Presenting a live 90-minute webinar with interactive Q&A Construction Contract Insurance, Indemnification and Limitations on Liability Clauses Structuring and Negotiating Key Provisions to Allocate Risk and Minimize Exposure TUES DAY, NOVEMBER 5, 2013 1pm East ern | 12pm Cent ral | 11am Mount ain | 10am Pacific Today’s faculty features: Brian Thomas Moore, Part ner, Drew Eckl & Farnham , At lant a Myles Levelle, S enior Associat e, Drew Eckl & Farnham , At lant a The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Brian T. Moore | Myles Levelle Drew, Eckl & Farnham, LLP Tel: 404.885.1400 bmoore@deflaw.com | levellem@deflaw.com
Insurance Policies & Provisions at Issue. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 6
Commercial General Liability (CGL) • Purpose of CGL policy is to cover insured for legal liability to third party, with certain limitations. – Major limitations are: • Only damage caused to others work or for work performed by subcontractors covered. • For contractors, any professional services are likely excluded • Mold and mildew, a common damage in construction cases, is typically not covered unless by special endorsement. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 7
Builder’s Risk Policy • Builder's risk insurance is coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause of loss. – First party insurance maintained by Owner to ensure limited interest; completed or partially completed structures on ongoing project, materials, fixtures, equipment; – Typically applies only to build period; – Must read with and consider effect of AIA A201 waiver of subrogation. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 8
Property Insurance Policy (Owner) • The owner may maintain some alternative form of property insurance policy and, pursuant to AIA standard contract terms, will be required to insure the project ( See AIA Sec. 11) – First party insurance – required of Owner by contract to protect contractor’s limited interest in build. No fault payments for property damage. – While a builder’s risk policy is more common, owner’s may insure an interest by adding special endorsements to pre- existing property insurance policies. – Again, must read together with waiver of subrogation provision. – Timing of payment under property insurance policy should not affect application of waiver. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 9
“All-Risk” Policies • Most comprehensive, though not always maintained as part of a construction project. AIA A201 Sec. 11.3.1 requires that the owner maintain “property insurance written on a builder’s risk “all risk” policy or equivalent policy form in the amount of the initial contract sum…” – Insures “all-risks” that are not specifically omitted from the insurance policy. If the contract is silent as to a certain risk, it should be covered. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 10
“Fringe Policies”: Other Applicable Insurance • Workers’ Compensation – State law on statutory employer? • Green Build Policies – LEED, sustainable materials, earthen materials? • “SDI” or Subcontractor Default Policies – SDI’s vs. payment and performance bonds, which is preferred? • Excess or umbrella • Professional liability • Pollution liability insurance Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 11
Important Questions when Approaching an Insurance Policy: • Who is covered? – Insured, additional insured, etc. (will touch on additional insureds later in presentation). • What is covered? – Type of damage • To what extent are the insureds covered? – Policy limits, per occurrence or aggregate, diminishing or vanishing policy? • What is excluded? – What exclusions apply? – Have the insureds failed to fulfill conditions precedent to coverage? Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 12
What is covered? Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 13
Coverage Under CGL Policy: – Bodily Injury and Property Damage (Cov. A) • “We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. – Personal and Advertising Injury (Cov. B) – Supplementary Payments Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 14
Definitions: • Bodily Injury: “‘Bodily Injury’ means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time” • Property Damage: – Physical injury to tangible property including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or – Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it. • Of course, coverage only applies if the bodily injury or property damage is caused by an occurrence in the coverage territory and during the policy period. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 15
Occurrence: • “Occurrence” means an accident including continuous or repeated exposure to substantially the same general harmful conditions. – This is a major battleground for coverage in construction matters under CGL policies; insurers argue that faulty workmanship is not an “occurrence” because it is not accident. That is, contractors intend to do the work – it is not “accidentally” performed. Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 16
What constitutes an “occurrence”? • Faulty workmanship? • Negligence? • Breach of contract? • Breach of warranty? • Intentional torts? • Fraud? • See Taylor Morrison Services, Inc. v. HDI-Gerling America Ins. Co. (Georgia Supreme Court; No. S13Q0462; 2013WL3841555) – Two key questions: • whether an “occurrence” under the insurance policy only exists if damage occurs to other property; and • if not, whether an “occurrence” exists for claims of breach of contract, breach of warranty, and fraud? Brian T. Moore | bmoore@deflaw.com Myles Levelle | levellem@deflaw.com 17
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