Insurance Coverage for Design Build Insurance Coverage for Design - PowerPoint PPT Presentation

Presenting a live 90 ‐ minute webinar with interactive Q&A Insurance Coverage for Design Build Insurance Coverage for Design ‐ Build Construction Projects Maximizing CGL, PLI and AI Coverage to Mitigate Risks for D ‐ B Contractors TUES DAY, AUGUS T 30, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f S tephen D. Palley, Principal, Ober | Kaler , Washington, D.C. John Hunt, Counsel, Forest City Ratner , Brooklyn, N.Y . Timothy E. Delahunt, Partner, Kenney Shelton Liptak Nowak , Buffalo, N.Y 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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Design Build Construction and Insurance Insurance Stephen D. Palley Ober Kaler sdpalley@ober.com 202.326.5075 John Hunt Forest City Ratner JHunt@fcrc.com Timothy E. Delahunt Kenney Shelton Liptak Nowak tedelahunt@kslnlaw.com 716.853.3801 7 6.853.380 5

Webinar Overview Webinar Overview • Introduction Introduction • Construction delivery methodology • Coverage for design risks in basic construction C f d i i k i b i i policies • Coverage for design risk in newer products • Insurance challenges for design ‐ build projects. g g p j • Questions? 6

Construction Delivery Construction Delivery 7

Design ‐ Bid ‐ Build Design Bid Build • Owner’s design team prepares documents O e s des g tea p epa es docu e ts suitable for construction. • Contractor performs the work designed by the p g y owner’s design team • Implied warranty (from Owner to Contractor) regarding plans. • But distinctions can blur: – coordination drawings, “value engineering”, shop drawings, performance specifications, state and local law requirements q 8

Design ‐ Build Design Build • Owner contracts with one entity to design and Owner contracts with one entity to design and build project • Typically contractor led but can be designer • Typically contractor led, but can be designer led (with contractor as sub to designed) • Also referred to as EPC (engineer, procure, Al f d EPC ( i construct) contracting, particularly in connection with industrial facilities and power i i h i d i l f ili i d plants. 9

Design ‐ Build Design Build • Project can have design ‐ build components – Project can have design build components design assist, design delegation, etc. • No owner warranty re plans • No owner warranty re plans – waivers and waivers and limitations of liability often heavily negotiated. • But . . .other owner retained B h i d “professional”risks: – Geotech? Pollution? 10

Other Considerations Other Considerations • Construction Management g – Construction manager ‐‐ role in either a design ‐ bid ‐ build or design ‐ build project. – At risk, agency At risk agency – “Professional” obligations? • BIM, Green Construction, LEED , , – BIM may create efficiencies through communication about project scope, design, schedule and cost. – However, can it draw non ‐ design professionals into However can it draw non design professionals into “design” decisions ? • Public Private Partnerships (“PPP”) 11

Cost impact Cost impact • Design error without property damage or bodily es g e o t out p ope ty da age o bod y injury – potential cost impact: – Disruption, ripple impact – Schedule compression, “hop ‐ scotching” – Delay to follow on trades – Extended general conditions d d l di i – Demobilization, remobilization costs – Increased material costs Increased material costs – Acceleration to avoid delay – Delayed opening y p g 12

Insurance – “Design” Risk Insurance Design Risk 13

Basic Coverage – CGL Basic Coverage CGL • CGL CGL – Questions at the outset where design build used: • Who is insured? Who is insured? – Subcontracted A/E firms? For what sorts of risks? • For what period of time are losses covered? • What risks are presented? What types of losses are insured? – Does contractor have coverage for A/E vicarious liability Does contractor have coverage for A/E vicarious liability – Are “purely economic losses” not caused by property damage or bodily injury covered? 14

CGL CGL • Professional services exclusions Professional services exclusions – ISO form CG 22 43 (“Exclusion – Engineers, Architects or Surveyors Professional Liability”) Architects or Surveyors Professional Liability ). • rendering or failure to render any professional services by or for you, including: 1. The preparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications; and 2. spec cat o s; a d Supervisory, inspection or Supe so y, spect o o engineering services. 15

CGL CGL • Following Omni v Harbor (see below) ISO now Following Omni v. Harbor (see below) ISO now suggests CG 22 43 should be limited to policies issued to architects engineers and policies issued to architects, engineers, and surveyors. • Other endorsements (discussed below) to be • Other endorsements (discussed below) to be used for means and methods. – Some insurers continued to use CG 22 43 for S i ti d t CG 22 43 f contractors, though will change when this is noted noted. 16

CGL CGL • CG CG 22 22 79 79 “Exclusion Exclusion – Contractors Contractors – Professional Liability” – Exception for contractors: “Professional services – Exception for contractors: Professional services do not include services within construction means, , methods, , techniques, q , sequences q and procedures employed by you in connection with your operations in your capacity as a construction contractor.” 17

CGL – Professional Services Exclusions CGL Professional Services Exclusions • Harbor Insurance Co. v. Omni, 912 F.2d 1520 (D.C. Cir. 1990). – Sheeting and shoring deemed “professional” nder older form of ISO professional ser ices Sheeting and shoring deemed “professional” under older form of ISO professional services exclusion (CG 22 43). ISO promulgated new endorsements. • State Farm v. Habitat Construction Co. , 875 N.E.2d 1159 (2007). – professional services exclusion inapplicable to general contractor who was “not an architect, engineer, or supervisor [where the plaintiff’s] Complaint [did] not allege otherwise”). g , p [ p ] p [ ] g ) • Cowell v. Gaston County , 190 N.C. App. 743, 660 S.E.2d 915 (2008). – by its plain terms, exclusion applied only to engineers, architects or surveyors. • Noyes v. Canadian Indemnity Co. , 487 F. Supp. 433 (D. Colo. 1980). – professional services exclusion did not apply to damage alleged to have arisen out of insured’s professional services exclusion did not apply to damage alleged to have arisen out of insured s consulting services in connection with oil and gas well construction and maintenance when the services at issue were not provided by a “professional” under applicable state law; • Aetna Fire Underwriters Insurance Co. v. Southwestern Engineering Co. , 626 S.W.2d 99 (Tex. App. 1981). – “ “engineering services” as used in definition of “professional services” in CG 22 43 is i i i ” d i d fi i i f “ f i l i ” i CG 22 43 i ambiguous, and the ambiguity is to be construed against the insurance company). 18