16TH REPRINT
DECEMBER 2007
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
MANAGEMENT
INTRODUCTION TO CONSTRUCTION
RISK MANAGEMENT................................................ I.A.1
Risk Management Process .................................. I.A.1
Risk Identification ............................................ I.A.3
Risk Analysis .................................................... I.A.8
Designing the Risk Management
Strategy......................................................... I.A.10
Risk Control ............................................... I.A.10
Risk Financing........................................... I.A.11
Selecting the Right Combination .......... I.A.14
Implementation............................................... I.A.16
Review ............................................................. I.A.17
Summary ......................................................... I.A.18
101 RULES OF RISK MANAGEMENT ...................I.B.1
TIPS FOR CONTROLLING INSURANCE
COSTS...........................................................................I.C.1
Automobile Insurance............................................I.C.1
Liability Insurance ..................................................I.C.3
Workers Compensation Insurance ......................I.C.4
Experience Rating ..................................................I.C.6
Property Insurance.................................................I.C.7
Claims ......................................................................I.C.7
Miscellaneous .........................................................I.C.8
THE CONSTRUCTION INDUSTRY .......................... I.F.1
Industry Dynamics ................................................. I.F.1
Contractual Relationships ..................................... I.F.5
Job Acquisition....................................................... I.F.7
Construction Contracts.......................................... I.F.8
Construction Risk Management ........................ I.F.10
CONSTRUCTION INDUSTRY
TRAINING SURVEY .....................................................I.J.1
Survey Highlights ....................................................I.J.1
Challenges for the Field ........................................I.J.2
Challenges for Management.................................I.J.3
Training .....................................................................I.J.4
Training Budgets ................................................I.J.5
Return on Training Investment ........................I.J.6
Training and Technology ..................................I.J.6
Conclusion................................................................I.J.7
Contents/Index
7 sdfgh
CONTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
2007 IRMI CONSTRUCTION RISK
AND INSURANCE SURVEY .................................... I.W.1
The Respondents.................................................. I.W.1
The Insurance Marketplace ................................ I.W.4
The Direction of the Marketplace..................... I.W.8
Insurance Representatives .................................. I.W.9
Wrap-Ups ............................................................. I.W.12
EXPANDED CONTENTS
Coverage Issues.................................................. I.W.14
Completed OperationsWrap-Ups ............. I.W.14
Additional Insured Coverage....................... I.W.16
Exclusionary Endorsements......................... I.W.18
Summary ............................................................. I.W.19
CHAPTER II: ADMINISTRATION
SELECTING AN INSURANCE
REPRESENTATIVE ..................................................... II.A.1
Distribution Systems ............................................ II.A.6
Compensation ....................................................... II.A.7
Service ................................................................... II.A.9
Marketing Insurance....................................... II.A.9
Risk Management Review........................... II.A.10
Loss Control ................................................... II.A.10
Policy Review................................................. II.A.11
Service after Separation.............................. II.A.11
Miscellaneous ................................................ II.A.12
Service Agreements........................................... II.A.12
THE COMPETITIVE PROPOSAL PROCESS......... II.B.1
The Decision Process .......................................... II.B.1
Suggested Frequency .......................................... II.B.5
Issuing a Request for Proposals........................ II.B.5
Coordinating a Common Renewal Date..... II.B.7
Preparing the Specifications ......................... II.B.7
Number of Invitations To Issue .................... II.B.9
Prequalifying Producers ............................... II.B.13
Maintaining a Competitive Atmosphere......... II.B.13
Market Allocation.......................................... II.B.14
Awaiting the Proposals................................ II.B.15
Awarding the Account ...................................... II.B.15
 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
MANAGING INSURANCE AND RISK
MANAGEMENT INFORMATION .............................II.C.1
Uses of Risk Management Information........... II.C.1
Improved Risk Financing Decisions ............ II.C.1
Improved Insurance Bargaining Position.... II.C.2
Effective Loss Control Expenditures ........... II.C.2
Permanent Record of Past Coverage.......... II.C.2
Detection of Errors......................................... II.C.3
Accuracy in Risk Allocation ......................... II.C.3
Due Diligence ................................................. II.C.3
Processing Risk Management Data ................. II.C.3
Items Requiring Immediate Attention ........ II.C.3
Binders ........................................................ II.C.4
Insurance Policies and Related
Endorsements.......................................... II.C.4
Loss Reports .............................................. II.C.5
Premium Audits......................................... II.C.6
Retrospective Rating Adjustments ......... II.C.7
Items to be Filed and Maintained
Long-Term...................................................... II.C.7
Insurance Policies ..................................... II.C.7
Permanent Policy Record......................... II.C.8
Loss Reports .............................................. II.C.8
General Insurance and Risk
Management Correspondence ............. II.C.9
Subcontractor Contracts .......................... II.C.9
Settlement Agreements and
Releases ................................................. II.C.10
Miscellaneous Items............................... II.C.10
Summary ............................................................. II.C.10
DOCUMENTING AN INSURANCE
COVERAGE HISTORY ............................................ II.D.1
Discovering Hidden Assets ................................ II.D.1
Making Details Count ......................................... II.D.2
Getting the Most from Internal Sources......... II.D.2
Using External Sources ...................................... II.D.3
Analyzing Your Findings ..................................... II.D.4
Finding Needles in a Haystack ......................... II.D.4
INSURER SOLVENCY................................................ II.F.1
Costs of Insurer Insolvency ................................ II.F.1
Personnel Time ................................................ II.F.2
Duplication of Premiums ............................... II.F.2
Unplanned Retention ...................................... II.F.2
Disruptions in Cash Flow .............................. II.F.3
Premium Increases.......................................... II.F.3
Errors and Omissions Claims ........................ II.F.6
Identifying Financially Troubled Insurers .......... II.F.7
Contributing Factors........................................ II.F.7
Underwriting Practices.............................. II.F.8
Investment Practices................................ II.F.10
Accounting Practices ............................... II.F.10
Managerial Practices ............................... II.F.12
Sources of Information ................................ II.F.12
Rating Services......................................... II.F.12
Making Use of Insurer Ratings ............. II.F.25
Risk-Based Capital Requirements .......... II.F.25
Minimizing the Impact of Insurer
Insolvency.......................................................... II.F.28
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8
15TH REPRINT
JUNE 2008
Pre-Insolvency Planning................................ II.F.28
Cut Through Endorsements.................... II.F.28
Record-Keeping ......................................... II.F.28
Policy Replacement Safeguards............. II.F.29
Post-Insolvency Planning .............................. II.F.29
Obtain Replacement Coverage
Immediately ............................................ II.F.30
List All Outstanding Claims.................... II.F.30
File Claims with Guaranty Funds and
the Liquidator......................................... II.F.30
Fill Potential Gaps in Coverage ............. II.F.32
Anticipate Uninsured Losses.................. II.F.33
Summary .............................................................. II.F.33
DEVELOPING A RISK MANAGEMENT
MANUAL..................................................................... II.G.1
Minimum Features............................................... II.G.2
Guidelines for Manual Writing .......................... II.G.3
Procedures, Checklists, Formats ....................... II.G.6
Systems and Synergy .................................... II.G.9
The Manual Index................................................ II.G.9
JOB COSTING CONSTRUCTION
INSURANCE COSTS ..................................................II.I.1
Direct versus Indirect Costs.................................II.I.1
Variability in Insurance Costs ..............................II.I.2
Commencing the Insurance Job Cost
Process..................................................................II.I.3
The Insurance Bid Model.....................................II.I.5
Workers Compensation.........................................II.I.6
Experience Modification Factors....................II.I.7
Premium Discount ............................................II.I.7
General Liability......................................................II.I.8
Premium Discount ..........................................II.I.12
Fixed Insurance Expenses ..................................II.I.12
Umbrella Coverage ..............................................II.I.14
Flat Umbrella...................................................II.I.14
Auditable Umbrella.........................................II.I.15
Retained Losses ...................................................II.I.16
Midterm Loading Adjustments ..........................II.I.17
Retrospectively Rated Insurance Programs.....II.I.17
