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16TH REPRINT CONTRUCTION RISK MANAGEMENT

DECEMBER 2007 CONTENTS/INDEX

EXPANDED TABLE OF CONTENTS

The following table of contents lists every major topic discussed in Construction Risk Man-
agement. It is included here as a guide for the user in determining where within the man-
ual as a whole a particular subject is treated.

CHAPTER I: INTRODUCTION TO RISK 2007 IRMI CONSTRUCTION RISK


MANAGEMENT AND INSURANCE SURVEY .................................... I.W.1
The Respondents.................................................. I.W.1
The Insurance Marketplace ................................ I.W.4
INTRODUCTION TO CONSTRUCTION The Direction of the Marketplace..................... I.W.8
RISK MANAGEMENT................................................ I.A.1 Insurance Representatives .................................. I.W.9
Risk Management Process .................................. I.A.1 Wrap-Ups ............................................................. I.W.12

EXPANDED CONTENTS
Risk Identification ............................................ I.A.3 Coverage Issues.................................................. I.W.14
Risk Analysis .................................................... I.A.8 Completed OperationsWrap-Ups ............. I.W.14
Designing the Risk Management Additional Insured Coverage....................... I.W.16
Strategy......................................................... I.A.10 Exclusionary Endorsements......................... I.W.18
Risk Control ............................................... I.A.10 Summary ............................................................. I.W.19
Risk Financing........................................... I.A.11
Selecting the Right Combination .......... I.A.14
Implementation............................................... I.A.16
Review ............................................................. I.A.17 CHAPTER II: ADMINISTRATION
Summary ......................................................... I.A.18
101 RULES OF RISK MANAGEMENT ...................I.B.1 SELECTING AN INSURANCE
TIPS FOR CONTROLLING INSURANCE REPRESENTATIVE ..................................................... II.A.1
COSTS...........................................................................I.C.1 Distribution Systems ............................................ II.A.6
Automobile Insurance............................................I.C.1 Compensation ....................................................... II.A.7
Liability Insurance ..................................................I.C.3 Service ................................................................... II.A.9
Workers Compensation Insurance ......................I.C.4 Marketing Insurance....................................... II.A.9
Experience Rating ..................................................I.C.6 Risk Management Review........................... II.A.10
Property Insurance.................................................I.C.7 Loss Control ................................................... II.A.10
Claims ......................................................................I.C.7 Policy Review................................................. II.A.11
Miscellaneous .........................................................I.C.8 Service after Separation.............................. II.A.11
THE CONSTRUCTION INDUSTRY .......................... I.F.1 Miscellaneous ................................................ II.A.12
Industry Dynamics ................................................. I.F.1 Service Agreements........................................... II.A.12
Contractual Relationships ..................................... I.F.5 THE COMPETITIVE PROPOSAL PROCESS......... II.B.1
Job Acquisition....................................................... I.F.7 The Decision Process .......................................... II.B.1
Construction Contracts.......................................... I.F.8 Suggested Frequency .......................................... II.B.5
Construction Risk Management ........................ I.F.10 Issuing a Request for Proposals........................ II.B.5
CONSTRUCTION INDUSTRY Coordinating a Common Renewal Date..... II.B.7
TRAINING SURVEY .....................................................I.J.1 Preparing the Specifications ......................... II.B.7
Survey Highlights ....................................................I.J.1 Number of Invitations To Issue .................... II.B.9
Challenges for the Field ........................................I.J.2 Prequalifying Producers ............................... II.B.13
Challenges for Management.................................I.J.3 Maintaining a Competitive Atmosphere......... II.B.13
Training .....................................................................I.J.4 Market Allocation.......................................... II.B.14
Training Budgets ................................................I.J.5 Awaiting the Proposals................................ II.B.15
Return on Training Investment ........................I.J.6 Awarding the Account ...................................... II.B.15
Training and Technology ..................................I.J.6
Conclusion................................................................I.J.7

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 15TH REPRINT
CONTENTS/INDEX JUNE 2008

MANAGING INSURANCE AND RISK Pre-Insolvency Planning................................ II.F.28


MANAGEMENT INFORMATION .............................II.C.1 Cut Through Endorsements.................... II.F.28
Uses of Risk Management Information........... II.C.1 Record-Keeping ......................................... II.F.28
Improved Risk Financing Decisions ............ II.C.1 Policy Replacement Safeguards............. II.F.29
Improved Insurance Bargaining Position.... II.C.2 Post-Insolvency Planning .............................. II.F.29
Effective Loss Control Expenditures ........... II.C.2 Obtain Replacement Coverage
Permanent Record of Past Coverage.......... II.C.2 Immediately ............................................ II.F.30
Detection of Errors......................................... II.C.3 List All Outstanding Claims.................... II.F.30
Accuracy in Risk Allocation ......................... II.C.3 File Claims with Guaranty Funds and
Due Diligence ................................................. II.C.3 the Liquidator......................................... II.F.30
Processing Risk Management Data ................. II.C.3 Fill Potential Gaps in Coverage ............. II.F.32
Items Requiring Immediate Attention ........ II.C.3 Anticipate Uninsured Losses.................. II.F.33
Binders ........................................................ II.C.4 Summary .............................................................. II.F.33
Insurance Policies and Related DEVELOPING A RISK MANAGEMENT
Endorsements.......................................... II.C.4 MANUAL..................................................................... II.G.1
Loss Reports .............................................. II.C.5 Minimum Features............................................... II.G.2
Premium Audits......................................... II.C.6 Guidelines for Manual Writing .......................... II.G.3
Retrospective Rating Adjustments ......... II.C.7 Procedures, Checklists, Formats ....................... II.G.6
Items to be Filed and Maintained Systems and Synergy .................................... II.G.9
Long-Term...................................................... II.C.7 The Manual Index................................................ II.G.9
Insurance Policies ..................................... II.C.7 JOB COSTING CONSTRUCTION
Permanent Policy Record......................... II.C.8 INSURANCE COSTS ..................................................II.I.1
Loss Reports .............................................. II.C.8 Direct versus Indirect Costs.................................II.I.1
General Insurance and Risk Variability in Insurance Costs ..............................II.I.2
Management Correspondence ............. II.C.9 Commencing the Insurance Job Cost
Subcontractor Contracts .......................... II.C.9 Process..................................................................II.I.3
Settlement Agreements and The Insurance Bid Model.....................................II.I.5
Releases ................................................. II.C.10 Workers Compensation.........................................II.I.6
Miscellaneous Items............................... II.C.10 Experience Modification Factors....................II.I.7
Summary ............................................................. II.C.10 Premium Discount ............................................II.I.7
DOCUMENTING AN INSURANCE General Liability......................................................II.I.8
COVERAGE HISTORY ............................................ II.D.1 Premium Discount ..........................................II.I.12
Discovering Hidden Assets ................................ II.D.1 Fixed Insurance Expenses ..................................II.I.12
Making Details Count ......................................... II.D.2 Umbrella Coverage ..............................................II.I.14
Getting the Most from Internal Sources......... II.D.2 Flat Umbrella...................................................II.I.14
Using External Sources ...................................... II.D.3 Auditable Umbrella.........................................II.I.15
Analyzing Your Findings ..................................... II.D.4 Retained Losses ...................................................II.I.16
Finding Needles in a Haystack ......................... II.D.4 Midterm Loading Adjustments ..........................II.I.17
INSURER SOLVENCY................................................ II.F.1 Retrospectively Rated Insurance Programs.....II.I.17
Costs of Insurer Insolvency ................................ II.F.1 Contract Review ...................................................II.I.20
Personnel Time ................................................ II.F.2 Broker/Agent Role in Job Costing ...................II.I.22
Duplication of Premiums ............................... II.F.2 Summary ...............................................................II.I.23
Unplanned Retention ...................................... II.F.2 USING RISK MANAGEMENT CONSULTANTS ... II.K.1
Disruptions in Cash Flow .............................. II.F.3 Services Offered................................................... II.K.3
Premium Increases.......................................... II.F.3 Costs ...................................................................... II.K.4
Errors and Omissions Claims ........................ II.F.6 How To Select a Consultant.............................. II.K.5
Identifying Financially Troubled Insurers .......... II.F.7 Agents/Brokers/Service Providers
Contributing Factors........................................ II.F.7 as Consultants ................................................... II.K.7
Underwriting Practices.............................. II.F.8 Some Advice for Agents and Brokers ............. II.K.8
Investment Practices................................ II.F.10 HOW TO FILE CLAIMS WITH INSURERS:
Accounting Practices ............................... II.F.10 FROM STARTING BLOCK TO FINISH LINE .......II.M.1
Managerial Practices ............................... II.F.12 Common Reporting Conditions .........................II.M.2
Sources of Information ................................ II.F.12 Insureds Investigative Duties.............................II.M.4
Rating Services......................................... II.F.12 Standards of Reporting Promptness ................II.M.4
Making Use of Insurer Ratings ............. II.F.25 Maximizing Recovery
Risk-Based Capital Requirements .......... II.F.25 Working with Adjusters ...................................II.M.6
Minimizing the Impact of Insurer Liability Claim Reporting Considerations.........II.M.7
Insolvency.......................................................... II.F.28

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18TH REPRINT CONSTRUCTION RISK MANAGEMENT
MARCH 2008 CONTENTS/INDEX

Coverage ProblemsProperty Losses .............. II.M.8 Flexibility ................................................... II.T.11


Coverage IssuesLiability Losses ..................... II.M.9 Estimating Losses .................................... II.T.12
Post-Reporting Follow-up ................................. II.M.10 Insurance Premiums ..................................... II.T.13
Keep Tabs on the Claim ............................ II.M.10 Loss Adjustment Expenses ......................... II.T.14
Check Reserves............................................ II.M.11 Loss Control Expenses................................. II.T.14
Check Insurer Supervision ......................... II.M.11 Risk Management Overhead....................... II.T.14
Hold a Meeting............................................ II.M.11 Allocation Examples........................................... II.T.14
Summary ............................................................ II.M.12 Pure Exposure Allocation ............................ II.T.15
CLAIM AUDITING ......................................................II.P.1 Pure Experience Allocation ......................... II.T.16
The Need for Claim Auditing .............................II.P.1 Blended Allocation........................................ II.T.17
Quantitative Auditing ......................................II.P.2 Multiyear Experience Period ....................... II.T.17
Qualitative Auditing.........................................II.P.2 Allocation Cap ............................................... II.T.18
Initial File Handling and Contact.............II.P.3 Funding ................................................................ II.T.18
Investigation.................................................II.P.3 Special Considerations ...................................... II.T.19
Reserve Review and Reserve Acquisition of a New Division ................... II.T.19
Adequacy ..................................................II.P.4 Change in Management.............................. II.T.19
Payment Control and Supervision ...........II.P.4 End-of-Year Balances .................................... II.T.20
Supervision and Control of Examiner/ Road Map to Change .................................. II.T.20
Adjuster Staff ...........................................II.P.5
Litigation ......................................................II.P.6
Risk Transfer Issues ...................................II.P.6

EXPANDED CONTENTS
General Performance Issues.....................II.P.7 CHAPTER III: LOSS EXPOSURES AND
Personnel .....................................................II.P.8 UNDERWRITING CONSIDERATIONS
Internal Systems and Procedures
Paper-flow..................................................II.P.8 LOSS EXPOSURE AND UNDERWRITING
Three-Dimensional Claim Auditing REVIEW......................................................................III.A.1
Methodology ..................................................II.P.9 General Overview ................................................III.A.1
Walk-through...................................................II.P.10 Workers Compensation.................................III.A.1
Summary ..............................................................II.P.10 General Liability..............................................III.A.3
ALTERNATIVE DISPUTE RESOLUTION ................ II.R.1 Automobile Liability and
When Is ADR Appropriate?................................ II.R.1 Physical Damage.........................................III.A.4
When Is ADR Not Appropriate?........................ II.R.2 Professional Liability ......................................III.A.5
Advantages of ADR ............................................. II.R.2 Physical Damage to the Work ....................III.A.5
Speedy Resolution .......................................... II.R.3 Damage to Contractors Equipment ...........III.A.6
Offers Options ................................................. II.R.3 Physical Damage to Owned, Rented, or
Less Costly....................................................... II.R.4 Leased Real and Personal Property.........III.A.6
Provides Confidentiality.................................. II.R.4 Additional Underwriting Considerations .........III.A.7
Types of ADR Proceedings ................................ II.R.4 Loss Exposures and Underwriting
Arbitration ........................................................ II.R.4 Considerations by Type of Contractor ..........III.A.8
Court Annexed Proceedings ......................... II.R.6 Highway/Heavy Contractors ........................III.A.8
Voluntary Settlement Conference ................ II.R.6 Building ContractorGeneral........................III.A.9
Mediation ......................................................... II.R.7 Building Trade Contractors .........................III.A.10
Mini-Trial ........................................................... II.R.7 Utility Contractors ........................................III.A.11
Summary ............................................................... II.R.8 WORKERS COMPENSATION LAW
COST ALLOCATION ..................................................II.T.1 SUMMARY ................................................................III.C.1
Setting Objectives.................................................II.T.2 Type of Law .........................................................III.C.2
Accountability versus Stability ............................II.T.3 Exclusive Remedy................................................III.C.2
Credibility ..........................................................II.T.4 Insurance Requirements .....................................III.C.5
Size of the Division ...................................II.T.6 Monopolistic State Funds.............................III.C.6
Experience Period ............................................II.T.6 Competitive State Funds ..............................III.C.7
Allocation Cap..................................................II.T.8 Penalties for Failure To Secure Benefits.........III.C.7
Maximum Annual Change .............................II.T.8 Covered Employments ......................................III.C.10
Timing of Allocations......................................II.T.8 Number of Employees ................................III.C.11
Allocating Risk Management Costs...................II.T.9 Type of Work................................................III.C.11
Retained Losses ...............................................II.T.9 Independent Contractors..................................III.C.12
Buffer Layer...............................................II.T.10 Employee Leasing..............................................III.C.13

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 22ND REPRINT
CONTENTS/INDEX MARCH 2008

