By Sherry Whaley, Commercial Account Manager
On a daily basis, many contractors are required to create and sign several contracts in addition to submitting several bids to various contractors for work. Once the job is awarded, the next step is to obtain an insurance certificate from their agent. Along with obtaining the insurance certificate, the contractor needs to review the contract, submit W-9’s and a multitude of other items that need to be submitted before work can begin.
As an account manager and trusted adviser for my clients, I typically review the insurance requirements and begin analyzing the insurance portion of the contract to see what is required of the general contractor. Below, is a review of insurance terms that are listed as requirements in most contracts.
Additional Insured Status: The general contractor is asking to be included as additional insured, along with the project owner and other parties included in the contractual requirements. The additional insured request may be requested on the general liability and the automobile liability. There are many additional insured endorsements to choose from, however, most contracts will require additional insured including completed operations coverage.
Waiver of Subrogation: Waiver is a relinquishment of a known right. The general contractor may request waiver on the general liability, automobile liability and the workers compensation policies. Waiver of subrogation with respects to your general liability, auto liability and workers compensation, basically is stating that coverage will not be jeopardized if the insured has waived in writing prior to a loss any rights of recovery from a party responsible for the loss. This basically means if you request waiver of subrogation before a loss occurs, your insurance carrier may not subrogate (go back against) the general contractors’ insurance coverage.
Primary and Non-Contributory: This is when the general contractor is requesting to transfer the financial consequences of legal liability arising out of the business relationship with the named insured. That means that in order to function effectively as a risk transfer technique, coverage that comes by way of additional insured status must respond first to a covered claim –before the additional insured’s own liability policy is called on to pay. The non-contributory wording is stating the general contractor is not wanting their insurance coverage to contribute to the loss.
Per Project Aggregate: The limit of liability would respond per project instead of applying per policy.
Cancellation Provisions: Often times the general contractor will require 30 days cancellation guaranteeing return receipt, certified mail. All policies will need to be endorsed to give 30 Days Notice of Cancellation for non-payment of premium if this provision is required.
Umbrella Policy- Normally an umbrella policy will be required by most general contractors. The umbrella policy is excess coverage that follows form to your underlying policies: General Liability, Auto Liability & Employers Liability. An umbrella policy would respond when your underlying policy limits have been exhausted.
Other insurance Requirements:
- Pollution – Normally the contract will state the limit required
- Mold- Normally the contract will state the limit required
- Workers Compensation to be endorsed with special endorsements: US Longshore & Harbor(required when working over or near navigable waters), Jones Act, Admiral Act
This is of course not all of the items we see in construction agreements. There are still other items you may be required to carry. Please feel free to call me on my direct line at 910-478-3316.