Contract Review ...................................................II.I.20
Broker/Agent Role in Job Costing ...................II.I.22
Summary ...............................................................II.I.23
USING RISK MANAGEMENT CONSULTANTS ... II.K.1
Services Offered................................................... II.K.3
Costs ...................................................................... II.K.4
How To Select a Consultant.............................. II.K.5
Agents/Brokers/Service Providers
as Consultants ................................................... II.K.7
Some Advice for Agents and Brokers ............. II.K.8
HOW TO FILE CLAIMS WITH INSURERS:
FROM STARTING BLOCK TO FINISH LINE .......II.M.1
Common Reporting Conditions .........................II.M.2
Insureds Investigative Duties.............................II.M.4
Standards of Reporting Promptness ................II.M.4
Maximizing Recovery
Working with Adjusters ...................................II.M.6
Liability Claim Reporting Considerations.........II.M.7
18TH REPRINT
MARCH 2008
Coverage ProblemsProperty Losses .............. II.M.8
Coverage IssuesLiability Losses ..................... II.M.9
Post-Reporting Follow-up ................................. II.M.10
Keep Tabs on the Claim ............................ II.M.10
Check Reserves............................................ II.M.11
Check Insurer Supervision ......................... II.M.11
Hold a Meeting............................................ II.M.11
Summary ............................................................ II.M.12
CLAIM AUDITING ......................................................II.P.1
The Need for Claim Auditing .............................II.P.1
Quantitative Auditing ......................................II.P.2
Qualitative Auditing.........................................II.P.2
Initial File Handling and Contact.............II.P.3
Investigation.................................................II.P.3
Reserve Review and Reserve
Adequacy ..................................................II.P.4
Payment Control and Supervision ...........II.P.4
Supervision and Control of Examiner/
Adjuster Staff ...........................................II.P.5
Litigation ......................................................II.P.6
Risk Transfer Issues ...................................II.P.6
General Performance Issues.....................II.P.7
Personnel .....................................................II.P.8
Internal Systems and Procedures
Paper-flow..................................................II.P.8
Three-Dimensional Claim Auditing
Methodology ..................................................II.P.9
Walk-through...................................................II.P.10
Summary ..............................................................II.P.10
ALTERNATIVE DISPUTE RESOLUTION ................ II.R.1
When Is ADR Appropriate?................................ II.R.1
When Is ADR Not Appropriate?........................ II.R.2
Advantages of ADR ............................................. II.R.2
Speedy Resolution .......................................... II.R.3
Offers Options ................................................. II.R.3
Less Costly....................................................... II.R.4
Provides Confidentiality.................................. II.R.4
Types of ADR Proceedings ................................ II.R.4
Arbitration ........................................................ II.R.4
Court Annexed Proceedings ......................... II.R.6
Voluntary Settlement Conference ................ II.R.6
Mediation ......................................................... II.R.7
Mini-Trial ........................................................... II.R.7
Summary ............................................................... II.R.8
COST ALLOCATION ..................................................II.T.1
Setting Objectives.................................................II.T.2
Accountability versus Stability ............................II.T.3
Credibility ..........................................................II.T.4
Size of the Division ...................................II.T.6
Experience Period ............................................II.T.6
Allocation Cap..................................................II.T.8
Maximum Annual Change .............................II.T.8
Timing of Allocations......................................II.T.8
Allocating Risk Management Costs...................II.T.9
Retained Losses ...............................................II.T.9
Buffer Layer...............................................II.T.10
Contents/Index
9 sdfgh
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Flexibility ................................................... II.T.11
Estimating Losses .................................... II.T.12
Insurance Premiums ..................................... II.T.13
Loss Adjustment Expenses ......................... II.T.14
Loss Control Expenses................................. II.T.14
Risk Management Overhead....................... II.T.14
Allocation Examples........................................... II.T.14
Pure Exposure Allocation ............................ II.T.15
Pure Experience Allocation ......................... II.T.16
Blended Allocation........................................ II.T.17
Multiyear Experience Period ....................... II.T.17
Allocation Cap ............................................... II.T.18
Funding ................................................................ II.T.18
Special Considerations ...................................... II.T.19
Acquisition of a New Division ................... II.T.19
Change in Management.............................. II.T.19
End-of-Year Balances .................................... II.T.20
Road Map to Change .................................. II.T.20
EXPANDED CONTENTS
CHAPTER III: LOSS EXPOSURES AND
UNDERWRITING CONSIDERATIONS
LOSS EXPOSURE AND UNDERWRITING
REVIEW......................................................................III.A.1
General Overview ................................................III.A.1
Workers Compensation.................................III.A.1
General Liability..............................................III.A.3
Automobile Liability and
Physical Damage.........................................III.A.4
Professional Liability ......................................III.A.5
Physical Damage to the Work ....................III.A.5
Damage to Contractors Equipment ...........III.A.6
Physical Damage to Owned, Rented, or
Leased Real and Personal Property.........III.A.6
Additional Underwriting Considerations .........III.A.7
Loss Exposures and Underwriting
Considerations by Type of Contractor ..........III.A.8
Highway/Heavy Contractors ........................III.A.8
Building ContractorGeneral........................III.A.9
Building Trade Contractors .........................III.A.10
Utility Contractors ........................................III.A.11
WORKERS COMPENSATION LAW
SUMMARY ................................................................III.C.1
Type of Law .........................................................III.C.2
Exclusive Remedy................................................III.C.2
Insurance Requirements .....................................III.C.5
Monopolistic State Funds.............................III.C.6
Competitive State Funds ..............................III.C.7
Penalties for Failure To Secure Benefits.........III.C.7
Covered Employments ......................................III.C.10
Number of Employees ................................III.C.11
Type of Work................................................III.C.11
Independent Contractors..................................III.C.12
Employee Leasing..............................................III.C.13
 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Sole Proprietors, Partners, Executive Officers,
and Limited Liability Companies................. III.C.16
Elective Coverage ............................................. III.C.25
Suits Against Third Parties ............................. III.C.27
Waiver of Subrogation ............................... III.C.28
Injuries Not Covered ........................................ III.C.30
Occupational Disease....................................... III.C.33
Extraterritorial Application............................... III.C.36
COMPLETED OPERATIONS RISKS...................... III.D.1
Warranties ............................................................ III.D.2
Contractors Right To Cure Breaches ........ III.D.2
Express versus Implied Warranties ............ III.D.3
Express Warranties .................................. III.D.4
Implied Warranties ................................... III.D.7
The Privity Doctrine .................................... III.D.11
Remedies ...................................................... III.D.12
Statutes of Limitation and Statutes of
Repose ............................................................. III.D.13
Statutes of Limitation ................................. III.D.14
Statutes of Limitation
and Warranties..................................... III.D.14
Statutes of Repose...................................... III.D.16
Contract Actions versus Tort Actions. III.D.17
State Differences.................................... III.D.19
Tolling the Statutes ..................................... III.D.20
Tolling a Statute of Limitations ........... III.D.20
Tolling a Statute of Repose ................. III.D.21
Mergers, Acquisitions, and Successor
Liability............................................................. III.D.22
Asset Sale..................................................... III.D.22
Exceptions to the Rule.......................... III.D.23
Mergers ......................................................... III.D.25
Coverage for Successor Liability .............. III.D.26
Completed Operations Insurance .................. III.D.27
When is a Contractors Work
Completed? ................................................ III.D.29
LIMITATIONS OF ACTIONS
CONTRACT AND TORT CLAIMS..........................III.E.1
Statutory Time Restrictions ................................III.E.2
Background......................................................III.E.3
Application.......................................................III.E.3
Tolling the Statutes .............................................III.E.5
Statutes of Repose for Contract Actions,
Tort Actions, or Both........................................III.E.5
Conflicting Statutes........................................III.E.6
Special Construction Industry Statutes of Repose
and/or Statutes of Limitations .......................III.E.7
Alabama ...........................................................III.E.7
Alaska ...............................................................III.E.7
