{"id":899770,"date":"2022-03-30T15:14:44","date_gmt":"2022-03-30T21:14:44","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=899770"},"modified":"2022-03-30T15:14:47","modified_gmt":"2022-03-30T21:14:47","slug":"construction-contract-insurance-terms","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-insurance-terms\/","title":{"rendered":"Understanding Insurance Terms in Construction Contracts"},"content":{"rendered":"\n<p>Seth Row | <a href=\"https:\/\/www.millernash.com\/industry-news\/understanding-insurance-terms-in-construction-contracts\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Miller Nash<\/a><\/p>\n\n\n\n<p><a href=\"https:\/\/www.myconstructionexpert.com\/blog\/indemnity-provision-over-other-insurance\/\" target=\"_blank\" rel=\"noreferrer noopener\">Construction contracts<\/a> at all tiers usually include terms requiring certain types of insurance, and often contain related provisions about indemnity. This \u201cboilerplate\u201d can be important if a job goes south, so here\u2019s a short explanation of some of the key terms and how they relate to one another:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Builder\u2019s risk insurance:<\/strong>&nbsp;This is insurance purchased by the owner or general contractor that covers property, equipment, and supplies at the jobsite (and sometimes beyond). It is a form of property or \u201cfirst-party\u201d insurance that pays to replace or repair covered property in case of theft, a fire, etc. It will usually provide coverage for some subcontractor supplies and equipment (but not all).<\/li><li><strong>Liability insurance:<\/strong>&nbsp;This is insurance against claims made by others for property damage or bodily injury. Often called \u201cthird-party\u201d insurance, this comes in many forms, the most common of which is \u201cCommercial General Liability\u201d or \u201cCGL.\u201d Everyone on a job should have their own CGL insurance, even if there is a \u201cwrap\u201d (see below), and of course, CGL is required by the CCB. One common dispute between policyholders and insurance carriers is over what kind of liability for property damage the insurance covers, and what it does not. Generally speaking, CGL insurance will cover liability arising from property damage to the work of other trades (or to the completed project), but will not cover the cost of correcting defects in the insured\u2019s own work. In a classic example, CGL insurance should cover water damage to framing caused by incorrectly installed siding, but may not cover the cost of redoing the siding if there has been no damage to anything else. (Notice that we said \u201cmay not.\u201d Whether insurance applies often depends on all the facts of a case and subtleties in the policy language. It is therefore very difficult to provide hard-and-fast rules about what is and what is not covered.)<\/li><li><strong>\u201cWrap\u201d insurance:<\/strong>&nbsp;This is a form of liability insurance purchased by the owner (\u201cOwner Controlled Insurance Program\u201d or \u201cOCIP\u201d) or the general contractor (\u201cContractor Controlled Insurance Program\u201d or \u201cCCIP\u201d). It provides coverage for everyone enrolled in the \u201cwrap,\u201d which usually includes all trades, but excludes design professionals. If there is a wrap, the subcontractors will generally be asked to exclude insurance costs from their bids. Most CGL policies held by individual subcontractors exclude coverage for any project with a wrap.<\/li><li><strong>\u201cAdditional insured\u201d:<\/strong>&nbsp;Most construction contracts require that the lower tier contractor add the upper tiers as \u201cadditional insureds\u201d on the lower tier\u2019s liability insurance. This means that if the upper tiers are sued for something that involved the lower tier\u2019s work, the upper tier contractors (and owner) can tender the claim to the lower tier contractor\u2019s insurance and that insurance company will pay for their defense lawyer and (potentially) the settlement. This is a method of shifting risk from the upper tier contractor down to the lower tier. One common problem that we see is a mismatch between the scope of the coverage that the lower tier contractor promises to provide and what the lower tier contractor\u2019s insurance policy actually provides. Liability policies usually have an additional-insured \u201cendorsement\u201d (an add-on to the policy) that says that anyone that the policyholder has agreed to add as an additional insured is an additional insured. But those endorsements often limit additional-insured coverage to less than the full scope of coverage provided by the policy. It is a good practice to have your insurance broker compare a draft of your construction contract with your insurance policy to make sure that you are not promising more than you can deliver.<\/li><li><strong>Indemnity:<\/strong>&nbsp;Most contracts require the lower tier contractor to \u201cindemnify\u201d the upper tier contractors and owner from claims relating to the lower tier contractor\u2019s work. This is a separate obligation from that of providing \u201cadditional insured\u201d coverage, but involves many of the same concepts. And of course, in reality the lower tier contractor may not have the resources to pay to \u201cindemnify\u201d anyone beyond what is available from its insurance. In Oregon, the obligation to indemnify someone generally includes the obligation to pay for a defense lawyer. It is therefore important to pay close attention to claims that may trigger the obligation (and having insurance to step in), because they can be quite expensive.<\/li><\/ul>\n\n\n\n<p>Boilerplate clauses in construction contracts often turn out to be critical if something goes wrong. That is certainly true of insurance terms. Involving your insurance broker and counsel can help prevent problems down the road, and having a good understanding of the basic terms can make that conversation more efficient. Happy contracting!<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Seth Row | Miller Nash Construction contracts at all tiers usually include terms requiring certain types of insurance, and often contain related provisions about indemnity. This \u201cboilerplate\u201d can be important if a job goes south, so here\u2019s a short explanation of some of the key terms and how they relate to one another: Builder\u2019s risk&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contract-insurance-terms\/\">Continue reading <span class=\"screen-reader-text\">Understanding Insurance Terms in Construction Contracts<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9,10721],"tags":[9895,224,11657],"class_list":["post-899770","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","category-insurance","tag-advise-consult","tag-construction-contract","tag-insurance-terms","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Understanding Insurance Terms in Construction Contracts - Advise &amp; 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