Sole Proprietors, Partners, Executive Officers, Florida............................................................ III.E.10


and Limited Liability Companies................. III.C.16 Georgia .......................................................... III.E.10
Elective Coverage ............................................. III.C.25 Hawaii ............................................................ III.E.10
Suits Against Third Parties ............................. III.C.27 Idaho.............................................................. III.E.10
Waiver of Subrogation ............................... III.C.28 Illinois............................................................. III.E.11
Injuries Not Covered ........................................ III.C.30 Indiana........................................................... III.E.11
Occupational Disease....................................... III.C.33 Iowa ............................................................... III.E.11
Extraterritorial Application............................... III.C.36 Kansas ........................................................... III.E.11
COMPLETED OPERATIONS RISKS...................... III.D.1 Kentucky........................................................ III.E.12
Warranties ............................................................ III.D.2 Louisiana ....................................................... III.E.12
Contractors Right To Cure Breaches ........ III.D.2 Maine............................................................. III.E.12
Express versus Implied Warranties ............ III.D.3 Maryland ....................................................... III.E.13
Express Warranties .................................. III.D.4 Massachusetts ............................................. III.E.13
Implied Warranties ................................... III.D.7 Michigan ....................................................... III.E.13
The Privity Doctrine .................................... III.D.11 Minnesota ..................................................... III.E.13
Remedies ...................................................... III.D.12 Mississippi..................................................... III.E.14
Statutes of Limitation and Statutes of Missouri......................................................... III.E.14
Repose ............................................................. III.D.13 Montana ........................................................ III.E.14
Statutes of Limitation ................................. III.D.14 Nebraska ....................................................... III.E.14
Statutes of Limitation Nevada........................................................... III.E.15
and Warranties..................................... III.D.14 New Hampshire ........................................... III.E.15
Statutes of Repose...................................... III.D.16 New Jersey................................................... III.E.16
Contract Actions versus Tort Actions. III.D.17 New Mexico ................................................. III.E.16
State Differences.................................... III.D.19 New York ...................................................... III.E.16
Tolling the Statutes ..................................... III.D.20 North Carolina.............................................. III.E.17
Tolling a Statute of Limitations ........... III.D.20 North Dakota................................................ III.E.17
Tolling a Statute of Repose ................. III.D.21 Ohio ............................................................... III.E.17
Mergers, Acquisitions, and Successor Oklahoma ...................................................... III.E.17
Liability............................................................. III.D.22 Oregon........................................................... III.E.18
Asset Sale..................................................... III.D.22 Pennsylvania ................................................. III.E.18
Exceptions to the Rule.......................... III.D.23 Rhode Island ................................................ III.E.18
Mergers ......................................................... III.D.25 South Carolina ............................................. III.E.18
Coverage for Successor Liability .............. III.D.26 South Dakota................................................ III.E.19
Completed Operations Insurance .................. III.D.27 Tennessee ..................................................... III.E.19
When is a Contractors Work Texas .............................................................. III.E.19
Completed? ................................................ III.D.29 Utah ............................................................... III.E.20
LIMITATIONS OF ACTIONS Vermont ......................................................... III.E.20
CONTRACT AND TORT CLAIMS..........................III.E.1 Virginia........................................................... III.E.20
Statutory Time Restrictions ................................III.E.2 Washington................................................... III.E.21
Background......................................................III.E.3 West Virginia ................................................ III.E.21
Application.......................................................III.E.3 Wisconsin...................................................... III.E.21
Tolling the Statutes .............................................III.E.5 Wyoming....................................................... III.E.22
Statutes of Repose for Contract Actions, INDEPENDENT CONTRACTOR LIABILITY ........... III.F.1
Tort Actions, or Both........................................III.E.5 Control of the Details ......................................... III.F.2
Conflicting Statutes........................................III.E.6 Selection of the Contractor ............................... III.F.2
Special Construction Industry Statutes of Repose Dangerous Activity .............................................. III.F.3
and/or Statutes of Limitations .......................III.E.7 Minimizing Independent Contractor
Alabama ...........................................................III.E.7 Liability ................................................................ III.F.5
Alaska ...............................................................III.E.7 THE LEGAL IMPLICATIONS AND STRUCTURE
Arizona .............................................................III.E.7 OF CONSTRUCTION JOINT VENTURES............ III.G.1
Arkansas...........................................................III.E.8 Advantages of a Joint Venture......................... III.G.1
California ..........................................................III.E.8 Creation and Elements of a
Colorado...........................................................III.E.9 Joint Venture ..................................................... III.G.2
Connecticut......................................................III.E.9 Duties and Liabilities Among
Delaware ..........................................................III.E.9 Joint Venturers.................................................. III.G.3
District of Columbia.......................................III.E.9

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24TH REPRINT CONSTRUCTION RISK MANAGEMENT
AUGUST 2007 CONTENTS/INDEX

Liability of Joint Venturers to Third Owners Risks and Benefits.........................III.R.4


Persons...............................................................III.G.4 Owner Liability to Design-Builder ..........III.R.5
Termination of a Joint Venture.........................III.G.5 Design Builders Risks and Benefits...........III.R.6
Conclusion............................................................III.G.5 Design-Builders Liability to Owner .......III.R.8
THE THIRD-PARTY BENEFICIARY PRINCIPLE.... III.I.1 Design-Builders Liability to
Third-Party Beneficiary Status Affirmed........... III.I.2 Third Parties............................................III.R.9
Incidental Beneficiaries ....................................... III.I.3 Subcontractors Risks and Benefits ..........III.R.10
PUNITIVE DAMAGES..............................................III.K.1 Key Contract Terms...........................................III.R.10
Historical Perspective .........................................III.K.2 Scope of Work and Related Terms..........III.R.11
Constitutionality of Punitive Damages ............III.K.2 Permits......................................................III.R.12
Case Law ........................................................III.K.3 Cleanup Standards .................................III.R.12
Insurability of Punitive Damages .....................III.K.8 Standard of Care ....................................III.R.13
Public Policy Concerns .................................III.K.8 Compliance with Laws and
Insurance Policy Language ..........................III.K.9 Regulations............................................III.R.13
Insurer Bad Faith .........................................III.K.11 Health and Safety ..................................III.R.13
CONSEQUENTIAL DAMAGES ............................... III.L.1 Exclusions to Scope of Work...............III.R.14
Limitation of Liability Clauses .......................... III.L.3 Disclaimers...............................................III.R.14
Cost of Redesign ....................................III.R.14
U.S. LONGSHORE AND HARBOR WORKERS Recourse for Noncompliance
COMPENSATION ACT ........................................... III.M.1 with the ROD .......................................III.R.14
Eligibility............................................................... III.M.1 Pricing and Payment Issues.......................III.R.15

EXPANDED CONTENTS
Covered Injuries and Diseases ........................ III.M.2 Changes.........................................................III.R.16
Benefits ................................................................ III.M.3 Differing Site Conditions ............................III.R.17
Disability ......................................................... III.M.3 Time-Related Issues.....................................III.R.18
Death .............................................................. III.M.3 Limitations of Liability and
Medical ........................................................... III.M.3 Indemnification ..........................................III.R.18
Insuring LHWCA Exposures ............................. III.M.4 Performance Guarantees and Bonds .......III.R.20
Rates ............................................................... III.M.5 Risk Management Techniques
Self-Insurance Requirements ............................ III.M.5 To Avoid Liability ............................................III.R.21
Penalties for Failure MERGERS AND ACQUISITIONS .......................... III.T.1
To Provide Coverage.................................. III.M.6 Risk Management Concerns ............................. III.T.3
AUTHORITY AND RESPONSIBILITY OF Pollution Liability ............................................ III.T.3
THE DESIGN PROFESSIONAL ..............................III.N.1 Insuring Pollution Liability ....................... III.T.5
Preparation of Drawings and Specifications..III.N.1 Successor Liability ......................................... III.T.7
Approval of Materials.........................................III.N.3 Insuring Successor Liability .................. III.T.10
Supervision of the Work ...................................III.N.3 Liability for Failure To Warn............................ III.T.12
Design-Build Liability ..........................................III.N.5 Risk Financing Arrangements ......................... III.T.13
Conclusion............................................................III.N.6 Captives ......................................................... III.T.13
IDENTIFYING AND DEFENDING AGAINST Self-Insurance Programs and
ENVIRONMENTAL RISKS IN CONTRACTING ... III.P.1 Deductibles................................................. III.T.14
Theories of Liability ............................................ III.P.2 Open Retros .................................................. III.T.14
Negligence ...................................................... III.P.2 Canceling a Retro................................... III.T.14
Misrepresentation........................................... III.P.4 Experience Rating ........................................ III.T.15
Breach of Contract ........................................ III.P.4 Directors and Officers Liability ....................... III.T.15
Superfund Liability ........................................ III.P.5 Insuring Directors and Officers Liability .. III.T.15
Operator and Transporter Liability... III.P.6 Sellers Board .......................................... III.T.16
Arranger Liability ................................... III.P.8 Buyers Board .......................................... III.T.17
The Deal-Makers Liability................... III.P.10 Acquisition-Related Exclusions ............. III.T.18
Government Contracts and the Other Problems ............................................ III.T.20
Government Contractor Defense ............ III.P.11 Mergers and Acquisitions Risk Management
Conclusions Concerning the Environmental Checklist ........................................................... III.T.21
Liability Exposure............................................ III.P.13 EMPLOYMENT PRACTICES LIABILITY...............III.W.1
DESIGN-BUILD ON ENVIRONMENTAL EPL Exposures ....................................................III.W.1
REMEDIATION PROJECTS..................................... III.R.1 Discrimination ................................................III.W.2
Overview of Design-Build on Wrongful Termination...................................III.W.4
Remediation Projects ....................................... III.R.2 Sexual Harassment .......................................III.W.4

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 28TH REPRINT
CONTENTS/INDEX AUGUST 2007

What Constitutes Knowledge Operator Practices ....................................... IV.E.15


of Harassment? ..................................... III.W.8 Security ......................................................... IV.E.16
Third-Party Sexual Harassment ............. III.W.9 Disclaimer of Liability....................................... IV.E.17
Prevalence of Harassing Behavior ....... III.W.9 Loss Control Checklist...................................... IV.E.17
Same-Sex Sexual Harassment .............. III.W.9 CONTRACTORS EQUIPMENT GUIDE TO LOSS
Workplace Torts.......................................... III.W.10 PREVENTION SUMMARY CHECKLIST ............. IV.E.18
Strategies for Avoiding Liability .................... III.W.10 ASBESTOS MANAGEMENT AND
LOSS CONTROL ......................................................IV.G.1
Health Effects of Asbestos ...............................IV.G.2
Asbestos Regulations .........................................IV.G.3
CHAPTER IV: LOSS CONTROL Occupational Safety and Health
Administration Standards ..........................IV.G.3
LOSS CONTROL ...................................................... IV.A.1 Environmental Protection Agency
Leadership in Loss Control ............................... IV.A.4 Standards......................................................IV.G.4
Safety Inspectors Checklist for Job-Site Notification ................................................IV.G.4
Safety Program................................................. IV.A.7 Asbestos Disposal ....................................IV.G.4
SUBSTANCE ABUSE PROGRAMS ...................... IV.B.1 Demolition .................................................IV.G.4
Policy Development ............................................ IV.B.2 Procedures for Emission Control ...........IV.G.5
Assess Needs................................................. IV.B.3 Asbestos Management Options .......................IV.G.5
Compliance with Legal Requirements.. IV.B.4 Inspection of Properties ...............................IV.G.5
Set Goals ........................................................ IV.B.6 Relocate or Stay ............................................IV.G.5
Define Scope.................................................. IV.B.7 Ongoing Air Monitoring ...............................IV.G.6
Establish Detection Procedures .................. IV.B.8 Operations and Maintenance Program
Testing and Searches ................................... IV.B.9 (O&M)............................................................IV.G.6
Preemployment Testing ......................... IV.B.10 Asbestos Substitutes ..........................................IV.G.8
Random Testing...................................... IV.B.10 Survey and Risk Assessment ...........................IV.G.9
Periodic Testing ...................................... IV.B.10 Sampling and Analytical Methods .............IV.G.9
Postincident Testing ............................... IV.B.10 Clearance Criteria ........................................IV.G.10
Reasonable Suspicion ........................... IV.B.11 Asbestos Abatement ........................................IV.G.11
Searches .................................................. IV.B.11 Encapsulation ...............................................IV.G.11
Risk Management in Drug Testing ..... IV.B.11 Enclosure.......................................................IV.G.12
Establish Penalties for Violations ............. IV.B.12 Removal.........................................................IV.G.12
Establish Procedures for Appeals............. IV.B.13 Procedures To Control Asbestos
Supervisor Training........................................... IV.B.14 during Routine Building Maintenance ........IV.G.13
Employee Education ......................................... IV.B.14 General Procedures .....................................IV.G.13
Treatment ........................................................... IV.B.15 Working with Asbestos/Cement Products ...IV.G.14
Employee Assistance Programs ................ IV.B.15 Cutting and Drilling.....................................IV.G.14
Putting It All in Writing................................... IV.B.16 Cleanup and Waste Disposal ....................IV.G.14
Substance Abuse Policy Checklist................. IV.B.17 Equipment .....................................................IV.G.14
THE AMERICANS WITH DISABILITIES ACT .... IV.C.1 Waste Disposal ............................................IV.G.15
IMUA LOSS CONTROL GUIDES FOR BUILDERS Personal Protective Equipment .................IV.G.15
RISK AND CONTRACTORS EQUIPMENT .......... IV.E.1 Insurance ............................................................IV.G.15
Builders Risk Guide to Loss Prevention.......... IV.E.1 Selecting an Asbestos Consultant .................IV.G.16
Management Practices ................................. IV.E.2 HUMAN FACTORS LOSS CONTROL
Site Security................................................... IV.E.2 IN THE CONSTRUCTION INDUSTRY..................IV.H.1
Off-Site Security ............................................ IV.E.4 Overview...............................................................IV.H.1
Fire Protection and Prevention ................... IV.E.5 The Cost of Occupational Stress .....................IV.H.1
Construction Practices.................................. IV.E.7 Stress and Accidents .........................................IV.H.3
Natural Perils................................................ IV.E.11 Breaking the Distress Cycle ..............................IV.H.3
Contractors Equipment Guide to A New Approach to Risk Management .........IV.H.5
Loss Prevention .............................................. IV.E.12 Human Factors Loss Control Programs ..........IV.H.7
Management Practices ............................... IV.E.12 Preemployment Screening for Theft,
Fire Prevention ............................................. IV.E.13 Violence, and Drug Abuse........................IV.H.8
Site Exposures: Flood, Windstorm, Employee Assistance Programs ..................IV.H.8
Earthquake, Landslide, Etc...................... IV.E.14 Managing the Troubled Employee ......IV.H.10
Transportation .............................................. IV.E.15 Injured Employee Management ................IV.H.10

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Use of Rehabilitation Specialists ..............IV.H.11 Test for Character ........................................ IV.W.2


Checklist for Identifying Distressed Use Protective Legal Documents.............. IV.W.3
Construction Workers ....................................IV.H.13 Require Employees To Sign Mandatory
HAZARD COMMUNICATION................................. IV.L.1 Arbitration Agreements ............................ IV.W.3
Hazardous Materials List ................................... IV.L.4 Train Managers and Employees in
Material Safety Data Sheets............................. IV.L.4 Human Relations ....................................... IV.W.4
Availability to Employees.............................. IV.L.6 Be Proactive in Identifying Problems ....... IV.W.4
Maintaining MSDS Records......................... IV.L.6 Acknowledge Problems Immediately ....... IV.W.5
Labeling ................................................................ IV.L.9 Implement a Procedure for
Employee Information and Training............... IV.L.10 Providing References ................................ IV.W.5
Written Hazard Communication Program .... IV.L.11 Maintain Employee Privacy ........................ IV.W.5
Hazard Communication to Independent Obtain Help When Needed ....................... IV.W.6
Contractors ................................................. IV.L.11 Use Only Established Agencies When Hiring
Noncompliance.................................................. IV.L.17 Leased or Temporary Employees ........... IV.W.6
Conclusion.......................................................... IV.L.17 Preventing Discrimination Claims................... IV.W.6
CONSTRUCTION FLEET MANAGEMENT ...........IV.N.1 Preventing Sexual Harassment Claims .......... IV.W.7
Problems Unique to the Construction Fleet....IV.N.2 Developing a Sexual Harassment Policy . IV.W.8
Components of a Fleet Management Communicating the Policy ......................... IV.W.9
Program..............................................................IV.N.3 Training Supervisors and Employees........ IV.W.9
Administration and Supervision ..................IV.N.3 Developing a Confidential
Fleet Management Policy Statement .........IV.N.5 Complaint Procedure ................................ IV.W.9

