INSURANCE TRENDS
Recent Updates to AIA Contract Docs Expand Insurance Demands for General Contractors
By Bob Mahan
expanded the insurance demands passed down from owner to general contractor (GC). While it isn’t clear that such increased coverage mandates were passed these along to the subs, it is good practice for the GC to implement such. Use of the AGC Standard Form Subcontract would accomplish this objective. Of special interest to everyone
T
operating in the California construction industry is the mandate that several of the most undesirable exclusions are not allowed on the GC’s liability coverage. Te language applies to the commercial general liability insurance policy, but good drafting would add in the umbrella/excess liability coverage.
Major Change Te language outlined below and
found in Exhibit A to the 2017 AIA Document A 102 represents a major change to the construction insurance landscape. Let’s take a quick look at each provision (in italic) followed by a brief analysis of how each might impact contractors. Te Contractor’s Commercial
General Liability policy under this Section A.3.2.2 shall not contain an exclusion or restriction of coverage for the following:
www.AGC-CA.org
he latest update of the American Institute of Architects (AIA) suite of contract docs greatly
1. Claims by one insured against another insured, if the exclusion or restriction is based solely on the fact that the claimant is an insured, and there would otherwise be coverage for the claim. Named insured versus name insured exclusions are common, and these are acceptable.
2. Claims for property damage to the contractor’s work arising out of the products-completed operations hazard, where the damaged work or the work out of which the damage arises was performed by a subcontractor. Implied use of ISO Endorsement 22 94 or its equivalent is not allowed. Your broker should assure you it isn’t used on either the GL or the umbrella.
3. Claims for bodily injury other than to employees of the insured. Claims for bodily injury should never be excluded.
4. Claims for indemnity under Section 3.18 of the General Conditions arising out of injury to employees of the insured. Tis is action over exclusionary language. Tere are many methods sneaky carriers use to circumvent this coverage. It takes an experi- enced, intelligent broker to ferret them all out.
5. Claims or loss excluded under a prior work endorsement or other similar exclusionary language. GCs should watch for this very limiting language extinguishing coverage for any liability coverage for completed operations for any prior work.
6. Claims or loss due to physical damage under a prior injury endorsement or similar exclusionary language. Tis provision is difficult to enforce. All carriers use some version to avoid claims from
another policy year. It should be removed from the contracts.
7. Claims related to residential, multi- family, or other habitational projects, if the work is to be performed on such a project. Tis is a very common limitation that should be carefully reviewed and modified. It is very difficult to obtain any coverage for condo projects; wrap up policies are necessary.
8. Claims related to roofing, if the work involves roofing. Tese do exist and must be removed.
9. Claims related to exterior insulation finish systems (EIFS), synthetic stucco or similar exterior coatings or surfaces, if the work involves such coatings or surfaces. It is the author’s experience that most medium and smaller GCs will not be able to remove EIFS for any frame projects. Ensure those performing such work maintain EIFS coverage.
10. Claims related to earth subsidence or movement, where the work involves such hazards. Ninety-five percent of these exclusions exclude damage caused by quake. As such, use of this language is prohibited for all who install anything anywhere.
11. Claims related to explosion, collapse, and underground hazards, where the work involves such hazards. Tis language seldom appears in insurance contracts. It is archaic and should not be used.
Breach of Contract Failure of the GC (or the sub) to
comply with the above is a breach of Continued on page 16 Associated General Contractors of California 15
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