RISK MANAGEMENT
CONTRACTUAL LIABILITY BASICS MARK E. ANDERSON, ARM, CRIS, CNA INSURANCE
C
ontracts are integral to the construction industry. In order to get the benefit of any contractual indemnity and defense to which you may be entitled, and to make sure that you are in compliance with your own contractual obligations to owners, contractors or other parties of interest, the following suggestions may be helpful:
1. Before work begins, review your insurance poli- cy contract for any potential gaps in coverage if you are assuming responsibility for indemnifying and defending a third party. It is likely that your policy con- tains exclusions for occurrences involving, among other things: “your work;” “pollution;” and, “injury to employ- ees in the course and scope of employment.” Exclusions can create coverage gaps for some of your contractual obligations to an owner or general contractor. It may be possible to mitigate uninsured exposures either with an endorsement to your insurance policy or a modification to the construction contract.
2. If you are seeking indemnification and defense from a subcontractor or supplier, make sure that the construction contract provides that the addi- tional insured coverage on the subcontractor’s or supplier’s insurance policy is to be afforded on a primary and non-contributory basis. The construc- tion contract should also require them to indemnify you even if the accident/injury was caused in whole or in part by your own conduct. If your contract is with a subcontrac- tor, the contract should stipulate that your subcontractor waives immunity, to the extent permissible under applica- ble workers’ compensation laws, for claims made by their employees against you. A review of the subcontractor’s in- surance contract, in addition to the construction contract, is highly advisable.
3. Certificates of insurance are not policy contracts. They may be indicative of the existence of insurance or “additional insured” status, but they will not, with few exceptions, serve to create additional insured status under an insurance contract absent additional documentation.
Be particularly cautious if the certificate names your com- pany only as a certificate holder, as this indicates only that the furnishing party has insurance.
4. If you do business in multiple states, be aware that one state’s courts may interpret a given indem- nification clause differently from another state’s courts. Contractual liability case law is constantly chang- ing. It is advisable, when deciding to conduct business in a new jurisdiction, to have an attorney, who represents contractors for liability defense work in that jurisdiction, review your contracts to make sure there are no identifi- able differences between your expectations and the way the terms are likely to be interpreted. If you have not had your current insurance contracts reviewed in the last few years, it is a good idea to have them looked at by an attorney in your home state to make sure the policies still provide coverage consistent with your expectations under existing statutes and case law.
5. Keep copies of your signed construction and insurance contracts. A contract not signed by all con- cerned parties may not be enforceable.
6. Finally, if a claim is made that involves allega- tions of negligence, potentially triggering coverage under your insurance contracts, report the claim to the insurance carrier promptly and within any timelines that may be set forth in your policy. Pro- vide your insurance company with complete copies of the involved construction contracts, along with any certificates of insurance and copies of any applicable subcontractor or supplier policies at your disposal.
The more quickly the relevant documents are received by your insurance carrier, the faster the defense and coverage obliga- tions can be determined. While disagreements sometimes occur between carriers, insureds, and potential insureds, the sugges- tions outlined herein should improve your ability to manage your contractual obligations, commitments and entitlements. 7
Sponsor: 26 THE LANDSCAPE PROFESSIONAL > MARCH/APRIL 2016
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