EXPANDED CONTENTS
The Role of the Fleet Manager ..................IV.N.6 Investigating Complaints............................. IV.W.9
The Fleet Review Committee......................IV.N.7 Use Caution in Documenting
Driver Selection..............................................IV.N.8 Investigations............................................ IV.W.10
Formal Program Regulations and Take Appropriate Actions Following
Procedures .........................................................IV.N.9 Investigations............................................ IV.W.10
Accident Reporting ........................................IV.N.9 Continuously Review the Policy .............. IV.W.10
Investigation and Corrective Action .........IV.N.11 Preventing Wrongful Termination Claims.... IV.W.10
Vehicle Maintenance ...................................IV.N.12 Interviewing and Background
Recordkeeping and Statistics ....................IV.N.13 Checking ................................................... IV.W.10
Employee Motivation ........................................IV.N.15 Avoiding Assurances of
Summary ............................................................IV.N.15 Permanent Employment ......................... IV.W.11
DISASTER PLANNING ............................................IV.Q.1 Using Legal Counsel To Review
Planning Steps.....................................................IV.Q.2 Employer-Produced Material.................. IV.W.12
Disaster Plan Example Exhibit ..........................IV.Q.4 Include a Management Rights Provision
MEDIA MANAGEMENT IN EMERGENCY in Written Material ................................. IV.W.12
SITUATIONS..............................................................IV.R.1 Periodic Performance Evaluations........... IV.W.12
Selecting a Spokesperson .................................IV.R.2 Record Warnings in Personnel Files ...... IV.W.13
Communicating with Reporters........................IV.R.5 Avoid Knee-Jerk Terminations ................. IV.W.13
Summary ..............................................................IV.R.5 Consider Alternatives to Termination..... IV.W.14
GENERAL GUIDELINES FOR Be Consistent in Making Termination
CONSTRUCTION...................................................... IV.T.1 Decisions................................................... IV.W.14
Clothing and Personal Protective Educate Managers in the Companys
Equipment.......................................................... IV.T.1 Termination Procedures.......................... IV.W.14
Housekeeping ...................................................... IV.T.2 When and Where To Fire ........................ IV.W.15
Ladders ................................................................. IV.T.2 Have the Appropriate Paperwork
Welding and Burning ......................................... IV.T.4 Ready......................................................... IV.W.15
Maintenance, Use, and Storage of Tools ....... IV.T.7 Using Counseling, Employee Assistance,
Scaffolds ............................................................... IV.T.8 and Outplacement Programs ................ IV.W.15
Storing and Handling of Material .................. IV.T.12 Preventing Claims Associated with
Temporary Wiring, Lighting, and Heating.... IV.T.12 Special Employment Situations.................. IV.W.16
EMPLOYMENT PRACTICES LIABILITY Claims Associated with Stock Options . IV.W.16
LOSS CONTROL .....................................................IV.W.1 Preventing Retaliation Claims .................. IV.W.18
General Recommendations...............................IV.W.1 Preventing Claims from
Hire Carefully.................................................IV.W.1 Corporate Downsizing ............................ IV.W.19
Test for Skills.................................................IV.W.2 Reducing Legal Liability ...................... IV.W.20

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CONTENTS/INDEX AUGUST 2007

Reducing Anger and Negative Sliding Scale Dividend Plans ......................V.E.13


Emotions in Employees ..................... IV.W.21 Retention Plans ..............................................V.E.13
Preventing Claims from Electronic Retention Plans versus Retros ...............V.E.14
Exposures .................................................. IV.W.21 CASH FLOW PLANS ................................................V.F.1
Establish Cyber Language Expected Loss Retrospective Rating .................V.F.1
Guidelines ............................................ IV.W.22 Paid Loss Retrospective Rating ..........................V.F.1
Educate Your Employees ..................... IV.W.22 Paid Loss Retro Calculation Example ..........V.F.4
Incorporate Harassment and Loss of Use Charge. .......................................V.F.5
Discrimination Policies into the Cash Flow Implications of Paid
Companys Written E-Mail Policy .... IV.W.22 Loss Retros.....................................................V.F.5
Compensating Balance Plans .............................V.F.6
Cash Flow Implications of
Compensating Balance Plans .....................V.F.7
CHAPTER V: RISK FINANCING LARGE DEDUCTIBLE PLANS................................. V.G.1
Program Structure................................................ V.G.2
OVERVIEW OF RISK FINANCING ........................ V.A.1 Payment Options ............................................ V.G.2
EXPERIENCE RATING .............................................. V.C.1 Collateralization............................................... V.G.3
Eligibility ................................................................ V.C.1 Defense Costs ................................................. V.G.3
Experience Rating Period ................................... V.C.2 Taxes and Assessments................................. V.G.4
Combinability................................................... V.C.3 Deductible Plan Buy Outs............................. V.G.5
Majority Ownership .................................. V.C.3 State Regulations............................................ V.G.5
Change in Ownership.................................... V.C.5 Insurer Filing Requirements ............................. V.G.10
Continuation of Experience ..................... V.C.6 Advantages of Large Deductible Plans ......... V.G.13
Joint Ventures............................................ V.C.7 State Approval Not Required ..................... V.G.14
Wrap-Up Construction Projects.................... V.C.7 Claims Handling Services ........................... V.G.14
Leased Employees ............................................... V.C.8 Low Start-Up Costs ...................................... V.G.14
Experience Modifier Calculation ....................... V.C.8 Incentive for Loss Control........................... V.G.14
Recalculation of Experience Disadvantages of Large Deductible Plans..... V.G.15
Modification ................................................ V.C.11 Risk of High Losses ..................................... V.G.15
Preliminary Modifications............................ V.C.12 Risk of High Service Charges
Contingent Modifications ............................ V.C.12 and Assessments ....................................... V.G.16
Changes in Experience Modifications ...... V.C.12 Defense Costs ............................................... V.G.16
Interstate Experience Rating............................ V.C.12 THE ALTERNATIVE MARKET ................................. V.H.1
GUARANTEED COST INSURANCE....................... V.D.1 Growth in Alternative Markets .......................... V.H.1
Premium Discounts ............................................. V.D.2 Risk Retention Groups ........................................ V.H.2
Schedule Rating................................................... V.D.2 Regulation of RRGs........................................ V.H.3
Experience Rating................................................ V.D.2 The NAIC Model Act for
Deductibles ........................................................... V.D.2 Risk Retention Groups ........................... V.H.3
Liability Deductibles....................................... V.D.2 State of Domicile ...................................... V.H.4
Workers Compensation Deductibles........... V.D.3 Day-to-Day Operations .............................. V.H.4
LOSS SENSITIVE INSURANCE PLANS ................V.E.1 Other Regulatory Requirements.............. V.H.5
Retrospective Rating Plans .................................V.E.1 Membership Criteria ...................................... V.H.6
Basic Premium.................................................V.E.3 Advantages and Disadvantages of RRGs... V.H.6
Converted Losses ............................................V.E.3 Evaluation Criteria .......................................... V.H.7
Incurred Losses ..........................................V.E.4 Group Self-Insurance for
Loss Conversion Factor.............................V.E.4 Workers Compensation.................................... V.H.9
Excess Loss Premium .....................................V.E.5 Regulation of Workers Compensation
Retrospective Development Self-Insurance Groups ............................... V.H.10
Premium (Optional) ......................................V.E.6 Application to the State ........................ V.H.10
Tax Multiplier....................................................V.E.6 Bylaws and Incorporation Procedures. V.H.11
Maximum Premium.........................................V.E.6 Premium Determination ......................... V.H.11
Minimum Premium .........................................V.E.7 Eligibility Requirements................................ V.H.11
Retrospective Period .......................................V.E.8 Advantages and Disadvantages ................. V.H.11
Analyzing Retrospective Plans............................V.E.8 Excess Insurance .......................................... V.H.13
Canceling a Retro...............................................V.E.11 AGC Self-Insured Workers
Dividend and Retention Plans..........................V.E.12 Compensation Funds...................................... V.H.13

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DECEMBER 2007 CONTENTS/INDEX

Captive Insurance Companies ......................... V.H.17 CHAPTER VI: INSURANCE


When Do Captives Make Sense?.............. V.H.18
Types of Captives ......................................... V.H.19
INTRODUCTION TO INSURANCE ....................... VI.A.1
Fronting Arrangements ................................V.H.21
Standard, Nonstandard,
Choice of Domicile....................................... V.H.22
and Manuscript Forms ................................... VI.A.1
Advantages and Disadvantages
Standard Forms............................................. VI.A.1
of Captives .................................................. V.H.25
Benefits of Standard Forms .................. VI.A.2
SELF-INSURANCE ...................................................... V.I.1
Nonstandard Forms ...................................... VI.A.3
Program Structure................................................. V.I.2
Manuscript Forms......................................... VI.A.3
Lines Included .................................................. V.I.2
Policy Format ...................................................... VI.A.3
Workers Compensation Insurance .......... V.I.4
Declarations ................................................... VI.A.4
Automobile Liability.................................... V.I.4
Insuring Agreement ...................................... VI.A.4
Automobile Physical Damage .................. V.I.5
Covered Perils................................................ VI.A.5
General Liability .......................................... V.I.5
Exclusions....................................................... VI.A.5
Funding for Self-Insurance ............................. V.I.5
Eliminating or Reducing
Excess Insurance ........................................ V.I.7
Overlapping Coverage .......................... VI.A.5
Services and Administration.......................... V.I.7
Removing Coverage Not Needed
Keys to an Effective Self-Insurance Program... V.I.8
by Typical Insureds............................... VI.A.5
Regulatory Constraints on Self-Insurance ....... V.I.11
Providing the Right Incentives .............. VI.A.6
Advantages and Disadvantages
Removing Coverage for
of Self-Insurance............................................... V.I.17
Uninsurable Risks.................................. VI.A.6

EXPANDED CONTENTS
TAX IMPLICATIONS OF
Definitions ...................................................... VI.A.6
RISK FINANCING OPTIONS................................... V.K.1
Conditions ...................................................... VI.A.7
Tax Deductibility ................................................... V.K.1
Endorsements ................................................ VI.A.7
Premium Taxes ..................................................... V.K.1
Insurance Policy Review ................................... VI.A.8
Income Taxes ........................................................ V.K.2
Construction Insurance Programs ................... VI.A.9
Plan Comparison.................................................. V.K.2
Casualty Insurance........................................ VI.A.9
Guaranteed Cost Insurance........................... V.K.2
Automobile Insurance ........................... VI.A.10
Retrospectively Rated Insurance .................. V.K.2
Commercial General Liability
Large Deductible Plans..................................V.K.3
Insurance .............................................. VI.A.10
Self-Insurance .................................................. V.K.3
Umbrella Liability Insurance ................ VI.A.10
Captives............................................................ V.K.4
Workers Compensation and
CHOOSING AMONG COMPETING RETROS ...... V.L.1
Employers Liability Insurance ........... VI.A.10
Forecasting Losses: The Initial Step................. V.L.1
First-Party Property Insurance................... VI.A.11
Evaluation Criteria................................................ V.L.3
Builders Risk Insurance ........................ VI.A.11
The Holding Power Formula...................... V.L.5
Installation Floaters ............................... VI.A.12
The Retrospective Accounting Formula...... V.L.5
Contractors Equipment Insurance....... VI.A.12
Retrospective Rating Plan Evaluation:
Commercial Property Insurance.......... VI.A.12
A Case Study..................................................... V.L.6
Commercial Crime Insurance .............. VI.A.13
Conclusion........................................................... V.L.10
Matching the Insurance with
PLAN COMPARISON MATRIX ............................... V.N.1
the Exposures................................................. VI.A.14
Explanation of Comparison Points.................... V.N.1
Direct Damage Loss Exposures ............... VI.A.14
Risk Financing Plan Considerations.................. V.N.3
Indirect Property Loss Exposures............. VI.A.16
Using the Matrix .................................................. V.N.5
Liability Loss Exposures............................. VI.A.18
ARRANGING A CASH FLOW PLAN......................V.P.1
Personnel Loss Exposures ......................... VI.A.19
Conceptualization ..................................................V.P.1
Liability Coverage Triggers.............................. VI.A.21
Design .....................................................................V.P.2
Occurrence Coverage Trigger ................ VI.A.21
Implementation......................................................V.P.3
Claims-Made Coverage Trigger................. VI.A.21
Operation ................................................................V.P.3
Common Claims-Made Provisions ...... VI.A.22
FINANCIAL ANALYSIS OF CASH FLOW
Summary ........................................................... VI.A.26
PROGRAMS ............................................................... V.T.1
AUTO LIABILITY AND
PHYSICAL DAMAGE INSURANCE .......................VI.B.1
Coverages and Covered Autos .........................VI.B.1
Liability Coverage ................................................VI.B.6
Insuring Agreement .......................................VI.B.6

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CONTENTS/INDEX DECEMBER 2007

Covered Autos .......................................... VI.B.7 Loss Control Techniques ................................ VI.B.44