Arizona .............................................................III.E.7
Arkansas...........................................................III.E.8
California ..........................................................III.E.8
Colorado...........................................................III.E.9
Connecticut......................................................III.E.9
Delaware ..........................................................III.E.9
District of Columbia.......................................III.E.9
sdfgh Contents/Index
10
22ND REPRINT
MARCH 2008
Florida............................................................ III.E.10
Georgia .......................................................... III.E.10
Hawaii ............................................................ III.E.10
Idaho.............................................................. III.E.10
Illinois............................................................. III.E.11
Indiana........................................................... III.E.11
Iowa ............................................................... III.E.11
Kansas ........................................................... III.E.11
Kentucky........................................................ III.E.12
Louisiana ....................................................... III.E.12
Maine............................................................. III.E.12
Maryland ....................................................... III.E.13
Massachusetts ............................................. III.E.13
Michigan ....................................................... III.E.13
Minnesota ..................................................... III.E.13
Mississippi..................................................... III.E.14
Missouri......................................................... III.E.14
Montana ........................................................ III.E.14
Nebraska ....................................................... III.E.14
Nevada........................................................... III.E.15
New Hampshire ........................................... III.E.15
New Jersey................................................... III.E.16
New Mexico ................................................. III.E.16
New York ...................................................... III.E.16
North Carolina.............................................. III.E.17
North Dakota................................................ III.E.17
Ohio ............................................................... III.E.17
Oklahoma ...................................................... III.E.17
Oregon........................................................... III.E.18
Pennsylvania ................................................. III.E.18
Rhode Island ................................................ III.E.18
South Carolina ............................................. III.E.18
South Dakota................................................ III.E.19
Tennessee ..................................................... III.E.19
Texas .............................................................. III.E.19
Utah ............................................................... III.E.20
Vermont ......................................................... III.E.20
Virginia........................................................... III.E.20
Washington................................................... III.E.21
West Virginia ................................................ III.E.21
Wisconsin...................................................... III.E.21
Wyoming....................................................... III.E.22
INDEPENDENT CONTRACTOR LIABILITY ........... III.F.1
Control of the Details ......................................... III.F.2
Selection of the Contractor ............................... III.F.2
Dangerous Activity .............................................. III.F.3
Minimizing Independent Contractor
Liability ................................................................ III.F.5
THE LEGAL IMPLICATIONS AND STRUCTURE
OF CONSTRUCTION JOINT VENTURES............ III.G.1
Advantages of a Joint Venture......................... III.G.1
Creation and Elements of a
Joint Venture ..................................................... III.G.2
Duties and Liabilities Among
Joint Venturers.................................................. III.G.3
24TH REPRINT
AUGUST 2007
Liability of Joint Venturers to Third
Persons...............................................................III.G.4
Termination of a Joint Venture.........................III.G.5
Conclusion............................................................III.G.5
THE THIRD-PARTY BENEFICIARY PRINCIPLE.... III.I.1
Third-Party Beneficiary Status Affirmed........... III.I.2
Incidental Beneficiaries ....................................... III.I.3
PUNITIVE DAMAGES..............................................III.K.1
Historical Perspective .........................................III.K.2
Constitutionality of Punitive Damages ............III.K.2
Case Law ........................................................III.K.3
Insurability of Punitive Damages .....................III.K.8
Public Policy Concerns .................................III.K.8
Insurance Policy Language ..........................III.K.9
Insurer Bad Faith .........................................III.K.11
CONSEQUENTIAL DAMAGES ............................... III.L.1
Limitation of Liability Clauses .......................... III.L.3
U.S. LONGSHORE AND HARBOR WORKERS
COMPENSATION ACT ........................................... III.M.1
Eligibility............................................................... III.M.1
Covered Injuries and Diseases ........................ III.M.2
Benefits ................................................................ III.M.3
Disability ......................................................... III.M.3
Death .............................................................. III.M.3
Medical ........................................................... III.M.3
Insuring LHWCA Exposures ............................. III.M.4
Rates ............................................................... III.M.5
Self-Insurance Requirements ............................ III.M.5
Penalties for Failure
To Provide Coverage.................................. III.M.6
AUTHORITY AND RESPONSIBILITY OF
THE DESIGN PROFESSIONAL ..............................III.N.1
Preparation of Drawings and Specifications..III.N.1
Approval of Materials.........................................III.N.3
Supervision of the Work ...................................III.N.3
Design-Build Liability ..........................................III.N.5
Conclusion............................................................III.N.6
IDENTIFYING AND DEFENDING AGAINST
ENVIRONMENTAL RISKS IN CONTRACTING ... III.P.1
Theories of Liability ............................................ III.P.2
Negligence ...................................................... III.P.2
Misrepresentation........................................... III.P.4
Breach of Contract ........................................ III.P.4
Superfund Liability ........................................ III.P.5
Operator and Transporter Liability... III.P.6
Arranger Liability ................................... III.P.8
The Deal-Makers Liability................... III.P.10
Government Contracts and the
Government Contractor Defense ............ III.P.11
Conclusions Concerning the Environmental
Liability Exposure............................................ III.P.13
DESIGN-BUILD ON ENVIRONMENTAL
REMEDIATION PROJECTS..................................... III.R.1
Overview of Design-Build on
Remediation Projects ....................................... III.R.2
Contents/Index
11
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Owners Risks and Benefits.........................III.R.4
Owner Liability to Design-Builder ..........III.R.5
Design Builders Risks and Benefits...........III.R.6
Design-Builders Liability to Owner .......III.R.8
Design-Builders Liability to
Third Parties............................................III.R.9
Subcontractors Risks and Benefits ..........III.R.10
Key Contract Terms...........................................III.R.10
Scope of Work and Related Terms..........III.R.11
Permits......................................................III.R.12
Cleanup Standards .................................III.R.12
Standard of Care ....................................III.R.13
Compliance with Laws and
Regulations............................................III.R.13
Health and Safety ..................................III.R.13
Exclusions to Scope of Work...............III.R.14
Disclaimers...............................................III.R.14
Cost of Redesign ....................................III.R.14
Recourse for Noncompliance
with the ROD .......................................III.R.14
Pricing and Payment Issues.......................III.R.15
EXPANDED CONTENTS
Changes.........................................................III.R.16
Differing Site Conditions ............................III.R.17
Time-Related Issues.....................................III.R.18
Limitations of Liability and
Indemnification ..........................................III.R.18
Performance Guarantees and Bonds .......III.R.20
Risk Management Techniques
To Avoid Liability ............................................III.R.21
MERGERS AND ACQUISITIONS .......................... III.T.1
Risk Management Concerns ............................. III.T.3
Pollution Liability ............................................ III.T.3
Insuring Pollution Liability ....................... III.T.5
Successor Liability ......................................... III.T.7
Insuring Successor Liability .................. III.T.10
Liability for Failure To Warn............................ III.T.12
Risk Financing Arrangements ......................... III.T.13
Captives ......................................................... III.T.13
Self-Insurance Programs and
Deductibles................................................. III.T.14
Open Retros .................................................. III.T.14
Canceling a Retro................................... III.T.14
Experience Rating ........................................ III.T.15
Directors and Officers Liability ....................... III.T.15
Insuring Directors and Officers Liability .. III.T.15
Sellers Board .......................................... III.T.16
Buyers Board .......................................... III.T.17
Acquisition-Related Exclusions ............. III.T.18
Other Problems ............................................ III.T.20
Mergers and Acquisitions Risk Management
Checklist ........................................................... III.T.21
EMPLOYMENT PRACTICES LIABILITY...............III.W.1
EPL Exposures ....................................................III.W.1
