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Contract Provisions That Will Affect Your Insurance Program and What to Do About Them
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Contract Provisions That Will Affect Your Insurance Program and What to Do About Them!
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by Gary R. Semmer, AssuredPartners
Construction Contracts are becoming more complex, regardless of which ones you're entering into, and the Insurance Requirements often include addendums or exhibits that need to be reviewed to comply with your Insurance Program.
The following are some of the more common Contract provisions that come up today in our Client’s Construction contracts. 1. Builders Risk (Property Insurance):
It’s important to check with the
General Contractor to determine who is going to provide the Builders
Risk (BR) coverage (Owner or
GC) and request a copy of the BR
Policy or BR Certificate of Property
Insurance evidencing coverage terms and deductibles. In addition, larger projects often come with higher deductibles and review the contract to see if you are responsible for payment of the Deductible. If that is the case, either negotiate it out of the contract, or bring it down to a level that you can handle or factor in the
Deductible amount into your Bid to handle potential payment of the BR deductible.
2. Property Insurance for Stored
Materials: Based on supply chain and scheduling issues, GC’s are requiring Subcontractors to take early delivery of equipment and materials and store them at their warehouse or offsite facility which can create a Property Insurance exposure and add insurance premium costs to their
Insurance program. Check with your
Insurance Agent/Broker to determine what the additional cost is and factor that into your bid. 3. Indemnification Provisions: Have your Attorney review Indemnification/
Hold Harmless provision to determine that you aren’t accepting “Broad
Form” type Indemnity language for either the Owner’s or GC’s negligence and try to negotiate it out of the contract. The ASA Attorney’s Council has done significant work in this area and can be of assistance.
4. Additional Insured requirements:
Just about every Contract we review has a requirement for adding the Owner, GC and others as an
Additional Insured’s (A/I) on the
Subcontractors’ General Liability (GL) coverage. The key here is to provide the “correct” A/I version or its equivalent so that in the event of a GL claim you aren’t in breach of contract that could lead to possible litigation.
It’s important to provide a copy of the Insurance Requirements to your
Agent/Broker for review so that you have the appropriate coverage.
5. Waiver of Subrogation
requirements: Most contracts today contain a Waiver of Subrogation (WOS) provision for Workers
Compensation, General Liability, Auto liability and Umbrella liability which
“waives” your Insurance Carriers rights to go after the GC or others if they contributed to the loss. Again, provide your Agent/Broker a copy of the Insurance Requirements to provide the appropriate specific or automatic WOS coverage.
About the Author
Gary Semmer, CIC CWCA, is Executive Vice President and Construction Practice Vertical Leader with AssuredPartners. Gary specializes in providing Insurance & Risk Management solutions to the Construction and Real Estate industries. He has served as President of the Independent Insurance Agents of Illinois (IIAI) and Associated Risk Manager
(ARM) of Illinois. AssuredPartners is the 10th largest Insurance Broker and Consultant in the country providing Commercial Insurance, Risk Management, Employee Benefits through consulting and services. For more information on AssuredPartners, please contact Gary at Gary.Semmer@assuredpartners.com or asa@assuredpartners.com.
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