Who Is an Insured................................... VI.B.8 Drivers Records and Licenses.................. VI.B.44
Out of State Coverage Extensions...... VI.B.10 Proper Maintenance of Vehicles............... VI.B.44
Exclusions ..................................................... VI.B.10 Loss Records ................................................ VI.B.45
Contractual Liability Exclusion ............. VI.B.11 AUTOMOBILE COVERAGE CHECKLIST .......... VI.B.101
Owned Property/Care, Custody GENERAL LIABILITY INSURANCE ....................... VI.C.1
or Control Exclusion............................ VI.B.12 Bodily Injury and Property Damage
Employee Indemnification/ (Coverage A) ..................................................... VI.C.2
Employers Liability Exclusion............. VI.B.13 Insuring Agreement....................................... VI.C.3
Fellow Employee Exclusion .................. VI.B.13 Legal Obligation for Damages............... VI.C.3
Handling/Movement of Covered Damages .................................... VI.C.3
Property Exclusions ............................. VI.B.16 Known Loss Restrictions......................... VI.C.4
Mobile Equipment Exclusion................ VI.B.16 Caused by an Occurrence................... VI.C.5
Completed Operations Exclusion ........ VI.B.21 Coverage Territory .................................... VI.C.6
Pollution Exclusion ................................. VI.B.21 Compliance with Policy Conditions ...... VI.C.6
Limit of Insurance ....................................... VI.B.22 Exclusions........................................................ VI.C.7
Physical Damage Coverage ............................ VI.B.23 Contractual Liability Exclusion ............... VI.C.8
Exclusions ..................................................... VI.B.24 Employers Liability Exclusion ............... VI.C.10
Limits of Insurance ..................................... VI.B.25 Pollution Exclusion ................................. VI.C.11
Deductibles................................................... VI.B.26 CGL Pollution Endorsements................ VI.C.15
Auto Medical Payments Insurance ................ VI.B.26 Aircraft, Automobile, or
Uninsured and Underinsured Watercraft Exclusion ........................... VI.C.18
Motorists Coverage ........................................ VI.B.27 Mobile Equipment Transportation
No-Fault Auto Insurance .................................. VI.B.29 Exclusion ............................................... VI.C.24
Policy Conditions .............................................. VI.B.29 Damage to Property Exclusion ............ VI.C.25
Duties in the Event of Accident, Damage to Your Work Exclusion ........ VI.C.30
Claim, Suit, or Loss ................................. VI.B.30 Impaired Property Exclusion.............. VI.C.33
Other Insurance ........................................... VI.B.31 Fire Legal Liability Coverage ................ VI.C.36
Subrogation .................................................. VI.B.32 Personal and Advertising Injury
Cancellation .................................................. VI.B.32 (Coverage B).................................................... VI.C.37
Coverage Territory ....................................... VI.B.33 Insuring Agreement..................................... VI.C.37
Endorsements and Modifications .................. VI.B.33 Exclusions...................................................... VI.C.39
Standard Endorsements ............................. VI.B.33 Contractual Liability Exclusion ............. VI.C.40
Individual Named Insured Pollution Exclusion ................................. VI.C.40
Endorsement ........................................ VI.B.33 Medical Payments (Coverage C) .................... VI.C.40
Drive Other Car Coverage.................... VI.B.34 Exclusions...................................................... VI.C.41
Employees as Insureds.......................... VI.B.35 Supplementary Payments
Employee as Lessor............................... VI.B.35 (Coverages A and B) ..................................... VI.C.41
Employee Hired Autos........................... VI.B.35 Defense of an Indemnitee......................... VI.C.41
Additional InsuredLessor.................... VI.B.36 Who Is an Insured............................................ VI.C.43
Hired Autos Specified as Broad Form Named Insured
Covered Autos You Own.................... VI.B.36 Endorsement .............................................. VI.C.46
Broadened Pollution Coverage............. VI.B.37 Joint Ventures .............................................. VI.C.47
Motor Carrier Act Coverage................. VI.B.37 Injury to a Fellow Employee ..................... VI.C.47
Stated Amount Endorsement............... VI.B.37 Additional Insured Endorsements............. VI.C.48
Limited Specified Causes of Owners, Lessees, or Contractors ........ VI.C.50
Loss Coverage...................................... VI.B.38 Engineers, Architects, or Surveyors.... VI.C.54
Limited Mexico Coverage..................... VI.B.39 Equipment Lessor................................... VI.C.55
Fellow Employee Coverage .................. VI.B.39 Special Considerations
Manuscript Endorsements ......................... VI.B.40 Additional Insureds.............................. VI.C.56
Modified Notice of Occurrence ........... VI.B.40 Limits of Insurance........................................... VI.C.58
Extended Notice of Cancellation, Products-Completed Operations Hazard ... VI.C.60
Nonrenewal, or Policy Change ......... VI.B.41 Designated General Aggregate Limit
Clarification of Punitive Damages....... VI.B.41 Endorsement .............................................. VI.C.62
Car Rental Concerns ........................................ VI.B.41 Designated Project or Premises
Classification...................................................... VI.B.42 Endorsement .............................................. VI.C.63

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AUGUST 2007 CONTENTS/INDEX

Other Common CGL Endorsements DIRECTORS AND OFFICERS


Construction ....................................................VI.C.64 LIABILITY INSURANCE........................................... VI.F.1
Unintentional Failure To D&O Exposures.................................................... VI.F.1
Disclose Hazards .......................................VI.C.64 Duty of Loyalty ............................................... VI.F.2
Notice Requirements ...................................VI.C.65 Duty of Care ................................................... VI.F.3
Extended Notice of Cancellation, Derivative Suits .............................................. VI.F.3
Nonrenewal, or Policy Change..........VI.C.65 Securities Law Violations ............................. VI.F.4
Modified Notice of Occurrence ...........VI.C.66 Other Statutory Claims ................................ VI.F.5
Employee Benefits Liability ........................VI.C.67 D&O Insurance Coverage for
Wrap-Up Exclusion Endorsement..............VI.C.67 Privately Held Companies............................... VI.F.6
Mold Exclusion.............................................VI.C.68 Potential Claimants ........................................ VI.F.7
EIFS Exclusion ..............................................VI.C.69 Minority Shareholders.............................. VI.F.7
Terrorism Exclusions ....................................VI.C.72 Employees .................................................. VI.F.7
Explosion, Collapse, Underground Property Claims by Third Parties ........................... VI.F.7
Damage Exclusion.....................................VI.C.72 D&O Insurance .................................................... VI.F.8
Construction Management Errors and Directors and Officers Liability Coverage
Omissions Exclusion .................................VI.C.73 (Side A) ...................................................... VI.F.9
Professional Liability Exclusion..................VI.C.74 Definition of Wrongful Acts....................... VI.F.10
Employment-Related Practices Who is Covered? .................................... VI.F.11
Exclusion.....................................................VI.C.75 Covered Organizations ........................... VI.F.12
Discontinued Operations..................................VI.C.76 Covered Losses ....................................... VI.F.12

EXPANDED CONTENTS
GENERAL LIABILITY COVERAGE Corporate Reimbursement Coverage
CHECKLIST ...........................................................VI.C.101 (Side B) .................................................... VI.F.13
INSURING JOINT VENTURE LIABILITY..............VI.D.1 Requirement To Indemnify Retention
Background on Joint Venture Coverage .........VI.D.1 Amounts ................................................ VI.F.14
Insuring Joint Ventures ......................................VI.D.2 Entity Coverage (Side C) ......................... VI.F.14
Current Joint Ventures ..................................VI.D.2 Exclusions ........................................................... VI.F.15
Past Joint Ventures Dishonesty Exclusions ................................. VI.F.15
(Completed Operations) .............................VI.D.3 Wage and Hour Claims Exclusion ............ VI.F.16
Blanket CoverageAll Losses ......................VI.D.5 Insured versus Insured Exclusion.............. VI.F.16
Rating Considerations ...................................VI.D.7 Personal Profit Exclusion ............................ VI.F.17
CONSTRUCTION DEFECTS COVERAGE............. VI.E.1 Short Swing Profits Exclusion ................ VI.F.17
Common Types of Claims ................................. VI.E.2 Return of Remuneration Exclusion ........... VI.F.17
Basis for Liability ........................................... VI.E.4 ERISA Act Liability Exclusion..................... VI.F.18
Coverage Issues .................................................. VI.E.7 Loss Insured under Another Policy .......... VI.F.18
Elements of a Covered Loss........................ VI.E.7 Employment Practices
Is Defective Work an Occurrence? ... VI.E.8 Liability Exclusion ...................................... VI.F.19
Is Defective Work Pollution Exclusion ....................................... VI.F.19
Property Damage? ........................... VI.E.10 Security Holder Exclusion........................... VI.F.20
Did the Property Damage Occur Bodily Injury, Property Damage, and
During the Policy Period? ................. VI.E.11 Personal Injury Exclusion ......................... VI.F.20
Does an Exclusion Apply? .................... VI.E.15 Prior/Pending Litigation Exclusion............ VI.F.21
Summary of Coverage under Failure To Insure Exclusion......................... VI.F.22
Basic CGL Policy Form ............................ VI.E.21 Nonimputation Provisions in
Insurance Industry Response .......................... VI.E.22 Policy Exclusions............................................. VI.F.22
EIFS Exclusions ............................................ VI.E.24 Insurers Defense Obligations ......................... VI.F.23
Mold Exclusions ........................................... VI.E.27 Duty To Defend ............................................ VI.F.23
Earth Movement Exclusion......................... VI.E.28 Defense within Limits ................................. VI.F.24
Residential Construction Exclusions ......... VI.E.28 Severability of Interests.................................... VI.F.24
Subcontractor Exclusion Policy Limits, Deductibles,
Endorsements ............................................ VI.E.28 and Retentions ................................................ VI.F.26
Contractor Limitations Endorsements ...... VI.E.29 Retentions...................................................... VI.F.27
Additional Insured Issues ................................ VI.E.30 Securities Claims .................................... VI.F.28
Defense of an Additional Insured ............ VI.E.32 Coinsurance .................................................. VI.F.28
Right to Repair Statutes ............................... VI.E.34 Cancellation and Nonrenewal ......................... VI.F.28
Subrogation................................................... VI.F.29

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 46TH REPRINT
CONTENTS/INDEX JUNE 2008

Subrogation Against Insureds .............VI.F.30 Broad Form Named Insured


Other Insurance ............................................VI.F.30 Endorsement ..............................................VI.H.28
Arbitration Provisions...................................VI.F.31 Modified Notice of
Presumptive Indemnification Provision.....VI.F.31 Injury Endorsement ..................................VI.H.29
Side A-Only D&O Policies ................................VI.F.31 Extended Notice of Cancellation
Distinctive Aspects of Private Company Endorsement ..............................................VI.H.29
D&O Coverage Forms ....................................VI.F.33 Extended Protection (Monopolistic States)
Packaged Approach .....................................VI.F.33 Endorsement ..............................................VI.H.30
Flexibility in Limits and Retentions ...........VI.F.33 Terrorism Endorsement...............................VI.H.32
Broad Entity Coverage.................................VI.F.33 WORKERS COMPENSATION COVERAGE
Duty To Defend ............................................VI.F.33 CHECKLIST ...........................................................VI.H.101
Cancellation and TERRORISM INSURANCE......................................VI.K.1
Nonrenewal Provisions..............................VI.F.34 TRIA Provisions ...................................................VI.K.1
Extended Reporting Provisions ..................VI.F.34 Covered Acts ..................................................VI.K.2
WORKERS COMPENSATION AND EMPLOYERS Payment of Losses ........................................VI.K.3
LIABILITY INSURANCE .......................................... VI.H.1 Cost..................................................................VI.K.4
General Section................................................... VI.H.3 Terrorism Endorsements ....................................VI.K.4
Who Is An Insured ....................................... VI.H.3 Commercial Property Endorsements..........VI.K.5
Additional Insureds .................................. VI.H.4 Stand-Alone Terrorism Coverage ...........VI.K.7
Covered Workplaces ..................................... VI.H.4 General Liability Endorsements...................VI.K.8
Definitions Regarding Applicable Law....... VI.H.5 Conditional and
Part OneWorkers Compensation Post-TRIA Endorsements .......................VI.K.12
Insurance ........................................................... VI.H.5 Workers Compensation Endorsements....VI.K.13
Subcontractors ............................................... VI.H.8 UMBRELLA LIABILITY INSURANCE ................... VI.M.1
Part TwoEmployers Liability Insurance......... VI.H.8 Umbrella Terminology ....................................... VI.M.1
Coverage Criteria........................................... VI.H.9 Covered Damages.............................................. VI.M.2
Exclusions ..................................................... VI.H.10 Occurrence versus Offense................... VI.M.5
Contractual Liability ............................... VI.H.11 Indemnify or Pay on Behalf ....................... VI.M.6
Illegally Employed Persons ................... VI.H.11 Duty to Defend .................................................. VI.M.7
Injuries Sustained in Self-Insured Retentions...................................... VI.M.7
Foreign Countries ................................ VI.H.11 Who is An Insured ............................................ VI.M.8
Employment-Related Practices ............. VI.H.13 Coverage Territory............................................ VI.M.10
Injuries Covered under a Limits of Liability ............................................. VI.M.10
Federal Compensation Act ................VI.H.13 Drop Down Provisions ............................... VI.M.11
Limits of Liability......................................... VI.H.16 Defense Costs ............................................. VI.M.12
Part ThreeOther States Insurance............... VI.H.17 Exclusions.......................................................... VI.M.13
Endorsements .................................................... VI.H.18 Expected or Intended Loss....................... VI.M.15
Stop Gap (Employers Liability) Statutory Liabilities ..................................... VI.M.16
Endorsement.............................................. VI.H.18 Discrimination.............................................. VI.M.16
Longshore and Harbor Workers Compensation Property Damage Exclusions ................. VI.M.17
Act Coverage Endorsement .................... VI.H.20 Owned Property .................................... VI.M.18
Outer Continental Shelf Lands Act Alienated Premises ............................... VI.M.18
Endorsement.............................................. VI.H.21 Property in the Insureds Care,
Maritime Coverage Endorsement ............. VI.H.21 Custody, or Control ............................ VI.M.19
Defense Base Act Coverage Damage to Your Product and
Endorsement.............................................. VI.H.22 Your Work ......................................... VI.M.19
Voluntary Compensation Endorsement ... VI.H.22 Impaired Property.................................. VI.M.20
Sole Proprietors, Partners, Officers, Pollution........................................................ VI.M.20
and Others ................................................. VI.H.23 Advertising Injury ....................................... VI.M.20
Joint Venture as Insured Endorsement ... VI.H.23 Aircraft/Watercraft Liability ...................... VI.M.22
Alternate Employer Endorsement............. VI.H.23 Employment Practices................................ VI.M.22
Employee Leasing Endorsements ............. VI.H.24 Asbestos....................................................... VI.M.22
Waiver of Subrogation Endorsement....... VI.H.27 Cross Liability .............................................. VI.M.22
Designated Workplaces Exclusion Contractors Limitation Endorsements .... VI.M.23
Endorsement.............................................. VI.H.28 Terrorism....................................................... VI.M.25
Other Insurance Provisions.......................... VI.M.25

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Cancellation Provisions ...................................VI.M.26 Monthly Limitation on