Discrimination ................................................III.W.2
Wrongful Termination...................................III.W.4
Sexual Harassment .......................................III.W.4
sdfgh
 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
What Constitutes Knowledge
of Harassment? ..................................... III.W.8
Third-Party Sexual Harassment ............. III.W.9
Prevalence of Harassing Behavior ....... III.W.9
Same-Sex Sexual Harassment .............. III.W.9
Workplace Torts.......................................... III.W.10
Strategies for Avoiding Liability .................... III.W.10
CHAPTER IV: LOSS CONTROL
LOSS CONTROL ...................................................... IV.A.1
Leadership in Loss Control ............................... IV.A.4
Safety Inspectors Checklist for Job-Site
Safety Program................................................. IV.A.7
SUBSTANCE ABUSE PROGRAMS ...................... IV.B.1
Policy Development ............................................ IV.B.2
Assess Needs................................................. IV.B.3
Compliance with Legal Requirements.. IV.B.4
Set Goals ........................................................ IV.B.6
Define Scope.................................................. IV.B.7
Establish Detection Procedures .................. IV.B.8
Testing and Searches ................................... IV.B.9
Preemployment Testing ......................... IV.B.10
Random Testing...................................... IV.B.10
Periodic Testing ...................................... IV.B.10
Postincident Testing ............................... IV.B.10
Reasonable Suspicion ........................... IV.B.11
Searches .................................................. IV.B.11
Risk Management in Drug Testing ..... IV.B.11
Establish Penalties for Violations ............. IV.B.12
Establish Procedures for Appeals............. IV.B.13
Supervisor Training........................................... IV.B.14
Employee Education ......................................... IV.B.14
Treatment ........................................................... IV.B.15
Employee Assistance Programs ................ IV.B.15
Putting It All in Writing................................... IV.B.16
Substance Abuse Policy Checklist................. IV.B.17
THE AMERICANS WITH DISABILITIES ACT .... IV.C.1
IMUA LOSS CONTROL GUIDES FOR BUILDERS
RISK AND CONTRACTORS EQUIPMENT .......... IV.E.1
Builders Risk Guide to Loss Prevention.......... IV.E.1
Management Practices ................................. IV.E.2
Site Security................................................... IV.E.2
Off-Site Security ............................................ IV.E.4
Fire Protection and Prevention ................... IV.E.5
Construction Practices.................................. IV.E.7
Natural Perils................................................ IV.E.11
Contractors Equipment Guide to
Loss Prevention .............................................. IV.E.12
Management Practices ............................... IV.E.12
Fire Prevention ............................................. IV.E.13
Site Exposures: Flood, Windstorm,
Earthquake, Landslide, Etc...................... IV.E.14
Transportation .............................................. IV.E.15
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Operator Practices ....................................... IV.E.15
Security ......................................................... IV.E.16
Disclaimer of Liability....................................... IV.E.17
Loss Control Checklist...................................... IV.E.17
CONTRACTORS EQUIPMENT GUIDE TO LOSS
PREVENTION SUMMARY CHECKLIST ............. IV.E.18
ASBESTOS MANAGEMENT AND
LOSS CONTROL ......................................................IV.G.1
Health Effects of Asbestos ...............................IV.G.2
Asbestos Regulations .........................................IV.G.3
Occupational Safety and Health
Administration Standards ..........................IV.G.3
Environmental Protection Agency
Standards......................................................IV.G.4
Notification ................................................IV.G.4
Asbestos Disposal ....................................IV.G.4
Demolition .................................................IV.G.4
Procedures for Emission Control ...........IV.G.5
Asbestos Management Options .......................IV.G.5
Inspection of Properties ...............................IV.G.5
Relocate or Stay ............................................IV.G.5
Ongoing Air Monitoring ...............................IV.G.6
Operations and Maintenance Program
(O&M)............................................................IV.G.6
Asbestos Substitutes ..........................................IV.G.8
Survey and Risk Assessment ...........................IV.G.9
Sampling and Analytical Methods .............IV.G.9
Clearance Criteria ........................................IV.G.10
Asbestos Abatement ........................................IV.G.11
Encapsulation ...............................................IV.G.11
Enclosure.......................................................IV.G.12
Removal.........................................................IV.G.12
Procedures To Control Asbestos
during Routine Building Maintenance ........IV.G.13
General Procedures .....................................IV.G.13
Working with Asbestos/Cement Products ...IV.G.14
Cutting and Drilling.....................................IV.G.14
Cleanup and Waste Disposal ....................IV.G.14
Equipment .....................................................IV.G.14
Waste Disposal ............................................IV.G.15
Personal Protective Equipment .................IV.G.15
Insurance ............................................................IV.G.15
Selecting an Asbestos Consultant .................IV.G.16
HUMAN FACTORS LOSS CONTROL
IN THE CONSTRUCTION INDUSTRY..................IV.H.1
Overview...............................................................IV.H.1
The Cost of Occupational Stress .....................IV.H.1
Stress and Accidents .........................................IV.H.3
Breaking the Distress Cycle ..............................IV.H.3
A New Approach to Risk Management .........IV.H.5
Human Factors Loss Control Programs ..........IV.H.7
Preemployment Screening for Theft,
Violence, and Drug Abuse........................IV.H.8
Employee Assistance Programs ..................IV.H.8
Managing the Troubled Employee ......IV.H.10
Injured Employee Management ................IV.H.10
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Use of Rehabilitation Specialists ..............IV.H.11
Checklist for Identifying Distressed
Construction Workers ....................................IV.H.13
HAZARD COMMUNICATION................................. IV.L.1
Hazardous Materials List ................................... IV.L.4
Material Safety Data Sheets............................. IV.L.4
Availability to Employees.............................. IV.L.6
Maintaining MSDS Records......................... IV.L.6
Labeling ................................................................ IV.L.9
Employee Information and Training............... IV.L.10
Written Hazard Communication Program .... IV.L.11
Hazard Communication to Independent
Contractors ................................................. IV.L.11
Noncompliance.................................................. IV.L.17
Conclusion.......................................................... IV.L.17
CONSTRUCTION FLEET MANAGEMENT ...........IV.N.1
Problems Unique to the Construction Fleet....IV.N.2
Components of a Fleet Management
Program..............................................................IV.N.3
Administration and Supervision ..................IV.N.3
Fleet Management Policy Statement .........IV.N.5
The Role of the Fleet Manager ..................IV.N.6
The Fleet Review Committee......................IV.N.7
Driver Selection..............................................IV.N.8
Formal Program Regulations and
Procedures .........................................................IV.N.9
Accident Reporting ........................................IV.N.9
Investigation and Corrective Action .........IV.N.11
Vehicle Maintenance ...................................IV.N.12
Recordkeeping and Statistics ....................IV.N.13
Employee Motivation ........................................IV.N.15
Summary ............................................................IV.N.15
DISASTER PLANNING ............................................IV.Q.1
Planning Steps.....................................................IV.Q.2
Disaster Plan Example Exhibit ..........................IV.Q.4
MEDIA MANAGEMENT IN EMERGENCY
SITUATIONS..............................................................IV.R.1
Selecting a Spokesperson .................................IV.R.2
Communicating with Reporters........................IV.R.5
Summary ..............................................................IV.R.5
GENERAL GUIDELINES FOR
CONSTRUCTION...................................................... IV.T.1
Clothing and Personal Protective
Equipment.......................................................... IV.T.1
Housekeeping ...................................................... IV.T.2
Ladders ................................................................. IV.T.2
Welding and Burning ......................................... IV.T.4
Maintenance, Use, and Storage of Tools ....... IV.T.7
Scaffolds ............................................................... IV.T.8
Storing and Handling of Material .................. IV.T.12
Temporary Wiring, Lighting, and Heating.... IV.T.12
EMPLOYMENT PRACTICES LIABILITY
LOSS CONTROL .....................................................IV.W.1
General Recommendations...............................IV.W.1
Hire Carefully.................................................IV.W.1
Test for Skills.................................................IV.W.2
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CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Test for Character ........................................ IV.W.2
Use Protective Legal Documents.............. IV.W.3
Require Employees To Sign Mandatory
Arbitration Agreements ............................ IV.W.3
Train Managers and Employees in
Human Relations ....................................... IV.W.4
Be Proactive in Identifying Problems ....... IV.W.4
Acknowledge Problems Immediately ....... IV.W.5
Implement a Procedure for
Providing References ................................ IV.W.5
Maintain Employee Privacy ........................ IV.W.5
Obtain Help When Needed ....................... IV.W.6
Use Only Established Agencies When Hiring
Leased or Temporary Employees ........... IV.W.6
Preventing Discrimination Claims................... IV.W.6
Preventing Sexual Harassment Claims .......... IV.W.7
