Bulletin Board Magazine 2018 Volume 2

Property and Casualty Insight

Solutions to Manage Impact of Common Liability Mistakes in Construction Industry

Managing the many facets of construction contracts is becoming increasingly challenging for contractors and developers. In 2017, for instance, the American Institute of Architects (AIA) updated the mostly commonly used set of construction contract forms for architects, contractors and subcontractors. The revisions included a detailed addendum outlining specific insurance provisions for each contract, a change reflecting the increased awareness of insurance as a critical tool for managing contractual risks. Common liability mistakes can create significant financial losses for construction firms. Oftentimes, these incidents arise when a general contractor enters into a contract with a subcontractor, and discovers later that the agreement does not align with the contractor’s insurance program. The mistake creates a potential breach of contract situation and, to make matters worse, the resulting litigation may not be covered by insurance. To avoid such incidents, USI recommends that contractors, with the help of an experienced construction risk consultant, review contracts for the following:

ƒ Appropriate and sufficient coverage for risk assumed ƒ Adequate risk transfers to another contractor/owner for risk assumed ƒ Potential contract amendment to reduce/eliminate exposures ƒ Opportunity to self-insure exposure. Following are other common liability issues which frequently create losses for construction companies, and solutions to help minimize their financial impact.

Failure to Align Contracts with Insurance Programs

Contracts between construction parties – general contractors, subcontractors, owners and other entities involved in projects – should frequently be reviewed to ensure they are supported by the insurance program. In a recent case, a plumbing company renovating a hospital signed a contract with a general contractor, which contained

Property & Casualty | Employee Benefits | Personal Risk | Retirement Consulting

Bulletin Board | 35 | www.shorebuilders.org

Bulletin Board | 36 | www.shorebuilders.org