Maintenance of Underlying Insurance .........VI.M.26 Loss Recovery...................................... VI.O.28
Notice of Occurrence ......................................VI.M.26 Contingent Extra Expense Coverage ....... VI.O.29
Waivers of Subrogation ..................................VI.M.27 Separate Coverages To Consider .................. VI.O.29
How Much Liability Insurance To Buy.........VI.M.27 Valuable Papers and Records................... VI.O.29
UMBRELLA LIABILITY COVERAGE Accounts Receivable .................................. VI.O.30
CHECKLIST ..........................................................VI.M.101 Package Policies ............................................... VI.O.30
COMMERCIAL PROPERTY INSURANCE ............VI.O.1 COMMERCIAL PROPERTY INSURANCE
Standard, Insurer, or Manuscript Forms.........VI.O.3 CHECKLIST........................................................... VI.O.101
Policy Structure ...................................................VI.O.3 CONTRACTORS EQUIPMENT .............................. VI.Q.1
Insuring Agreement .......................................VI.O.4 Covered Property................................................ VI.Q.1
Covered Property ...........................................VI.O.4 Definition of Contractors Equipment ........ VI.Q.1
Outside Property Limit ............................VI.O.6 Office and Utility Trailers ....................... VI.Q.4
Excluded Property ....................................VI.O.6 Tools, Accessories, and Spare Parts.... VI.Q.4
Property Subject to Limitations .............VI.O.7 Property of Others........................................ VI.Q.5
Personal Property of Others...................VI.O.8 Newly Acquired Equipment ........................ VI.Q.6
Property Under Construction..................VI.O.8 Excluded Property .............................................. VI.Q.6
Covered Locations .........................................VI.O.8 Property Loaned or Rented to Others ...... VI.Q.7
Unscheduled Locations ...........................VI.O.9 Vehicles........................................................... VI.Q.7
Newly Acquired Locations......................VI.O.9 Waterborne Property .................................... VI.Q.8
Property in Transit....................................VI.O.9 Covered Locations.............................................. VI.Q.9

EXPANDED CONTENTS
Additional Coverages .............................VI.O.10 Debris Removal and Pollutant Cleanup.......... VI.Q.9
Covered Causes of Loss.............................VI.O.12 Additional Coverages....................................... VI.Q.10
Named Perils Coverage.........................VI.O.12 Leased Equipment ...................................... VI.Q.10
All Risks Coverage .................................VI.O.13 Borrowed Equipment .................................. VI.Q.11
Flood Exclusion.......................................VI.O.16 Rental Reimbursement ............................... VI.Q.12
Earthquake Exclusion.............................VI.O.17 Employees Tools and Work Clothing ...... VI.Q.13
Building Ordinance Enforcement Covered Perils ................................................... VI.Q.13
Exclusion................................................VI.O.17 Named Perils Coverage ............................. VI.Q.13
Collapse Exclusion..................................VI.O.18 All Risks Coverage...................................... VI.Q.14
Mold Exclusion........................................VI.O.18 Crane or Derrick Booms............................ VI.Q.16
Terrorism Exclusion ................................VI.O.18 Weight of Load ........................................... VI.Q.17
Other Important Provisions ........................VI.O.19 Terrorism Coverage..................................... VI.Q.17
Vacancy ....................................................VI.O.19 Limits.................................................................. VI.Q.18
Protective Safeguards............................VI.O.19 Deductibles........................................................ VI.Q.19
Cancellation .............................................VI.O.20 Valuation ............................................................ VI.Q.20
Property Valuation ..................................VI.O.20 Coinsurance....................................................... VI.Q.20
Coinsurance.............................................VI.O.21 CONTRACTORS EQUIPMENT COVERAGE
Coinsurance Penalty Illustration...........VI.O.21 CHECKLIST........................................................... VI.Q.101
Agreed Value Provision .........................VI.O.22 CRIME INSURANCE ................................................VI.R.1
Limit Structure ........................................VI.O.22 Standard Commercial Crime
Deductibles..............................................VI.O.23 Insurance Programs .........................................VI.R.1
Time Element Coverages .................................VI.O.24 Contractors Crime Loss Exposures .................VI.R.2
Time Element Exposures ............................VI.O.24 Employee Dishonesty Insurance .......................VI.R.3
Loss of Income or Rents ......................VI.O.24 Covered Property ...........................................VI.R.4
Extra Expense .........................................VI.O.25 Covered Causes of Loss...............................VI.R.5
Contingent Business Interruption Covered Employees .......................................VI.R.6
and Extra Expense ..............................VI.O.25 Prior Dishonesty Provisions..........................VI.R.8
Insuring the Time Element Exposure.......VI.O.25 Joint Insured Provision ............................VI.R.8
Extra Expense Coverage.............................VI.O.26 Employee Benefit Plans ................................VI.R.8
What Is Covered.....................................VI.O.26 Coverage Period: Loss Sustained
Valuation and Indemnity Period ..........VI.O.26 versus Discovery Coverage......................VI.R.10
Monthly Limitation .................................VI.O.27 Loss Sustained Coverage ......................VI.R.10
Determining Limits of Insurance .........VI.O.27 Discovery Coverage................................VI.R.11
Rental Value Coverage................................VI.O.28 Limits and Deductibles ...............................VI.R.11
What Is Covered.....................................VI.O.28 Exclusions......................................................VI.R.11

Contents/Index
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CONTENTS/INDEX SEPTEMBER 2008

Dishonest Acts of Insured, Coverage for Innocent Insureds .......... VI.S.38


Partners, Etc......................................... VI.R.12 Known Conditions ....................................... VI.S.38
Known Prior Dishonesty ....................... VI.R.12 Completed Operations ................................ VI.S.40
Confidential Information........................ VI.R.13 Naturally Occurring Substances................ VI.S.40
Indirect Loss............................................ VI.R.13 Transportation Exposures ........................... VI.S.41
Legal Expenses....................................... VI.R.13 Off-Site Storage or Disposal of Wastes .. VI.S.42
Other Exclusions..................................... VI.R.13 Damage to Property ................................... VI.S.42
Kidnap, Ransom, and Extortion Coverage.... VI.R.14 Contractual Liability..................................... VI.S.43
Insuring Agreements................................... VI.R.14 Insured versus Insured Exclusions............ VI.S.45
Kidnap/Ransom and Extortion Employers Liability....................................... VI.S.46
Direct Loss............................................ VI.R.14 CONTRACTORS POLLUTION LIABILITY
Kidnap/Ransom and Extortion COVERAGE CHECKLIST..................................... VI.S.101
Expenses Incurred ............................... VI.R.15 CONTRACTORS POLLUTION LIABILITY
Detention or Hijack ............................... VI.R.16 POLICY ANALYSES.................................................. VI.T.1
In-Transit Delivery of Property ............. VI.R.16 ACE Insurance Company........................ VI.T, ACE1
Exclusions ..................................................... VI.R.16 American International Surplus Lines
Coverage Territory ....................................... VI.R.17 Insurance ........................................... VI.T, AISLIC1
Coverage Period........................................... VI.R.17 American Safety Indemnity
Limits and Deductibles............................... VI.R.17 Company.............................. VI.T, American Safety1
Confidentiality Agreement.......................... VI.R.18 Arch Specialty Insurance Company ..... VI.T, Arch1
Notice Requirements................................... VI.R.18 Chubb Insurance Company..................VI.T, Chubb1
Commercial Crime Endorsements ................. VI.R.18 CNA Insurance Company .......................VI.T, CNA1
COMMERCIAL CRIME COVERAGE Evanston Insurance Company......... VI.T, Evanston1
CHECKLIST ........................................................... VI.R.101 Everest Reinsurance Company .......... VI.T, Everest1
CONTRACTORS POLLUTION LIABILITY Freberg Environmental, Inc.................VI.T, Freberg1
INSURANCE...............................................................VI.S.1 Liberty Mutual Insurance
Pollution Coverage under the CGL...................VI.S.2 Company.................................VI.T, Liberty Mutual1
Contractors Pollution Liability Markets ............VI.S.2 St. Paul Travelers Insurance
Coverage Triggers ................................................VI.S.4 Company.............................VI.T, St. Paul Travelers1
Occurrence Triggers.......................................VI.S.5 XL Insurance Company..............................VI.T, XL1
Progressive Injury or Damage ................VI.S.7 Zurich Insurance Company ..................VI.T, Zurich1
Claims-Made Coverage Issues ...................VI.S.10 SUBCONTRACTOR DEFAULT INSURANCE........VI.U.1
Extended Reporting Periods..................VI.S.11 Covered Persons/Entities...................................VI.U.2
Discovery Provisions ...............................VI.S.13 Coverage Trigger .................................................VI.U.2
Covered Pollution Incidents..............................VI.S.14 Which Policy Is Triggered? ..........................VI.U.3
Covered Damages .............................................VI.S.15 Policy Period ........................................................VI.U.3
Coverage Territory..............................................VI.S.17 Covered Territory.................................................VI.U.4
Covered Sites .....................................................VI.S.18 Covered Loss .......................................................VI.U.4
Covered Operations ...........................................VI.S.19 Claims Process...............................................VI.U.5
Covered Persons/Entities..................................VI.S.20 Time Limits for Filing Claims.................VI.U.5
Employees......................................................VI.S.20 Interim Payments......................................VI.U.6
Clients of the Named Insured ...................VI.S.21 Exclusions.............................................................VI.U.6
Joint Ventures ...............................................VI.S.22 Contracts Covered by a Bond.....................VI.U.7
Newly Acquired Entities ..............................VI.S.23 Prior Notice of Default .................................VI.U.7
Defense of Claims .............................................VI.S.23 Acquired Contracts........................................VI.U.7
Consent To Settle Provisions .....................VI.S.24 Material Breach of Warranty
Deductibles and Self-Insured Retentions.......VI.S.26 or Covenant .................................................VI.U.7
Mediation Credit...........................................VI.S.27 Terrorism..........................................................VI.U.8
Limits ...................................................................VI.S.27 Professional Negligence
Notice of Claims ................................................VI.S.28 on the Part of the Insured......................VI.U.10
Notice of Cancellation ......................................VI.S.29 Cost .....................................................................VI.U.10
Waivers of Subrogation....................................VI.S.30 Deductibles and Copays ............................VI.U.12
Other Insurance .................................................VI.S.32 Multiple Defaults by a Subcontractor......VI.U.14
Separation of Insureds......................................VI.S.35 Limits...................................................................VI.U.14
Exclusions............................................................VI.S.35 Multiple Defaults by a Subcontractor......VI.U.15
Expected or Intended Acts.........................VI.S.38 Terms, Conditions, and Responsibilities .......VI.U.16

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Qualification Procedures.............................VI.U.16 Covered Locations........................................... VII.A.10


Notice of Default .........................................VI.U.16 Additional Coverages...................................... VII.A.12
Notice of Change in Composition............VI.U.17 Covered Causes of Loss ................................ VII.A.14
Other Insurance ...........................................VI.U.17 Theft Exclusions ......................................... VII.A.16
Cancellation ..................................................VI.U.17 Wear and Tear, Etc.................................... VII.A.16
Underwriting Criteria........................................VI.U.18 Fungus, Wet or Dry Rot,
BUSINESSOWNERS POLICY................................VI.W.1 and Bacteria............................................. VII.A.16
Contractor Eligibility...........................................VI.W.1 Asbestos Materials .................................... VII.A.17
BOP Coverage versus Commercial Ordinance or Law ...................................... VII.A.18
Property Coverage...........................................VI.W.5 Flood and Earthquake............................... VII.A.19
Business Income and Settling, Cracking, Expansion,
Extra Expense Coverage ...........................VI.W.5 or Contraction .......................................... VII.A.19
Valuation.........................................................VI.W.6 Equipment Breakdown Exclusions .......... VII.A.20
Categories of Covered Property.................VI.W.6 Testing Exclusions ...................................... VII.A.20
Computers and Electronic Data.................VI.W.6 Faulty Workmanship or Materials........... VII.A.23
Additional Coverages/ Design Error................................................ VII.A.23
Coverage Extensions .................................VI.W.7 Collapse ....................................................... VII.A.23
Covered Causes of Loss..............................VI.W.8 Loss Covered under Guarantee,
Limits ..............................................................VI.W.8 Warranty, or Obligation .......................... VII.A.25
Optional Coverages ......................................VI.W.8 Manufacturers and Suppliers ............. VII.A.26
BOP Coverage versus CGL Coverage.............VI.W.9 Contractors............................................. VII.A.26

EXPANDED CONTENTS
New Organizations Coverage .....................VI.W.9 Architects and Engineers
Coverage Categories ....................................VI.W.9 Professional Services.............................. VII.A.26
Limit Structure.............................................VI.W.10 Terrorism Coverage ......................................... VII.A.27
Professional Liability Exclusion.................VI.W.12 Protective Safeguards Endorsements .......... VII.A.28
Nuclear Energy Liability Exclusion...........VI.W.13 Termination of Coverage Provisions............. VII.A.28
Policy Conditions..............................................VI.W.13 Occupancy................................................... VII.A.30
BOP Endorsements ..........................................VI.W.14 Subrogation ...................................................... VII.A.31
BUSINESSOWNERS COVERAGE Architects, Engineers, Manufacturers,
CHECKLIST ..........................................................VI.W.101 and Suppliers........................................... VII.A.33
CONSTRUCTION INSURANCE CHECKLISTS .... VI.Z.1 Reporting Form versus Completed Value... VII.A.34
Completed Value Form............................. VII.A.34
Reporting Form .......................................... VII.A.35
CHAPTER VII: Valuation ........................................................... VII.A.35
BUILDERS RISK INSURANCE Coverage for Overhead and Profit.......... VII.A.36
Limits and Deductibles .................................. VII.A.36
BUILDERS RISK AND INSTALLATION Deductibles ................................................. VII.A.37
FLOATER COVERAGE............................................ VII.A.1 Delayed Completion/Soft Costs
Builders Risk Coverage Forms........................ VII.A.2 Coverage ........................................................ VII.A.37
Importance of Construction What Is Covered ........................................ VII.A.38
Contract Review.............................................. VII.A.2 Denial of Access (Civil Authority)........... VII.A.41
Responsibility for Purchasing Coverage for Expenses
Builders Risk Policy........................................ VII.A.3 To Reduce Loss ....................................... VII.A.41
Covered Parties.................................................. VII.A.3 Valuation Basis:
Covered Property............................................... VII.A.4 Actual Loss Sustained ............................ VII.A.41
Temporary Structures .................................. VII.A.6 Coinsurance and Monthly Limitations ... VII.A.42
Property of Others....................................... VII.A.6 Exclusions.................................................... VII.A.42
Property Included in Values Reported Limits and Deductibles ............................. VII.A.43
to Insurer .................................................... VII.A.6 Indemnity Period ........................................ VII.A.43
Office Trailers ............................................... VII.A.6 Arranging Delayed Completion
Other Property.............................................. VII.A.7 Coverage ................................................... VII.A.44
Excluded Property ............................................. VII.A.8 Other Construction-Related Coverages........ VII.A.44
Existing Property .......................................... VII.A.8 Efficacy or Systems Performance
Contractors Tools and Equipment............ VII.A.9 Coverage ................................................... VII.A.45
Other Excluded Property .......................... VII.A.10 Force Majeure Coverage .......................... VII.A.45
Stipulated Loss Coverage ......................... VII.A.46

Contents/Index
21 sdfgh
CONSTRUCTION RISK MANAGEMENT 33RD REPRINT
CONTENTS/INDEX SEPTEMBER 2008

BUILDERS RISK COVERAGE CHECKLIST ....VII.A.101 Other Covered Property................................... VII.X.7