Developing a Sexual Harassment Policy . IV.W.8
Communicating the Policy ......................... IV.W.9
Training Supervisors and Employees........ IV.W.9
Developing a Confidential
Complaint Procedure ................................ IV.W.9
EXPANDED CONTENTS
Investigating Complaints............................. IV.W.9
Use Caution in Documenting
Investigations............................................ IV.W.10
Take Appropriate Actions Following
Investigations............................................ IV.W.10
Continuously Review the Policy .............. IV.W.10
Preventing Wrongful Termination Claims.... IV.W.10
Interviewing and Background
Checking ................................................... IV.W.10
Avoiding Assurances of
Permanent Employment ......................... IV.W.11
Using Legal Counsel To Review
Employer-Produced Material.................. IV.W.12
Include a Management Rights Provision
in Written Material ................................. IV.W.12
Periodic Performance Evaluations........... IV.W.12
Record Warnings in Personnel Files ...... IV.W.13
Avoid Knee-Jerk Terminations ................. IV.W.13
Consider Alternatives to Termination..... IV.W.14
Be Consistent in Making Termination
Decisions................................................... IV.W.14
Educate Managers in the Companys
Termination Procedures.......................... IV.W.14
When and Where To Fire ........................ IV.W.15
Have the Appropriate Paperwork
Ready......................................................... IV.W.15
Using Counseling, Employee Assistance,
and Outplacement Programs ................ IV.W.15
Preventing Claims Associated with
Special Employment Situations.................. IV.W.16
Claims Associated with Stock Options . IV.W.16
Preventing Retaliation Claims .................. IV.W.18
Preventing Claims from
Corporate Downsizing ............................ IV.W.19
Reducing Legal Liability ...................... IV.W.20
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Reducing Anger and Negative
Emotions in Employees ..................... IV.W.21
Preventing Claims from Electronic
Exposures .................................................. IV.W.21
Establish Cyber Language
Guidelines ............................................ IV.W.22
Educate Your Employees ..................... IV.W.22
Incorporate Harassment and
Discrimination Policies into the
Companys Written E-Mail Policy .... IV.W.22
CHAPTER V: RISK FINANCING
OVERVIEW OF RISK FINANCING ........................ V.A.1
EXPERIENCE RATING .............................................. V.C.1
Eligibility ................................................................ V.C.1
Experience Rating Period ................................... V.C.2
Combinability................................................... V.C.3
Majority Ownership .................................. V.C.3
Change in Ownership.................................... V.C.5
Continuation of Experience ..................... V.C.6
Joint Ventures............................................ V.C.7
Wrap-Up Construction Projects.................... V.C.7
Leased Employees ............................................... V.C.8
Experience Modifier Calculation ....................... V.C.8
Recalculation of Experience
Modification ................................................ V.C.11
Preliminary Modifications............................ V.C.12
Contingent Modifications ............................ V.C.12
Changes in Experience Modifications ...... V.C.12
Interstate Experience Rating............................ V.C.12
GUARANTEED COST INSURANCE....................... V.D.1
Premium Discounts ............................................. V.D.2
Schedule Rating................................................... V.D.2
Experience Rating................................................ V.D.2
Deductibles ........................................................... V.D.2
Liability Deductibles....................................... V.D.2
Workers Compensation Deductibles........... V.D.3
LOSS SENSITIVE INSURANCE PLANS ................V.E.1
Retrospective Rating Plans .................................V.E.1
Basic Premium.................................................V.E.3
Converted Losses ............................................V.E.3
Incurred Losses ..........................................V.E.4
Loss Conversion Factor.............................V.E.4
Excess Loss Premium .....................................V.E.5
Retrospective Development
Premium (Optional) ......................................V.E.6
Tax Multiplier....................................................V.E.6
Maximum Premium.........................................V.E.6
Minimum Premium .........................................V.E.7
Retrospective Period .......................................V.E.8
Analyzing Retrospective Plans............................V.E.8
Canceling a Retro...............................................V.E.11
Dividend and Retention Plans..........................V.E.12
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Sliding Scale Dividend Plans ......................V.E.13
Retention Plans ..............................................V.E.13
Retention Plans versus Retros ...............V.E.14
CASH FLOW PLANS ................................................V.F.1
Expected Loss Retrospective Rating .................V.F.1
Paid Loss Retrospective Rating ..........................V.F.1
Paid Loss Retro Calculation Example ..........V.F.4
Loss of Use Charge. .......................................V.F.5
Cash Flow Implications of Paid
Loss Retros.....................................................V.F.5
Compensating Balance Plans .............................V.F.6
Cash Flow Implications of
Compensating Balance Plans .....................V.F.7
LARGE DEDUCTIBLE PLANS................................. V.G.1
Program Structure................................................ V.G.2
Payment Options ............................................ V.G.2
Collateralization............................................... V.G.3
Defense Costs ................................................. V.G.3
Taxes and Assessments................................. V.G.4
Deductible Plan Buy Outs............................. V.G.5
State Regulations............................................ V.G.5
Insurer Filing Requirements ............................. V.G.10
Advantages of Large Deductible Plans ......... V.G.13
State Approval Not Required ..................... V.G.14
Claims Handling Services ........................... V.G.14
Low Start-Up Costs ...................................... V.G.14
Incentive for Loss Control........................... V.G.14
Disadvantages of Large Deductible Plans..... V.G.15
Risk of High Losses ..................................... V.G.15
Risk of High Service Charges
and Assessments ....................................... V.G.16
Defense Costs ............................................... V.G.16
THE ALTERNATIVE MARKET ................................. V.H.1
Growth in Alternative Markets .......................... V.H.1
Risk Retention Groups ........................................ V.H.2
Regulation of RRGs........................................ V.H.3
The NAIC Model Act for
Risk Retention Groups ........................... V.H.3
State of Domicile ...................................... V.H.4
Day-to-Day Operations .............................. V.H.4
Other Regulatory Requirements.............. V.H.5
Membership Criteria ...................................... V.H.6
Advantages and Disadvantages of RRGs... V.H.6
Evaluation Criteria .......................................... V.H.7
Group Self-Insurance for
Workers Compensation.................................... V.H.9
Regulation of Workers Compensation
Self-Insurance Groups ............................... V.H.10
Application to the State ........................ V.H.10
Bylaws and Incorporation Procedures. V.H.11
Premium Determination ......................... V.H.11
Eligibility Requirements................................ V.H.11
Advantages and Disadvantages ................. V.H.11
Excess Insurance .......................................... V.H.13
AGC Self-Insured Workers
Compensation Funds...................................... V.H.13
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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

Contents/Index
15 sdfgh
 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Covered Autos .......................................... VI.B.7
Who Is an Insured................................... VI.B.8
Out of State Coverage Extensions...... VI.B.10
Exclusions ..................................................... VI.B.10
Contractual Liability Exclusion ............. VI.B.11
Owned Property/Care, Custody
or Control Exclusion............................ VI.B.12
Employee Indemnification/
Employers Liability Exclusion............. VI.B.13
Fellow Employee Exclusion .................. VI.B.13
Handling/Movement of
Property Exclusions ............................. VI.B.16
Mobile Equipment Exclusion................ VI.B.16
Completed Operations Exclusion ........ VI.B.21
Pollution Exclusion ................................. VI.B.21
Limit of Insurance ....................................... VI.B.22
Physical Damage Coverage ............................ VI.B.23
Exclusions ..................................................... VI.B.24
Limits of Insurance ..................................... VI.B.25
Deductibles................................................... VI.B.26
Auto Medical Payments Insurance ................ VI.B.26
Uninsured and Underinsured
Motorists Coverage ........................................ VI.B.27
No-Fault Auto Insurance .................................. VI.B.29
Policy Conditions .............................................. VI.B.29
Duties in the Event of Accident,
Claim, Suit, or Loss ................................. VI.B.30
Other Insurance ........................................... VI.B.31
Subrogation .................................................. VI.B.32
Cancellation .................................................. VI.B.32
Coverage Territory ....................................... VI.B.33
Endorsements and Modifications .................. VI.B.33
Standard Endorsements ............................. VI.B.33
Individual Named Insured
Endorsement ........................................ VI.B.33
Drive Other Car Coverage.................... VI.B.34
Employees as Insureds.......................... VI.B.35
Employee as Lessor............................... VI.B.35
Employee Hired Autos........................... VI.B.35
Additional InsuredLessor.................... VI.B.36
Hired Autos Specified as
Covered Autos You Own.................... VI.B.36
Broadened Pollution Coverage............. VI.B.37
Motor Carrier Act Coverage................. VI.B.37
Stated Amount Endorsement............... VI.B.37
Limited Specified Causes of
