFESSIONALS TO TEAM Since opening its doors in 2014, the ISG Des Moines office has rapidly expanded to accommodate growth and project additions in the metro market. ISG announced the re- cent hire of two design professionals: struc- tural engineer Brad Penar , PE and architect David Hofmann . Penar joins the structural en- gineering group and Hofmann will lead ISG’s healthcare market efforts within the architec- ture group. Penar’s experience encompasses a range of facilities including schools, parking structures,

phases of design from master planning and programming through construction documen- tation and administration. He has expertise in healthcare as well as commercial, retail, and institutional design. Hofmann is known for his work as a project architect overseeing all as- pects of project development. Hofmann is a member of the AIA and the NCARB. His community involvement includes serving as a past president of the Rotary Club of greater Des Moines and is presently a mem- ber of the Greater Des Moines Leadership In- stitute’s Community Leadership Program.

manufacturing plants, pedestrian bridges, and more. With a passion for innovation, Penar looks for unique tools that can enhance client projects, utilizing 3-D scanning and outside- the-box approaches to find a truly unique so- lution. Penar is a member of several professional or- ganizations including the ASCE, SEI, SEAIA, AISC, and the ACI, as well as local volunteer organizations. Hofmann has served as a project architect with more than 20 years of experience in all

DAN KNISE, from page 3

terminating employees, which can lead to employment- related claims. Be sure to understand your policy’s coverage, tail and claim reporting provisions and requirements. CHECK WORKERS’ COMPENSATION. Sellers with elevated accident or injury rates can have profoundly negative effects on an acquiring firm’s business. Workers’ compensation insurers use a rating system based on an employer’s loss history to set that entity’s insurance premiums. Significantly, the rating, known as an experience modifier, is among criteria project owners and managers use to evaluate design and construction firms working or bidding on their projects. A poor rating can disqualify a firm from a bid or retaining a client. So, be sure to assess whether and how the seller’s workers’ compensation loss experience might affect your business. KEY CONSIDERATIONS IN OTHER COVERAGES. With regard to commer- cial general liability and other related property/casualty insurance policies, it’s common to add the acquired firm to the acquirer’s CGL and other policies as an “additional named insured.” In a merger, the combined entity should have both predecessor companies as named insureds in its CGL policy to address any current occurrences arising out of the combined operations. For property and other insurance policies, be sure to have a process in place to identify coverages carried by each firm, ensure continuity of needed coverage, and cancel redundant policies. INSURANCE AND PRICING. In pricing M&A transactions, many buyers employ a two-year earn-out or escrow fund to ad- dress contingencies arising post-closing. This fund should also contemplate insurance-related costs, such as those for audits related to workers’ compensation, general liability, and automobile liability policies, as well as for deduct- ibles and self-insured retentions, which can be $25,000 to $500,000 or more per claim under some policies. Successful mergers and acquisitions require careful due diligence, which should include risk and insurance issues. Be sure to reach out to your insurance broker and tap their experience and expertise with merger-related insurance and risk management issues. DAN KNISE is president and CEO of Ames & Gough . Contact him at dknise@amesgough.com.

EXTENDED REPORTING PERIODS CAN ASSIST. One solution often utilized is for the selling firm to purchase an extended reporting period, or “tail” coverage, as an extension to its last claims-made policy. Most ERPs extend for one, two, or three years. While the insurance limit usually remains the same, it applies for the entire ERP period versus a single year when a PLI policy is typically renewed. This restricts the monies available to pay claims and could increase the risk of uncovered claims. To help determine an appropriate duration for tail coverage, some firms check the statutes of limitation and statutes of repose in states where they have current or completed projects. Statutes of limitation define the maximum timeframe after an event or accident that legal proceedings may be initiated. They vary by jurisdiction and may, under certain circumstances, be extended. Statutes of repose specify the maximum time after completing an act, such as completion of a construction project, that legal proceedings can be initiated. Some state statutes provide more than 10 years of liability. “When planning to buy, sell, or merge with another firm, you need to understand and evaluate various risk and insurance issues that can affect the success or terms of the transaction.” Unfortunately, most ERPs will not extend for such longer periods and buyers and sellers will have to evaluate other options including whether or not the seller’s liabilities can be rolled into the buyer’s PLI policy. OTHER CLAIMS-MADE POLICIES NEED ATTENTION TOO. Speaking of claims-made policies, it is important to keep in mind that there may be other claims-made policies beyond PLI that require tail coverage. These include directors and officers liability, employment practices liability, fiduciary liability, and employee benefits liability (under the commercial gen- eral liability policy). During a merger or acquisition, EPLI coverage can be critical; eliminating staffing redundancies may require

THE ZWEIG LETTER February 29, 2016, ISSUE 1141

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