FAULTY WORKMANSHIP EXCLUSION: External Loss--Meaning and Impact .............. VII.X.7
PURPOSE AND EFFECT .......................................VII.B.1
Purpose of this Discussion ..............................VII.B.2
History and Development of the
Faulty Workmanship Exclusion .....................VII.B.3 CHAPTER VIII:
Exploring the Meaning of PROFESSIONAL LIABILITY
Faulty Workmanship .....................................VII.B.6
Case Law ...........................................................VII.B.8 CONTRACTORS PROFESSIONAL
Importance of All Risk Coverage..................VII.B.10 LIABILITY OVERVIEW .......................................... VIII.A.1
Evaluating the Faulty Workmanship CONTRACTORS DESIGN-BUILD
Exclusion.........................................................VII.B.10 PROFESSIONAL LIABILITY................................. VIII.B.1
Intent of These Exclusions.............................VII.B.12 Traditional Design-Bid-Build Method............. VIII.B.1
Some Additional Cases ................................VII.B.13 Design-Build Construction .............................. VIII.B.2
Summary and Conclusions ............................VII.B.16 Methods of Selection ................................ VIII.B.4
THE AMERICAN LONDON STURGES Unique Characteristics of Design-Build........ VIII.B.5
FORMS .....................................................................VII.D.1 Single Point Accountability.................. VIII.B.6
History of the ALS Forms................................VII.D.1 Simplicity ................................................ VIII.B.6
ALS Forms and Coverage Considerations ....VII.D.1 Accelerated Delivery............................. VIII.B.6
ALS 1967 Specimen Copy...............................VII.D.3 Quality of the Work.............................. VIII.B.7
ALS 1972 Specimen Copy...............................VII.D.7 Transfer of Design Liability.................. VIII.B.7
Paragraph-by-Paragraph Comparison Disadvantages of Design-Build................. VIII.B.8
of ALS 67 and ALS 72 ...............................VII.D.15 When Is Design-Build Appropriate? ...... VIII.B.10
Form Comparison of ALS 67 and Insurance Issues............................................. VIII.B.12
ALS 72............................................................VII.D.19 Surety Issues .................................................. VIII.B.12
FOREIGN BUILDERS RISK ................................... VII.E.1 Design-Build Risk Management................... VIII.B.13
Markets................................................................ VII.E.1 COVERAGE FOR DESIGN LIABILITY
Contractors All Risk and Erection All Risk ... VII.E.2 IN TRADITIONAL POLICIES ................................VIII.E.1
Contractors All Risk ..................................... VII.E.2 Builders Risk Coverage ....................................VIII.E.1
General Exclusions .................................. VII.E.2 General Liability Coverage...............................VIII.E.3
Coverage Period ...................................... VII.E.2 Contractors Professional Liability
Material Damage .................................... VII.E.3 Exclusion Endorsements ..........................VIII.E.4
Third-Party Liability ................................. VII.E.4 Total Professional Liability
Debris Removal ....................................... VII.E.5 Exclusion ...............................................VIII.E.5
Erection All Risk ........................................... VII.E.5 Limited Professional Liability
General Exclusions .................................. VII.E.5 Exclusion ...............................................VIII.E.5
Coverage Period ...................................... VII.E.6 Umbrella Coverage ...........................................VIII.E.6
Material Damage .................................... VII.E.6 Professional Liability Insurance ......................VIII.E.7
Third-Party Liability ................................. VII.E.8 Coordinating Coverages...................................VIII.E.8
Contractors All Risks Specimen Policy.......... VII.E.9 CONTRACTORS PROFESSIONAL
Erection All Risks Specimen Policy.............. VII.E.19 LIABILITY INSURANCE ....................................... VIII.H.1
BUILDERS RISK INSURANCE Coverage Trigger .............................................. VIII.H.4
AND WAIVERS OF SUBROGATION................... VII.P.1 Retroactive Date ......................................... VIII.H.4
Subrogation Against Insureds ......................... VII.P.1 Notice of Circumstance Provisions.......... VIII.H.4
Parties Protected by the Waiver..................... VII.P.3 Extended Reporting Period ....................... VIII.H.6
Property Subject to the Waiver ...................... VII.P.5 Covered Organizations ............................... VIII.H.9
Property Not under Construction .............. VII.P.8 Covered Persons ....................................... VIII.H.11
Duration of Waiver ............................................ VII.P.8 Covered Services ...................................... VIII.H.12
Strategies for Avoiding Subrogation ............ VII.P.11 Covered Acts ............................................. VIII.H.14
ISSUES IN BUILDERS RISK ................................VII.X.1 Who Performed the Services?.......... VIII.H.14
Market for Builders Risk Insurance................VII.X.2 When Were the
Deciding on the Appropriate Forms ..............VII.X.2 Services Performed? ........................ VIII.H.14
The Importance of a Good Foundation ........VII.X.3 Is Negligence Required
Building versus Structure .................................VII.X.4 To Trigger Coverage? ....................... VIII.H.15
Temporary Structure versus Contractors Covered Damages .................................... VIII.H.17
Equipment ........................................................VII.X.5 Covered Territory....................................... VIII.H.17

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SEPTEMBER 2008 CONTENTS/INDEX

Policy Term......................................................VIII.H.19 Covered Employees..................................VIII.O.9


Exclusions ........................................................VIII.H.19 Spousal Coverage..................................VIII.O.9
Express Warranties or Guarantees ........VIII.H.23 Covered Acts .............................................VIII.O.10
Faulty Workmanship.................................VIII.H.23 Discrimination.......................................VIII.O.10
Damage to Owned Harassment ...........................................VIII.O.11
Property Exclusion..................................VIII.H.24 Wrongful Termination .........................VIII.O.12
Contractual Liability..................................VIII.H.25 Workplace Torts ...................................VIII.O.12
Pollution......................................................VIII.H.27 All Risk EPLI Coverage ..................VIII.O.15
Mold............................................................VIII.H.27 Third-Party Liability Coverage ............VIII.O.15
Means and Methods of Construction...VIII.H.28 Covered Damages.....................................VIII.O.16
Defense and Settlement of Claims ............VIII.H.28 Covered Defense Costs and Claims
Consent To Settle Provisions..................VIII.H.29 Settlement Provisions ............................VIII.O.19
Deductibles......................................................VIII.H.30 Claims Settlement Procedures ..........VIII.O.19
Mediation Credit..................................VIII.H.33 Counsel Selection................................VIII.O.20
Limits................................................................VIII.H.33 Duty To Defend....................................VIII.O.21
Policy Conditions............................................VIII.H.35 Defense Cost Provisions ..........................VIII.O.21
Notice of a Claim .....................................VIII.H.35 Covered Territory.......................................VIII.O.22
Subrogation................................................VIII.H.37 Policy Limits, Deductibles,
Other Insurance ........................................VIII.H.39 and Coinsurance..........................................VIII.O.22
Valid and Collectible ........................VIII.H.39 Policy Limits...............................................VIII.O.22
Project-Specific Coverage...................VIII.H.40 Selecting Policy Limits .......................VIII.O.22

EXPANDED CONTENTS
Prior or Subsequent Insurance .........VIII.H.40 Exhaustion of Limits ...........................VIII.O.23
Examples...............................................VIII.H.40 Deductibles ................................................VIII.O.23
Cancellation ...............................................VIII.H.41 Batch Clause ........................................VIII.O.23
Rating ...............................................................VIII.H.42 Coinsurance Provisions ............................VIII.O.23
Project-Specific Professional Conditions........................................................VIII.O.24
Liability Insurance........................................VIII.H.44 Arbitration Provisions ...............................VIII.O.24
Protective Errors and Definition of Claim.................................VIII.O.24
Omissions Insurance...................................VIII.H.45 Other Insurance Provisions .....................VIII.O.26
Limits ..........................................................VIII.H.46 Severability Provision................................VIII.O.26
CONTRACTORS PROFESSIONAL LIABILITY Exclusions ........................................................VIII.O.27
CHECKLIST ........................................................VIII.H.101 Criminal, Fraudulent,
CONTRACTORS PROFESSIONAL LIABILITY or Intentional Injury ...............................VIII.O.27
POLICY ANALYSES................................................ VIII.I.1 Americans With Disabilities Act ............VIII.O.28
ACE Insurance Company ...................... VIII.I, ACE1 Strikes and Lockouts ................................VIII.O.29
Arch Specialty Insurance Company.... VIII.I, Arch1 Wage and Hour Claims .........................VIII.O.29
CNA Insurance Company ..................... VIII.I, CNA1 Bodily Injury...............................................VIII.O.30
Lexington Insurance Company .... VIII.I, Lexington1 Liability under Workers Compensation
Liberty Mutual and Similar Laws ...................................VIII.O.30
Insurance Group .................. VIII.I, Liberty Mutual1 Contractual Liability ................................VIII.O.31
RA&MCO ........................................VIII.I, RA&MCO1 Prior Knowledge of Potential
The St. Paul Travelers Claim Incidents .......................................VIII.O.31
Insurance Company ........ VIII.I, St. Paul Travelers1 Claims Reported to Prior Insurers .........VIII.O.32
XL Environmental ...................................... VIII.I, XL1 Insurance Plan Benefits ...........................VIII.O.32
Zurich Insurance Company ................VIII.I, Zurich1 WARN Act Liability...................................VIII.O.33
EMPLOYMENT PRACTICES LIABILITY Nonpecuniary Relief .................................VIII.O.34
INSURANCE ...........................................................VIII.O.1 Breach of Express Employment
Coverage in Traditional Policies.....................VIII.O.1 Contracts..................................................VIII.O.34
General Liability Policies............................VIII.O.2 Coverage Triggers...........................................VIII.O.35
Coverage ABodily Injury....................VIII.O.3 Value-Added Provisions .................................VIII.O.35
Coverage BPersonal Injury................VIII.O.3 Underwriting Considerations........................VIII.O.36
Umbrella Policy......................................VIII.O.4 EMPLOYMENT PRACTICES LIABILITY
Workers Compensation Policy..................VIII.O.5 INSURANCE CHECKLIST ................................VIII.O.101
D&O Liability Policy....................................VIII.O.5 CONSTRUCTION MANAGEMENT
Analysis of EPLI Forms...................................VIII.O.7 PROFESSIONAL LIABILITY INSURANCE.........VIII.Q.1
Covered Persons and Organizations .......VIII.O.8 What Is CM?.....................................................VIII.Q.1

Contents/Index
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CONTENTS/INDEX SEPTEMBER 2008

How Is the CM Exposure Routinely Insurer............................................................ IX.C.18


Handled? ......................................................... VIII.Q.2 Risk Control Services.................................. IX.C.18
What Is CM Professional Liability Medical Services ......................................... IX.C.19
Insurance?....................................................... VIII.Q.2 Claims Management Services................... IX.C.19
Underwriting Background .............................. VIII.Q.3 Contractors.................................................... IX.C.20
Most Common Exclusions.............................. VIII.Q.5 INSURANCE PROGRAM DESIGN ........................IX.H.1
Recommendations and Conclusions ............ VIII.Q.6 CGL and Umbrella Liability Insurance ............IX.H.2
Limits of Insurance .......................................IX.H.3
Structuring the CGL Limits.....................IX.H.5
Selecting Umbrella Limits.......................IX.H.5
CHAPTER IX: WRAP-UP/OCIP Defense Cost Coverage...........................IX.H.6
Scope of Coverage........................................IX.H.6
INTRODUCTION TO WRAP-UPS.......................... IX.A.1 Insureds ...........................................................IX.H.8
Background ..........................................................IX.A.1 Cross Liability Coverage..........................IX.H.9
Sponsorship ......................................................... IX.A.3 Contractual Liability Coverage...................IX.H.10
Benefits of a CIP ................................................ IX.A.4 Property Damage Liability..........................IX.H.10
Reduced Litigation ........................................ IX.A.4 Completed Operations ................................IX.H.12
Conflict Resolution ................................... IX.A.5 XCU Coverage ..............................................IX.H.13
Compliance with Regulatory Standards .... IX.A.7 Liability Deductibles ....................................IX.H.13
Control of Insurance Coverage ................... IX.A.7 Other Considerations ..................................IX.H.14
Limits of Liability......................................IX.A.8 Other Liability Coverages ................................IX.H.14
Solving Insurance Availability Problems.... IX.A.9 Railroad Protective Liability........................IX.H.14
Improved Productivity ................................. IX.A.10 Professional Liability....................................IX.H.15
Cost Control ................................................. IX.A.10 Pollution Liability..........................................IX.H.15
Enhanced Ability To Use Products Liability .........................................IX.H.15
Small Contractors ..................................... IX.A.11 Workers Compensation Insurance .................IX.H.16
What Constraints Apply to CIP Use?............ IX.A.12 Possible Coverage Extensions ...................IX.H.16
Project Size .................................................. IX.A.12 Other States Coverage .......................IX.H.16
Control ........................................................... IX.A.13 Stop Gap Coverage................................IX.H.16
Legal Jurisdiction ........................................ IX.A.13 Federal and Maritime Coverages ........IX.H.17
Costs.............................................................. IX.A.13 Voluntary Compensation Coverage .....IX.H.17
Ability and Inclination To Administer Subrogation Waiver ...............................IX.H.17
a Wrap-Up.................................................. IX.A.14 Policy Issuance.............................................IX.H.17
Runoff............................................................ IX.A.15 Coverage Commencement
Wrap-Up Dos and Donts ............................... IX.A.15 and Termination..............................................IX.H.18
FEASIBILITY STUDY AND PLAN OF ACTION.. IX.C.1 Builders Risk ......................................................IX.H.19
Who Should Perform the Study ...................... IX.C.1 Rating and Risk Finance Structures ..............IX.H.20
General Guidelines.............................................. IX.C.3 Guaranteed Cost Insurance .......................IX.H.21
Jurisdictional Qualifications ......................... IX.C.3 Loss Sensitive Plans ...................................IX.H.21
Adequate Size................................................ IX.C.4 Deductible Plans.....................................IX.H.21
Multiple Contractors...................................... IX.C.5 Retrospective Rating Plans ...................IX.H.22
Limited Number of Sites ............................. IX.C.5 Dividend and Retention Plans .............IX.H.22
Project Duration............................................. IX.C.5 Wrap-Up Captive..........................................IX.H.23
Control of Contractors .................................. IX.C.6 Cash Flow .....................................................IX.H.23
Design for Safety .......................................... IX.C.7 Tax Implications ...........................................IX.H.23
Site Security................................................... IX.C.8 Term of Adjustment ....................................IX.H.23
Support for Risk Control .............................. IX.C.8 Comments on Non-CIP Insurance..................IX.H.24
Plan of Action ..................................................... IX.C.8 Standard Lines .............................................IX.H.24
Time Schedule ............................................. IX.C.10 Aircraft Liability............................................IX.H.25
Required Services........................................ IX.C.11 Design Errors and Omissions....................IX.H.25
Exposure Data and Risk Identification .... IX.C.13 Wrap-Up DIC Coverage ..............................IX.H.25
Qualification and Selection of Contractors Tools and Equipment............IX.H.26
Service Providers............................................ IX.C.13 CIP Insurance Manual......................................IX.H.27
CIP Manager or Administrator.................. IX.C.14 MITIGATING CONTRACTOR CONCERNS .......... IX.L.1
Insurance Broker.......................................... IX.C.14 Inequity in the Risk Allocation......................... IX.L.2
Broker/Administrator Compensation .. IX.C.15 Conflicts of Interest ............................................ IX.L.3