Loss Coverage...................................... VI.B.38
Limited Mexico Coverage..................... VI.B.39
Fellow Employee Coverage .................. VI.B.39
Manuscript Endorsements ......................... VI.B.40
Modified Notice of Occurrence ........... VI.B.40
Extended Notice of Cancellation,
Nonrenewal, or Policy Change ......... VI.B.41
Clarification of Punitive Damages....... VI.B.41
Car Rental Concerns ........................................ VI.B.41
Classification...................................................... VI.B.42
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42ND REPRINT
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Loss Control Techniques ................................ VI.B.44
Drivers Records and Licenses.................. VI.B.44
Proper Maintenance of Vehicles............... VI.B.44
Loss Records ................................................ VI.B.45
AUTOMOBILE COVERAGE CHECKLIST .......... VI.B.101
GENERAL LIABILITY INSURANCE ....................... VI.C.1
Bodily Injury and Property Damage
(Coverage A) ..................................................... VI.C.2
Insuring Agreement....................................... VI.C.3
Legal Obligation for Damages............... VI.C.3
Covered Damages .................................... VI.C.3
Known Loss Restrictions......................... VI.C.4
Caused by an Occurrence................... VI.C.5
Coverage Territory .................................... VI.C.6
Compliance with Policy Conditions ...... VI.C.6
Exclusions........................................................ VI.C.7
Contractual Liability Exclusion ............... VI.C.8
Employers Liability Exclusion ............... VI.C.10
Pollution Exclusion ................................. VI.C.11
CGL Pollution Endorsements................ VI.C.15
Aircraft, Automobile, or
Watercraft Exclusion ........................... VI.C.18
Mobile Equipment Transportation
Exclusion ............................................... VI.C.24
Damage to Property Exclusion ............ VI.C.25
Damage to Your Work Exclusion ........ VI.C.30
Impaired Property Exclusion.............. VI.C.33
Fire Legal Liability Coverage ................ VI.C.36
Personal and Advertising Injury
(Coverage B).................................................... VI.C.37
Insuring Agreement..................................... VI.C.37
Exclusions...................................................... VI.C.39
Contractual Liability Exclusion ............. VI.C.40
Pollution Exclusion ................................. VI.C.40
Medical Payments (Coverage C) .................... VI.C.40
Exclusions...................................................... VI.C.41
Supplementary Payments
(Coverages A and B) ..................................... VI.C.41
Defense of an Indemnitee......................... VI.C.41
Who Is an Insured............................................ VI.C.43
Broad Form Named Insured
Endorsement .............................................. VI.C.46
Joint Ventures .............................................. VI.C.47
Injury to a Fellow Employee ..................... VI.C.47
Additional Insured Endorsements............. VI.C.48
Owners, Lessees, or Contractors ........ VI.C.50
Engineers, Architects, or Surveyors.... VI.C.54
Equipment Lessor................................... VI.C.55
Special Considerations
Additional Insureds.............................. VI.C.56
Limits of Insurance........................................... VI.C.58
Products-Completed Operations Hazard ... VI.C.60
Designated General Aggregate Limit
Endorsement .............................................. VI.C.62
Designated Project or Premises
Endorsement .............................................. VI.C.63
41ST REPRINT
AUGUST 2007
Other Common CGL Endorsements
Construction ....................................................VI.C.64
Unintentional Failure To
Disclose Hazards .......................................VI.C.64
Notice Requirements ...................................VI.C.65
Extended Notice of Cancellation,
Nonrenewal, or Policy Change..........VI.C.65
Modified Notice of Occurrence ...........VI.C.66
Employee Benefits Liability ........................VI.C.67
Wrap-Up Exclusion Endorsement..............VI.C.67
Mold Exclusion.............................................VI.C.68
EIFS Exclusion ..............................................VI.C.69
Terrorism Exclusions ....................................VI.C.72
Explosion, Collapse, Underground Property
Damage Exclusion.....................................VI.C.72
Construction Management Errors and
Omissions Exclusion .................................VI.C.73
Professional Liability Exclusion..................VI.C.74
Employment-Related Practices
Exclusion.....................................................VI.C.75
Discontinued Operations..................................VI.C.76
GENERAL LIABILITY COVERAGE
CHECKLIST ...........................................................VI.C.101
INSURING JOINT VENTURE LIABILITY..............VI.D.1
Background on Joint Venture Coverage .........VI.D.1
Insuring Joint Ventures ......................................VI.D.2
Current Joint Ventures ..................................VI.D.2
Past Joint Ventures
(Completed Operations) .............................VI.D.3
Blanket CoverageAll Losses ......................VI.D.5
Rating Considerations ...................................VI.D.7
CONSTRUCTION DEFECTS COVERAGE............. VI.E.1
Common Types of Claims ................................. VI.E.2
Basis for Liability ........................................... VI.E.4
Coverage Issues .................................................. VI.E.7
Elements of a Covered Loss........................ VI.E.7
Is Defective Work an Occurrence? ... VI.E.8
Is Defective Work
Property Damage? ........................... VI.E.10
Did the Property Damage Occur
During the Policy Period? ................. VI.E.11
Does an Exclusion Apply? .................... VI.E.15
Summary of Coverage under
Basic CGL Policy Form ............................ VI.E.21
Insurance Industry Response .......................... VI.E.22
EIFS Exclusions ............................................ VI.E.24
Mold Exclusions ........................................... VI.E.27
Earth Movement Exclusion......................... VI.E.28
Residential Construction Exclusions ......... VI.E.28
Subcontractor Exclusion
Endorsements ............................................ VI.E.28
Contractor Limitations Endorsements ...... VI.E.29
Additional Insured Issues ................................ VI.E.30
Defense of an Additional Insured ............ VI.E.32
Right to Repair Statutes ............................... VI.E.34
Contents/Index
17
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
DIRECTORS AND OFFICERS
LIABILITY INSURANCE........................................... VI.F.1
D&O Exposures.................................................... VI.F.1
Duty of Loyalty ............................................... VI.F.2
Duty of Care ................................................... VI.F.3
Derivative Suits .............................................. VI.F.3
Securities Law Violations ............................. VI.F.4
Other Statutory Claims ................................ VI.F.5
D&O Insurance Coverage for
Privately Held Companies............................... VI.F.6
Potential Claimants ........................................ VI.F.7
Minority Shareholders.............................. VI.F.7
Employees .................................................. VI.F.7
Claims by Third Parties ........................... VI.F.7
D&O Insurance .................................................... VI.F.8
Directors and Officers Liability Coverage
(Side A) ...................................................... VI.F.9
Definition of Wrongful Acts....................... VI.F.10
Who is Covered? .................................... VI.F.11
Covered Organizations ........................... VI.F.12
Covered Losses ....................................... VI.F.12
EXPANDED CONTENTS
Corporate Reimbursement Coverage
(Side B) .................................................... VI.F.13
Requirement To Indemnify Retention
Amounts ................................................ VI.F.14
Entity Coverage (Side C) ......................... VI.F.14
Exclusions ........................................................... VI.F.15
Dishonesty Exclusions ................................. VI.F.15
Wage and Hour Claims Exclusion ............ VI.F.16
Insured versus Insured Exclusion.............. VI.F.16
Personal Profit Exclusion ............................ VI.F.17
Short Swing Profits Exclusion ................ VI.F.17
Return of Remuneration Exclusion ........... VI.F.17
ERISA Act Liability Exclusion..................... VI.F.18
Loss Insured under Another Policy .......... VI.F.18
Employment Practices
Liability Exclusion ...................................... VI.F.19
Pollution Exclusion ....................................... VI.F.19
Security Holder Exclusion........................... VI.F.20
Bodily Injury, Property Damage, and
Personal Injury Exclusion ......................... VI.F.20
Prior/Pending Litigation Exclusion............ VI.F.21
Failure To Insure Exclusion......................... VI.F.22
Nonimputation Provisions in
Policy Exclusions............................................. VI.F.22
Insurers Defense Obligations ......................... VI.F.23
Duty To Defend ............................................ VI.F.23
Defense within Limits ................................. VI.F.24
Severability of Interests.................................... VI.F.24
Policy Limits, Deductibles,
and Retentions ................................................ VI.F.26
Retentions...................................................... VI.F.27
Securities Claims .................................... VI.F.28
Coinsurance .................................................. VI.F.28
Cancellation and Nonrenewal ......................... VI.F.28
Subrogation................................................... VI.F.29
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Subrogation Against Insureds .............VI.F.30
Other Insurance ............................................VI.F.30
Arbitration Provisions...................................VI.F.31
Presumptive Indemnification Provision.....VI.F.31
Side A-Only D&O Policies ................................VI.F.31
Distinctive Aspects of Private Company
D&O Coverage Forms ....................................VI.F.33
Packaged Approach .....................................VI.F.33
Flexibility in Limits and Retentions ...........VI.F.33
Broad Entity Coverage.................................VI.F.33
Duty To Defend ............................................VI.F.33
Cancellation and
Nonrenewal Provisions..............................VI.F.34
Extended Reporting Provisions ..................VI.F.34
WORKERS COMPENSATION AND EMPLOYERS