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Insurance Program Disruption .......................... IX.L.3 Safety Services............................................IX.M.21


Complication of Bid Preparation ...................... IX.L.4 Certificates of Insurance............................IX.M.22
Inability To Receive Timely Premium Audits...........................................IX.M.23
Loss Information............................................... IX.L.4 Loss Runs and Loss Data .........................IX.M.23
Audit and Claims Management Problems ..... IX.L.5 Experience Modifier Filings.......................IX.M.24
Administrative Tasks ........................................... IX.L.5 Claims Management ..................................IX.M.24
Coordination of Coverage.................................. IX.L.6 Alternative Dispute Resolution .................IX.M.25
Risk Control Program Changes ........................ IX.L.7 Broker/Carrier Service Agreements.........IX.M.25
A CONTRACTORS GUIDE TO OWNER What Are Some of the Other Issues
CONTROLLED INSURANCE PROGRAMS.......... IX.M.1 That May Need To Be Addressed? ............IX.M.26
The Problem .................................................. IX.M.2 Mutual Waiver of Subrogation .................IX.M.26
The Solution .................................................. IX.M.2 Safety Incentives .........................................IX.M.26
The Process ................................................... IX.M.2 Substance Abuse Programs......................IX.M.27
How To Use this Guide .................................... IX.M.2 Return-to-Work Programs...........................IX.M.27
Are any Firms, Operations, or Locations Subcontracts and Letters of Intent .........IX.M.28
Omitted or Excluded from the OCIP? ......... IX.M.3 Changes in Program Policies....................IX.M.28
Specific Firms or Operations...................... IX.M.3 Appendix A
Furnish and Install Contractors ............... IX.M.4 Administrative Checklist of
Staging Areas and Things To Ask For ......................................IX.M.29
Fabrication Facilities .................................. IX.M.5 Appendix B
Incidental Travel ............................................ IX.M.6 Action List.......................................................IX.M.30

EXPANDED CONTENTS
Are There any Periods of Time WRAP-UP PREMIUM AUDITING .......................... IX.P.1
Omitted or Excluded from the OCIP? ......... IX.M.6 Setting an Accurate Standard Premium......... IX.P.2
Warranty Work and Callbacks.................... IX.M.6 Premium Audits................................................... IX.P.4
Extended Completed Operations ............... IX.M.7 Common Errors ................................................... IX.P.5
Are There any Other Omissions or Exclusions Contractor Errors............................................ IX.P.5
That the Contractor Needs To Consider? ... IX.M.8 Insurer Errors .................................................. IX.P.6
Automobile Liability...................................... IX.M.8 Field Errors ................................................ IX.P.7
Design-Build Elements of the Project ....... IX.M.8 Premium Processing Errors................... IX.P.11
Damage to the Work................................... IX.M.9 Premium Adjustment Errors ................. IX.P.12
Hazardous Materials and Be on Guard ...................................................... IX.P.13
Other Pollutants........................................IX.M.10 Conclusion .......................................................... IX.P.14
Aircraft or Watercraft.................................IX.M.10
Contractors Consequential Damages .....IX.M.11
Indemnification............................................IX.M.11
Are There Adequate Limits on the Coverage CHAPTER X:
That the OCIP Provides? ..............................IX.M.12 CONTRACTUAL RISK TRANSFER
Shared Limits of OCIP Coverage.............IX.M.12
Separation of Insureds...............................IX.M.13 OVERVIEW OF CONTRACTUAL RISK TRANSFER
How Does the OCIP Relate to the Contractors IN CONSTRUCTION .................................................X.A.1
Regular Insurance Program?........................IX.M.14 Basics of Construction Contracting ..................X.A.2
Primary and Excess Coverage..................IX.M.14 Standard Construction Contracts .................X.A.4
Difference in Conditions (DIC) .................IX.M.15 Goal of Risk Allocation ..................................X.A.5
OCIP Exclusion from the Contractors Regular Contract Review and Negotiation .....................X.A.6
Insurance Program...................................IX.M.15 Risk Transfer Provisions ......................................X.A.7
How Is a Contractor Supposed To Calculate Indemnity (Hold Harmless) Provisions ........X.A.7
Its Premium Deductions? .............................IX.M.16 Scope of Indemnification Obligation .....X.A.8
Basis for Each Deduction .........................IX.M.16 Broad Form Indemnity............................X.A.10
Deductibles and Penalties.........................IX.M.16 Comparative (Limited) Form
Insurance Credit Worksheet .....................IX.M.17 Indemnity................................................X.A.10
Premium Overruns and Underruns..........IX.M.18 Intermediate Form Indemnity................X.A.11
How Does the Owner or Its Broker Statutory Limitations ...............................X.A.11
Intend To Administer the OCIP?.................IX.M.19 Insurance Provisions and
OCIP Documents.........................................IX.M.19 Anti-Indemnity Statutes........................X.A.13
Contractors Responsibilities .....................IX.M.20 Standard Contract Indemnity
Subcontractor Deductions .........................IX.M.20 Provisions ...............................................X.A.14

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CONTENTS/INDEX SEPTEMBER 2008

Indemnification of Defense Costs........ X.A.15 Blanket Endorsements ............................ X.C.27


Limitation of Liability ................................... X.A.16 Order of PaymentOther Insurance..... X.C.29
Types of Limitations ............................... X.A.16 Defense of the Additional Insured....... X.C.32
Enforceability............................................ X.A.17 Additional Exclusions.............................. X.C.33
Waiver of Recovery Rights ......................... X.A.18 Notice Requirements............................... X.C.34
CONTRACTUAL LIABILITY COVERAGE............... X.B.1 Limits of Insurance ...................................... X.C.35
Standard CGL Policy ........................................... X.B.1 Tips for Requesting Additional
The Insuring Agreement ............................... X.B.2 Insured Status.................................................. X.C.38
The Contractual Liability Exclusion ............. X.B.2 Additional Insured or Additional
Definition of Insured Contract................... X.B.3 Named Insured? ......................................... X.C.38
Lease of Premises..................................... X.B.4 Cross-Liability Coverage............................... X.C.39
Sidetrack Agreements .............................. X.B.4 Specify Required Scope of Coverage ....... X.C.39
Easements .................................................. X.B.4 Consider State Restrictions ................... X.C.41
Agreements with Municipalities ............. X.B.5 Designated Limit .......................................... X.C.43
Elevator Maintenance Agreements ........ X.B.5 Mutual Additional Insureds......................... X.C.43
Indemnity Provisions................................. X.B.5 HOLD HARMLESS AGREEMENTS
Excluded Contractual Liabilities .............. X.B.6 IN THE CONSTRUCTION INDUSTRY................... X.D.1
Other Policy Exclusions ................................. X.B.9 Indemnification Agreements in General .......... X.D.2
Contractually-Assumed Defense Costs ..... X.B.10 Treatment of Indemnification Agreements
Supplementary Payments ...................... X.B.11 in the Courts...................................................... X.D.4
Contractual Liability Endorsements ........... X.B.13 Public Policy Rationale.............................. X.D.4
Assumption of an Indemnitees Majority Clear and Unequivocal
Sole Negligence ................................... X.B.13 Approach ....................................................... X.D.5
Contractual Liability Limitation ........... X.B.13 Minority Express Negligence
Contractual LiabilityRailroads.............. X.B.13 Approach ....................................................... X.D.7
Contractual LiabilityPersonal Other Rules of Construction....................... X.D.11
and Advertising Injury ....................... X.B.14 Standard Form Indemnification
Business Auto Policy......................................... X.B.14 Agreements ...................................................... X.D.12
ADDITIONAL INSURED COVERAGE .................... X.C.1 AIA Document A201 ......................................... X.D.13
Purpose of Requiring Additional Paragraph 4.18 (1976), Paragraph 3.18 (1987),
Insured Status.................................................... X.C.1 and Paragraph 3.18 (1997) ...................... X.D.13
Problems with Hold Harmless Paragraph 3.18 (1987)................................. X.D.15
Enforcement.................................................. X.C.2 Paragraph 3.18 (1997) ................................. X.D.18
Right to a Defense of Claims...................... X.C.3 Paragraph 3.18 (2007) ................................ X.D.20
Obtaining Broader Coverage ........................ X.C.5 Comparison of AIA A201
Commercial General Liability (CGL) Indemnity Paragraphs ............................... X.D.21
Insurance ............................................................ X.C.6 Court Decisions Involving A201
Named Insured versus Indemnity Provisions ................................. X.D.22
Additional Insured ....................................... X.C.6 Other A201 Indemnity Clauses ....................... X.D.24
Standard Additional Insured ConsensusDOCS 300 Indemnity Clause ....... X.D.28
Endorsements ............................................... X.C.9 ConsensusDOCS 200 Indemnity Clause ....... X.D.31
Scheduled Person or Organization ConsensusDOCS Hazardous
(CG 20 10) ............................................ X.C.10 Materials Provisions ........................................ X.D.33
Automatic Additional Insured Endorsement EJCDC Document C-700 (2007)..................... X.D.36
(CG 20 33) ............................................ X.C.13 Standard Form Subcontract
Completed Operations (CG 20 37)...... X.C.14 Indemnity Clauses........................................... X.D.37
Engineers, Architects, or Surveyors Incorporation by Reference ........................ X.D.41
(CG 20 07 and CG 20 32) ................ X.C.15 Duty To Defend Clarified .................................. X.D.41
Equipment Lessor (CG 20 28 and STATUTORY TREATMENT OF
CG 20 34) ............................................. X.C.16 INDEMNIFICATION AGREEMENTS ........................X.E.1
Designated Person or Organization Insurance Provisions and
(CG 20 26) ............................................ X.C.17 Anti-Indemnity Statutes .....................................X.E.6
Order of PaymentOther Insurance.......... X.C.18 Status of Anti-Indemnity Statutes ......................X.E.8
Nonstandard Endorsements........................ X.C.18 THIRD-PARTY-OVER ACTIONS ...............................X.F.1
Additional Insured's Negligence ........... X.C.19 Implied Indemnity .................................................X.F.2
Completed Operations Coverage ......... X.C.26 Express or Contractual Indemnity......................X.F.3

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SEPTEMBER 2008 CONTENTS/INDEX

Theory Behind the Third-Party-Over Action .....X.F.4 Alternative Liability Coverage


The Third-Party-Over ActionContractors Requirements..................................................... X.I.15
Employee..............................................................X.F.4 Owners and Contractors Protective Liability
The Third-Party-Over Action Insurance ...................................................... X.I.15
Subcontractors Employee...............................X.F.10 Project Management Protective Liability
The Third-Party-Over Action (PMPL) Insurance................................... X.I.15
No Additional Insured .....................................X.F.13 Railroad Protective Liability Insurance ....... X.I.16
The Third-Party-Over Action Workers Compensation and
No Indemnity Agreement ...............................X.F.14 Employers Liability Insurance ......................... X.I.16
Breach of Contract Issues............................X.F.15 Who Is Covered?............................................ X.I.17
Waiver of Additional Insured Minimum Limits of Coverage ...................... X.I.18
Requirement ......................................................X.F.18 Minimum Scope of Coverage...................... X.I.18
VICARIOUS LIABILITY AND Duration of Coverage .................................... X.I.19
ADDITIONAL INSURED COVERAGE..................... X.G.1 Order of Payment .......................................... X.I.20
What Is Vicarious Liability?................................ X.G.1 Deductibles ..................................................... X.I.20
Scope of Coverage for Additional Insureds.... X.G.2 Waiver of Subrogation.................................. X.I.20
The Case for Covering Anothers Active Acceptable Insurance Companies .................... X.I.21
Negligence.......................................................... X.G.3 Evidence of Compliance .................................... X.I.22
WAIVERS OF SUBROGATION ............................... X.H.1 General Considerations ...................................... X.I.22
Waiver of Subrogation Defined......................... X.H.2 Sample Insurance Specifications.................... X.I.101
Related Property Insurance Policy CERTIFICATES OF INSURANCE ............................. X.J.1

EXPANDED CONTENTS
Provisions ............................................................ X.H.3 Standard Certificates ............................................ X.J.1
Typical Uses of Waivers of Subrogation Manuscript Certificates ........................................ X.J.7
in Construction .................................................. X.H.5 Cancellation............................................................ X.J.7
With Equipment Floaters .............................. X.H.5 Coverage Disclaimer ............................................. X.J.9
With Builders Risk Insurance ....................... X.H.5 Certification of Contractual Liability
With Insurance on Adjacent Property of Coverage ............................................................ X.J.10
the Owner ..................................................... X.H.8 Additional Insured Status .................................. X.J.10
With Insurance on the Proof of Authority ............................................... X.J.13
Completed Project ....................................... X.H.8 Endorsement as Alternative to Manuscript
With General Liability, Automobile, and Certificate........................................................... X.J.14
Workers Compensation Insurance ............ X.H.9 Scope of Coverage Conflicts ....................... X.J.14
Waivers of Subrogation in Other Other Insurance Issue ................................ X.J.16
Types of Contracts .......................................... X.H.10 Notice of Cancellation .................................. X.J.16
Conclusion........................................................... X.H.11 Severability of Interests ................................ X.J.16
CONTRACT INSURANCE REQUIREMENTS.......... X.I.1 Other Considerations..................................... X.J.17
Builders Risk Insurance........................................ X.I.2 Suggestions for Tailoring Certificate
Who Purchases Coverage? ............................ X.I.4 Language ........................................................... X.J.17
Who Is Covered? ............................................. X.I.5 Certificate Management..................................... X.J.21
Minimum Limit of Coverage.......................... X.I.5 Verifying Compliance .................................... X.J.21
Minimum Scope of Coverage ....................... X.I.5 Selecting and Training Certificate
Duration of Coverage...................................... X.I.6 Management Staff ................................. X.J.23
Deductibles ....................................................... X.I.6 Obtaining Certificates .............................. X.J.23
Order of Payment ............................................ X.I.7 Obtaining Full Compliance...................... X.J.24
Waiver of Subrogation.................................... X.I.7 Waiving Requirements ............................. X.J.25
Other Required Property Coverages .................. X.I.8 Monitoring Ongoing Compliance ................ X.J.26
Liability Insurance ................................................. X.I.8 Maintaining Records...................................... X.J.26
Minimum Limits of Coverage...................... X.I.10 CERTIFICATE TRACKING SYSTEMS.....................X.K.1
Who Is Covered? ........................................... X.I.10 System Capabilities..............................................X.K.4
Minimum Required Limits ............................ X.I.10 Viewing and Sorting Data ............................X.K.4
Minimum Scope of Coverage ..................... X.I.11 Electronic Images ......................................X.K.5
Duration of Coverage.................................... X.I.12 Compliance Verification .................................X.K.5
Order of Payment .......................................... X.I.12 Report Generation...........................................X.K.6
Deductibles ..................................................... X.I.13 Letter Generation ............................................X.K.7
Waiver of Subrogation.................................. X.I.14 Customization ..................................................X.K.8
Hardware/Software Requirements ...............X.K.8

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 13TH REPRINT
CONTENTS/INDEX SEPTEMBER 2008

Nontechnical Considerations ............................. X.K.9 Permits and Licenses ....................................... X.M.17


Experience ....................................................... X.K.9 Health and Safety............................................. X.M.18
Customer Service ......................................... X.K.10 Training .......................................................... X.M.19
Cost................................................................. X.K.10 Disposal of Materials ....................................... X.M.20
Professional Responsibility.......................... X.K.11 Indemnification .................................................. X.M.21
System Evaluation and Comparison .............. X.K.11 Client Indemnifies Consultant.................... X.M.21
Cert2000........................................................ X.K.12 Consultant Indemnifies Client.................... X.M.22
Certifitrac+ ..................................................... X.K.13 Environmental Liability ................................ X.M.24
Certificate Management Solutions ............ X.K.15 Mutual Indemnification............................... X.M.26
ConfirmNet .................................................... X.K.16 Limitation of Liability........................................ X.M.28
Ins-Cert.com .................................................. X.K.18 Confidentiality .................................................... X.M.29
Insurance Data Services ............................. X.K.20 Dispute Resolution............................................ X.M.30
Periculum Services Group........................... X.K.21 Recovery of Dispute Resolution Costs..... X.M.30
Conclusion........................................................... X.K.22 Time Limit for Legal Action ...................... X.M.31
RAILROAD PROTECTIVE LIABILITY Third-Party Rights.............................................. X.M.31
INSURANCE................................................................X.L.1 Warnings Regarding Use of
Bodily Injury and Property Damage Liability...X.L.2 Consultants Report .................................. X.M.32
Covered Location and Operations................X.L.3 Severability ......................................................... X.M.34
Covered Acts or Omissions...........................X.L.3 Survival ............................................................... X.M.34
Exclusions .........................................................X.L.4 RISK ALLOCATION IN THE AIA
Expected or Intended Injury ....................X.L.4 GENERAL CONDITIONS (A201).............................X.P.1
Contractual Liability ...................................X.L.4 Indemnity Provisions ............................................X.P.2
Completed Work ........................................X.L.5 Insurance Requirements.......................................X.P.4
Acts or Omissions of the Insured ..........X.L.5 General Liability Insurance.............................X.P.5
Workers Compensation.............................X.L.6 Additional Insured Status...............................X.P.6
Pollution .......................................................X.L.7 Builders Risk Insurance ..................................X.P.7
Damage to Owned, Leased or Waivers of Subrogation .......................................X.P.9
Entrusted Property...................................X.L.7 Waivers of Consequential Damages ...............X.P.11
Physical Damage to Property.............................X.L.8 Design Responsibilities ......................................X.P.14
Policy Conditions ..................................................X.L.8 Differing Site Conditions ...................................X.P.16
Cancellation ......................................................X.L.8 Site Safety............................................................X.P.17
Other Insurance ...............................................X.L.9 Hazardous Materials...........................................X.P.18
Premium and Premium Audit .......................X.L.9 Mediation and Arbitration .................................X.P.21
Transfer of Recovery Rights ..........................X.L.9 Mediation ........................................................X.P.22
Contractual Liability to Railroads................X.L.10 Arbitration .......................................................X.P.23
Limits of Insurance.............................................X.L.11 Conclusion............................................................X.P.24
Railroad Protective Liability Endorsements ....X.L.11 OWNERS AND CONTRACTORS PROTECTIVE
Rating....................................................................X.L.12 LIABILITY INSURANCE ........................................... X.Q.1
CONTRACT PROVISIONS The OCP Liability Coverage Form .................... X.Q.2
AND ENVIRONMENTAL LIABILITY.......................X.M.1 Insuring Agreement........................................ X.Q.3
Scope of Work.....................................................X.M.2 Exclusions......................................................... X.Q.3
Construction ContractNo Contractual Liability .................................. X.Q.5
Environmental Responsibility......................X.M.3 Damaged or Impaired Property.............. X.Q.5
Remediation Contract...............................X.M.4 Completed Operations.............................. X.Q.6
Phases of Services ...................................X.M.4 Acts or Omissions of the Insured.......... X.Q.7
Changes.................................................................X.M.5 Supplementary Payments............................ X.Q.12
Differing Site Conditions....................................X.M.6 Who Is an Insured ....................................... X.Q.12
Standard of Care .................................................X.M.8 Limits of Insurance ...................................... X.Q.13
Ordinary Negligence Standard.....................X.M.8 Conditions ...................................................... X.Q.13
Higher Standards of Care.............................X.M.9 Cancellation.............................................. X.Q.14
Warranty ..............................................................X.M.11 Changes .................................................... X.Q.15
Cost Estimates ..............................................X.M.12 Examination of Books and Records..... X.Q.15
Responsibilities of Parties ................................X.M.12 Inspections and Surveys........................ X.Q.15
Compliance with Laws................................X.M.14 Other Insurance....................................... X.Q.15
Requirements Applicable to Premiums and Premium Audit ............. X.Q.16
Subcontractors............................................X.M.17 Definitions ...................................................... X.Q.16

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SEPTEMBER 2008 CONTENTS/INDEX

Contractor .............................................. X.Q.16 PROJECT SPECIFICATION CLAIMS ....................XI.C.1


Insured Contract ................................... X.Q.18 Spearin Doctrine .................................................XI.C.1
Suit.......................................................... X.Q.18 Design-Build Contracts ..................................XI.C.2
Work ....................................................... X.Q.18 Duty To Inform ....................................................XI.C.2
Endorsements ................................................ X.Q.18 Rules of Contract Interpretation .......................XI.C.3
Injury To Leased Workers ...................... X.Q.19 Ambiguities .....................................................XI.C.3
Additional InsuredEngineers, The Whole Contract Rule .......................XI.C.3
Architects Or Surveyors ...................... X.Q.20 The Specific Provision Rule....................XI.C.4
Underground Resources The Custom and Usage Rule.................XI.C.4
And Equipment ..................................... X.Q.20 The Practical Construction Rule ............XI.C.5
Arbitration Endorsements ...................... X.Q.21 Parol Evidence Rule .................................XI.C.5
Amendment of Limits of Insurance Insertions Rule ..........................................XI.C.5
(Designated Project or Premises) ...... X.Q.21 Estoppel......................................................XI.C.5
Earlier Notice of Cancellation Impossibility ...............................................XI.C.6
Provided by Us...................................... X.Q.21 DIFFERING SITE CONDITIONS............................ XI.D.1
Personal Injury Liability .......................... X.Q.21 Site Conditions Clauses .................................... XI.D.3
Pesticide or Herbicide Applicator CONDITIONAL PAYMENT CLAUSES ...................XI.E.1
Coverage................................................. X.Q.21 Pay-When-Paid versus Pay-If-Paid .....................XI.E.1
Additional InsuredState or Majority View .................................................XI.E.4
Political SubdivisionsPermits ............X.Q.22 Minority View .................................................XI.E.5
Employment-Related Practices Other Considerations.....................................XI.E.6

EXPANDED CONTENTS
Exclusion................................................. X.Q.22 Barriers to Enforcement................................XI.E.7
Waiver of Rights of Recovery Void by Statute .........................................XI.E.8
Against Others to Us ........................... X.Q.22 Provisions Against Public Policy ............XI.E.9
Construction Project Management Conflicting Contract Provisions ..............XI.E.9
Protective Liability Coverage .............. X.Q.22 General Contractor Interference...........XI.E.10
Fungi or Bacteria Exclusions................. X.Q.23 Contractual Privity with Surety ............XI.E.10
War or Terrorism Exclusion ................... X.Q.23 States Position on Enforcement...............XI.E.11
OCP Policy versus Additional Insured STATES POSITIONS ON CONDITIONAL
Status................................................................. X.Q.24 PAYMENT CLAUSES IN CONSTRUCTION
CONTRACTUAL RISK TRANSFER SUMMARY... X.T.1 SUBCONTRACTS ..................................................... XI.F.1
Indemnitee ............................................................ X.T.1 PROJECT SCHEDULING CLAIMS ....................... XI.G.1
Indemnitor ............................................................. X.T.2 Owners Scheduling Responsibilities .............. XI.G.1
General Considerations ....................................... X.T.4 Contractors Scheduling Responsibilities........ XI.G.2
CONSTRUCTION CONTRACT REVIEW Schedule Changes ........................................ XI.G.2
CHECKLIST ................................................................ X.U.1 Subcontractors Scheduling Rights ................. XI.G.3
Schedulers Implied Duties............................... XI.G.3
Duty To Schedule and
Coordinate Work ........................................ XI.G.4
CHAPTER XI: Duty Not To Delay, Hinder, or
CONTRACT CLAIMS LITIGATION Interfere with Work ................................... XI.G.5
Duty To Cooperate ....................................... XI.G.6
CONSTRUCTION CONTRACT CLAIMS ..............XI.A.1 Duty To Grant Reasonable
CHANGE ORDERS...................................................XI.B.1 Time Extensions ......................................... XI.G.7
Problems Involving Change Orders .................XI.B.3 Scheduling Claims ........................................... XI.G.10
Authority To Order Changes........................XI.B.3 Abandonment of the Project Schedule .. XI.G.10
Notice...............................................................XI.B.3 Concurrent Delay ........................................ XI.G.11
Actual Notice ............................................XI.B.4 Acceleration Leading to Disruption ......... XI.G.11
Constructive Notice..................................XI.B.4 Suspension of Work................................... XI.G.12
Waiver ........................................................XI.B.5 DELAY DAMAGES .................................................. XI.H.1
Constructive Changes ...................................XI.B.5 Calculating Delay Damages ............................. XI.H.2
Cardinal Change ............................................XI.B.5 Liquidated Damages.......................................... XI.H.5
Duty To Perform Changes ...........................XI.B.6 No Damages for Delay Clauses.............. XI.H.6
Effect of Bilateral Modification on Uncontemplated Delays ......................... XI.H.7
Duty To Perform Cardinal Changes ...XI.B.7 Owner Interference ................................. XI.H.7
Performance Delays ......................................XI.B.7

Contents/Index
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CONSTRUCTION RISK MANAGEMENT 7TH REPRINT
CONTENTS/INDEX SEPTEMBER 2008

Owner Fraud, Concealment, Work Schedule............................................XII.B.15


or Misrepresentation ............................. XI.H.8 Company Management .............................XII.B.16
Extremely Long Delay ............................. XI.H.8 Improving the Quality of
Delay Claim Scheduling Analysis .................... XI.H.9 Your Submission............................................XII.B.17
As-Planned Schedules .................................. XI.H.9 FINANCIAL STATEMENT REVIEW
As-Built Schedule ........................................ XI.H.10 CHECKLIST ..........................................................XII.B.101
As-Built Schedule Including Delays ......... XI.H.10 A SURETYS REVIEW OF THE
Adjusted Schedule Reflecting Completion FINANCIAL STATEMENTS ....................................XII.E.1
Absent Delays ........................................... XI.H.10 Ratio Analysis .....................................................XII.E.1
LITIGATION RISK ASSESSMENT TECHNIQUES Gross Profit Analysis .........................................XII.E.4
FOR CONSTRUCTION DISPUTES ....................... XI.L.1 Analysis of Estimating Skills............................XII.E.6
Benefits of an LRA............................................. XI.L.2 CASH BUDGETING ................................................ XII.F.1
Facilitates Settlement ................................... XI.L.2 Job Cash Flow Budget ..................................... XII.F.1
Better Settlements ........................................ XI.L.3 Job Operating Budget....................................... XII.F.1
Improved Litigation Strategies .................... XI.L.3 Job Cash Flow Budget ..................................... XII.F.1
Required Skills..................................................... XI.L.4 Company Cash Flow Budget ........................... XII.F.1
Stages of an LRA ............................................... XI.L.4 Projected (Pro Forma) Balance Sheets
Types of LRAs ..................................................... XI.L.5 and Statement of Earnings ........................... XII.F.2
Timing of the Assessment................................ XI.L.6 Importance of Projected Financial State-
Hypothetical Illustration ..................................... XI.L.6 ments with Cash Planning Process............. XII.F.2
Background Information............................... XI.L.8 TAX PLANNING ..................................................... XII.G.1
Company As Options............................ XI.L.10 THE MILLER ACT .................................................. XII.K.1
Preparing the LRA Models ........................ XI.L.10 Notice Requirements ........................................ XII.K.3
Influence Diagrams................................ XI.L.11 Requirements for Filing Suit ........................... XII.K.4
Decision Trees ........................................ XI.L.12 State Statutes (Little Miller Acts) ............... XII.K.4
The Decision to Fight or Settle .......... XI.L.19 Eligible Claimants ........................................ XII.K.5
Using LRAs in Trial Strategies Notice Requirements ................................... XII.K.5
and Preparation .............................................. XI.L.26 Filing Requirements..................................... XII.K.6
HOW TO SELECT A PROFESSIONAL
SURETY AGENT ....................................................XII.M.1
Responsibilities ..................................................XII.M.2
CHAPTER XII: SURETY Professional Qualifications...............................XII.M.3
Request for Information Exhibit .....................XII.M.6
SURETY OVERVIEW ..............................................XII.A.1 LEGAL REMEDIES WHEN SURETIES
Surety and Insurance Contrasted ...................XII.A.2 BECOME INSOLVENT ............................................XII.R.1
Types of Construction Bonds ..........................XII.A.6 Potential Sources of Recovery.........................XII.R.2
Bid Bond ........................................................XII.A.6 State Guaranty Associations.......................XII.R.2
Performance Bonds......................................XII.A.7 Security Deposits..........................................XII.R.3
Payment Bonds .............................................XII.A.9 Liability of Public Entities
Underwriting.......................................................XII.A.9 (Public Projects Only)................................XII.R.4
Bond Costs ..................................................XII.A.11 Liability of Negligent Architect ..................XII.R.5
Evaluating a Surety Company .......................XII.A.11 PAYMENT BOND CLAIMS:
CONTRACT BOND UNDERWRITING .................XII.B.1 A SURVEY OF SURETIES LEGAL
Qualification Process.........................................XII.B.1 OBLIGATIONS IN HANDLING CLAIMS .............XII.T.1
Financial Condition ......................................XII.B.4 Bad Faith Claims................................................XII.T.2
Liquidity ....................................................XII.B.7 Statutory Claims ...........................................XII.T.2
Profitability................................................XII.B.8 STATE-BY-STATE REVIEW OF
Stability and Capitalization..................XII.B.10 SURETIES LEGAL OBLIGATIONS
Accounting Issues and Methods ......XII.B.11 IN HANDLING BOND CLAIMS........................... XII.U.1
Business Plan ...................................................XII.B.12 U.S. TREASURY DEPARTMENT
Plans for Growth...................................XII.B.12 SURETY LIST .........................................................XII.W.1
Survival ...................................................XII.B.13

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