LIABILITY INSURANCE .......................................... VI.H.1
General Section................................................... VI.H.3
Who Is An Insured ....................................... VI.H.3
Additional Insureds .................................. VI.H.4
Covered Workplaces ..................................... VI.H.4
Definitions Regarding Applicable Law....... VI.H.5
Part OneWorkers Compensation
Insurance ........................................................... VI.H.5
Subcontractors ............................................... VI.H.8
Part TwoEmployers Liability Insurance......... VI.H.8
Coverage Criteria........................................... VI.H.9
Exclusions ..................................................... VI.H.10
Contractual Liability ............................... VI.H.11
Illegally Employed Persons ................... VI.H.11
Injuries Sustained in
Foreign Countries ................................ VI.H.11
Employment-Related Practices ............. VI.H.13
Injuries Covered under a
Federal Compensation Act ................VI.H.13
Limits of Liability......................................... VI.H.16
Part ThreeOther States Insurance............... VI.H.17
Endorsements .................................................... VI.H.18
Stop Gap (Employers Liability)
Endorsement.............................................. VI.H.18
Longshore and Harbor Workers Compensation
Act Coverage Endorsement .................... VI.H.20
Outer Continental Shelf Lands Act
Endorsement.............................................. VI.H.21
Maritime Coverage Endorsement ............. VI.H.21
Defense Base Act Coverage
Endorsement.............................................. VI.H.22
Voluntary Compensation Endorsement ... VI.H.22
Sole Proprietors, Partners, Officers,
and Others ................................................. VI.H.23
Joint Venture as Insured Endorsement ... VI.H.23
Alternate Employer Endorsement............. VI.H.23
Employee Leasing Endorsements ............. VI.H.24
Waiver of Subrogation Endorsement....... VI.H.27
Designated Workplaces Exclusion
Endorsement.............................................. VI.H.28
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18
46TH REPRINT
JUNE 2008
Broad Form Named Insured
Endorsement ..............................................VI.H.28
Modified Notice of
Injury Endorsement ..................................VI.H.29
Extended Notice of Cancellation
Endorsement ..............................................VI.H.29
Extended Protection (Monopolistic States)
Endorsement ..............................................VI.H.30
Terrorism Endorsement...............................VI.H.32
WORKERS COMPENSATION COVERAGE
CHECKLIST ...........................................................VI.H.101
TERRORISM INSURANCE......................................VI.K.1
TRIA Provisions ...................................................VI.K.1
Covered Acts ..................................................VI.K.2
Payment of Losses ........................................VI.K.3
Cost..................................................................VI.K.4
Terrorism Endorsements ....................................VI.K.4
Commercial Property Endorsements..........VI.K.5
Stand-Alone Terrorism Coverage ...........VI.K.7
General Liability Endorsements...................VI.K.8
Conditional and
Post-TRIA Endorsements .......................VI.K.12
Workers Compensation Endorsements....VI.K.13
UMBRELLA LIABILITY INSURANCE ................... VI.M.1
Umbrella Terminology ....................................... VI.M.1
Covered Damages.............................................. VI.M.2
Occurrence versus Offense................... VI.M.5
Indemnify or Pay on Behalf ....................... VI.M.6
Duty to Defend .................................................. VI.M.7
Self-Insured Retentions...................................... VI.M.7
Who is An Insured ............................................ VI.M.8
Coverage Territory............................................ VI.M.10
Limits of Liability ............................................. VI.M.10
Drop Down Provisions ............................... VI.M.11
Defense Costs ............................................. VI.M.12
Exclusions.......................................................... VI.M.13
Expected or Intended Loss....................... VI.M.15
Statutory Liabilities ..................................... VI.M.16
Discrimination.............................................. VI.M.16
Property Damage Exclusions ................. VI.M.17
Owned Property .................................... VI.M.18
Alienated Premises ............................... VI.M.18
Property in the Insureds Care,
Custody, or Control ............................ VI.M.19
Damage to Your Product and
Your Work ......................................... VI.M.19
Impaired Property.................................. VI.M.20
Pollution........................................................ VI.M.20
Advertising Injury ....................................... VI.M.20
Aircraft/Watercraft Liability ...................... VI.M.22
Employment Practices................................ VI.M.22
Asbestos....................................................... VI.M.22
Cross Liability .............................................. VI.M.22
Contractors Limitation Endorsements .... VI.M.23
Terrorism....................................................... VI.M.25
Other Insurance Provisions.......................... VI.M.25
46TH REPRINT
SEPTEMBER 2008
Cancellation Provisions ...................................VI.M.26
Maintenance of Underlying Insurance .........VI.M.26
Notice of Occurrence ......................................VI.M.26
Waivers of Subrogation ..................................VI.M.27
How Much Liability Insurance To Buy.........VI.M.27
UMBRELLA LIABILITY COVERAGE
CHECKLIST ..........................................................VI.M.101
COMMERCIAL PROPERTY INSURANCE ............VI.O.1
Standard, Insurer, or Manuscript Forms.........VI.O.3
Policy Structure ...................................................VI.O.3
Insuring Agreement .......................................VI.O.4
Covered Property ...........................................VI.O.4
Outside Property Limit ............................VI.O.6
Excluded Property ....................................VI.O.6
Property Subject to Limitations .............VI.O.7
Personal Property of Others...................VI.O.8
Property Under Construction..................VI.O.8
Covered Locations .........................................VI.O.8
Unscheduled Locations ...........................VI.O.9
Newly Acquired Locations......................VI.O.9
Property in Transit....................................VI.O.9
Additional Coverages .............................VI.O.10
Covered Causes of Loss.............................VI.O.12
Named Perils Coverage.........................VI.O.12
All Risks Coverage .................................VI.O.13
Flood Exclusion.......................................VI.O.16
Earthquake Exclusion.............................VI.O.17
Building Ordinance Enforcement
Exclusion................................................VI.O.17
Collapse Exclusion..................................VI.O.18
Mold Exclusion........................................VI.O.18
Terrorism Exclusion ................................VI.O.18
Other Important Provisions ........................VI.O.19
Vacancy ....................................................VI.O.19
Protective Safeguards............................VI.O.19
Cancellation .............................................VI.O.20
Property Valuation ..................................VI.O.20
Coinsurance.............................................VI.O.21
Coinsurance Penalty Illustration...........VI.O.21
Agreed Value Provision .........................VI.O.22
Limit Structure ........................................VI.O.22
Deductibles..............................................VI.O.23
Time Element Coverages .................................VI.O.24
Time Element Exposures ............................VI.O.24
Loss of Income or Rents ......................VI.O.24
Extra Expense .........................................VI.O.25
Contingent Business Interruption
and Extra Expense ..............................VI.O.25
Insuring the Time Element Exposure.......VI.O.25
Extra Expense Coverage.............................VI.O.26
What Is Covered.....................................VI.O.26
Valuation and Indemnity Period ..........VI.O.26
Monthly Limitation .................................VI.O.27
Determining Limits of Insurance .........VI.O.27
Rental Value Coverage................................VI.O.28
What Is Covered.....................................VI.O.28
Contents/Index
19
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Monthly Limitation on
Loss Recovery...................................... VI.O.28
Contingent Extra Expense Coverage ....... VI.O.29
Separate Coverages To Consider .................. VI.O.29
Valuable Papers and Records................... VI.O.29
Accounts Receivable .................................. VI.O.30
Package Policies ............................................... VI.O.30
COMMERCIAL PROPERTY INSURANCE
CHECKLIST........................................................... VI.O.101
CONTRACTORS EQUIPMENT .............................. VI.Q.1
Covered Property................................................ VI.Q.1
Definition of Contractors Equipment ........ VI.Q.1
Office and Utility Trailers ....................... VI.Q.4
Tools, Accessories, and Spare Parts.... VI.Q.4
Property of Others........................................ VI.Q.5
Newly Acquired Equipment ........................ VI.Q.6
Excluded Property .............................................. VI.Q.6
Property Loaned or Rented to Others ...... VI.Q.7
Vehicles........................................................... VI.Q.7
Waterborne Property .................................... VI.Q.8
Covered Locations.............................................. VI.Q.9
EXPANDED CONTENTS
Debris Removal and Pollutant Cleanup.......... VI.Q.9
Additional Coverages....................................... VI.Q.10
Leased Equipment ...................................... VI.Q.10
Borrowed Equipment .................................. VI.Q.11
Rental Reimbursement ............................... VI.Q.12
Employees Tools and Work Clothing ...... VI.Q.13
Covered Perils ................................................... VI.Q.13
Named Perils Coverage ............................. VI.Q.13
All Risks Coverage...................................... VI.Q.14
Crane or Derrick Booms............................ VI.Q.16
Weight of Load ........................................... VI.Q.17
Terrorism Coverage..................................... VI.Q.17
Limits.................................................................. VI.Q.18
Deductibles........................................................ VI.Q.19
Valuation ............................................................ VI.Q.20
Coinsurance....................................................... VI.Q.20
CONTRACTORS EQUIPMENT COVERAGE
CHECKLIST........................................................... VI.Q.101
CRIME INSURANCE ................................................VI.R.1
Standard Commercial Crime
Insurance Programs .........................................VI.R.1
Contractors Crime Loss Exposures .................VI.R.2
Employee Dishonesty Insurance .......................VI.R.3
Covered Property ...........................................VI.R.4
Covered Causes of Loss...............................VI.R.5
Covered Employees .......................................VI.R.6
Prior Dishonesty Provisions..........................VI.R.8
Joint Insured Provision ............................VI.R.8
Employee Benefit Plans ................................VI.R.8
Coverage Period: Loss Sustained
versus Discovery Coverage......................VI.R.10
Loss Sustained Coverage ......................VI.R.10
Discovery Coverage................................VI.R.11
Limits and Deductibles ...............................VI.R.11
Exclusions......................................................VI.R.11
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Dishonest Acts of Insured,
Partners, Etc......................................... VI.R.12
Known Prior Dishonesty ....................... VI.R.12
Confidential Information........................ VI.R.13
Indirect Loss............................................ VI.R.13
Legal Expenses....................................... VI.R.13
Other Exclusions..................................... VI.R.13
Kidnap, Ransom, and Extortion Coverage.... VI.R.14
Insuring Agreements................................... VI.R.14
Kidnap/Ransom and Extortion
Direct Loss............................................ VI.R.14
Kidnap/Ransom and Extortion
Expenses Incurred ............................... VI.R.15
Detention or Hijack ............................... VI.R.16
In-Transit Delivery of Property ............. VI.R.16
Exclusions ..................................................... VI.R.16
Coverage Territory ....................................... VI.R.17
Coverage Period........................................... VI.R.17
Limits and Deductibles............................... VI.R.17
Confidentiality Agreement.......................... VI.R.18
Notice Requirements................................... VI.R.18
Commercial Crime Endorsements ................. VI.R.18
COMMERCIAL CRIME COVERAGE
CHECKLIST ........................................................... VI.R.101
CONTRACTORS POLLUTION LIABILITY
INSURANCE...............................................................VI.S.1
Pollution Coverage under the CGL...................VI.S.2
Contractors Pollution Liability Markets ............VI.S.2
Coverage Triggers ................................................VI.S.4
Occurrence Triggers.......................................VI.S.5
Progressive Injury or Damage ................VI.S.7
Claims-Made Coverage Issues ...................VI.S.10
Extended Reporting Periods..................VI.S.11
Discovery Provisions ...............................VI.S.13
Covered Pollution Incidents..............................VI.S.14
Covered Damages .............................................VI.S.15
Coverage Territory..............................................VI.S.17
Covered Sites .....................................................VI.S.18
Covered Operations ...........................................VI.S.19
Covered Persons/Entities..................................VI.S.20
Employees......................................................VI.S.20
Clients of the Named Insured ...................VI.S.21
Joint Ventures ...............................................VI.S.22
Newly Acquired Entities ..............................VI.S.23
Defense of Claims .............................................VI.S.23
Consent To Settle Provisions .....................VI.S.24
Deductibles and Self-Insured Retentions.......VI.S.26
Mediation Credit...........................................VI.S.27
Limits ...................................................................VI.S.27
Notice of Claims ................................................VI.S.28
Notice of Cancellation ......................................VI.S.29
Waivers of Subrogation....................................VI.S.30
Other Insurance .................................................VI.S.32
Separation of Insureds......................................VI.S.35
Exclusions............................................................VI.S.35
Expected or Intended Acts.........................VI.S.38
sdfgh Contents/Index
20
44TH REPRINT
SEPTEMBER 2008
Coverage for Innocent Insureds .......... VI.S.38
Known Conditions ....................................... VI.S.38
Completed Operations ................................ VI.S.40
Naturally Occurring Substances................ VI.S.40
Transportation Exposures ........................... VI.S.41
Off-Site Storage or Disposal of Wastes .. VI.S.42
Damage to Property ................................... VI.S.42
Contractual Liability..................................... VI.S.43
Insured versus Insured Exclusions............ VI.S.45
Employers Liability....................................... VI.S.46
CONTRACTORS POLLUTION LIABILITY
COVERAGE CHECKLIST..................................... VI.S.101
CONTRACTORS POLLUTION LIABILITY
POLICY ANALYSES.................................................. VI.T.1
ACE Insurance Company........................ VI.T, ACE1
American International Surplus Lines
Insurance ........................................... VI.T, AISLIC1
American Safety Indemnity
Company.............................. VI.T, American Safety1
Arch Specialty Insurance Company ..... VI.T, Arch1
Chubb Insurance Company..................VI.T, Chubb1
CNA Insurance Company .......................VI.T, CNA1
Evanston Insurance Company......... VI.T, Evanston1
Everest Reinsurance Company .......... VI.T, Everest1
Freberg Environmental, Inc.................VI.T, Freberg1
Liberty Mutual Insurance
Company.................................VI.T, Liberty Mutual1
St. Paul Travelers Insurance
Company.............................VI.T, St. Paul Travelers1
XL Insurance Company..............................VI.T, XL1
Zurich Insurance Company ..................VI.T, Zurich1
SUBCONTRACTOR DEFAULT INSURANCE........VI.U.1
Covered Persons/Entities...................................VI.U.2
Coverage Trigger .................................................VI.U.2
Which Policy Is Triggered? ..........................VI.U.3
Policy Period ........................................................VI.U.3
Covered Territory.................................................VI.U.4
Covered Loss .......................................................VI.U.4
Claims Process...............................................VI.U.5
Time Limits for Filing Claims.................VI.U.5
Interim Payments......................................VI.U.6
Exclusions.............................................................VI.U.6
Contracts Covered by a Bond.....................VI.U.7
Prior Notice of Default .................................VI.U.7
Acquired Contracts........................................VI.U.7
Material Breach of Warranty
or Covenant .................................................VI.U.7
Terrorism..........................................................VI.U.8
Professional Negligence
on the Part of the Insured......................VI.U.10
Cost .....................................................................VI.U.10
Deductibles and Copays ............................VI.U.12
Multiple Defaults by a Subcontractor......VI.U.14
Limits...................................................................VI.U.14
Multiple Defaults by a Subcontractor......VI.U.15
Terms, Conditions, and Responsibilities .......VI.U.16
37TH REPRINT
SEPTEMBER 2008
Qualification Procedures.............................VI.U.16
Notice of Default .........................................VI.U.16
Notice of Change in Composition............VI.U.17
Other Insurance ...........................................VI.U.17
Cancellation ..................................................VI.U.17
Underwriting Criteria........................................VI.U.18
BUSINESSOWNERS POLICY................................VI.W.1
Contractor Eligibility...........................................VI.W.1
BOP Coverage versus Commercial
Property Coverage...........................................VI.W.5
Business Income and
Extra Expense Coverage ...........................VI.W.5
Valuation.........................................................VI.W.6
Categories of Covered Property.................VI.W.6
Computers and Electronic Data.................VI.W.6
Additional Coverages/
Coverage Extensions .................................VI.W.7
Covered Causes of Loss..............................VI.W.8
Limits ..............................................................VI.W.8
Optional Coverages ......................................VI.W.8
BOP Coverage versus CGL Coverage.............VI.W.9
New Organizations Coverage .....................VI.W.9
Coverage Categories ....................................VI.W.9
Limit Structure.............................................VI.W.10
Professional Liability Exclusion.................VI.W.12
Nuclear Energy Liability Exclusion...........VI.W.13
Policy Conditions..............................................VI.W.13
BOP Endorsements ..........................................VI.W.14
BUSINESSOWNERS COVERAGE
CHECKLIST ..........................................................VI.W.101
CONSTRUCTION INSURANCE CHECKLISTS .... VI.Z.1
CHAPTER VII:
BUILDERS RISK INSURANCE
BUILDERS RISK AND INSTALLATION
FLOATER COVERAGE............................................ VII.A.1
Builders Risk Coverage Forms........................ VII.A.2
Importance of Construction
Contract Review.............................................. VII.A.2
Responsibility for Purchasing
Builders Risk Policy........................................ VII.A.3
Covered Parties.................................................. VII.A.3
Covered Property............................................... VII.A.4
Temporary Structures .................................. VII.A.6
Property of Others....................................... VII.A.6
Property Included in Values Reported
to Insurer .................................................... VII.A.6
Office Trailers ............................................... VII.A.6
Other Property.............................................. VII.A.7
Excluded Property ............................................. VII.A.8
Existing Property .......................................... VII.A.8
Contractors Tools and Equipment............ VII.A.9
Other Excluded Property .......................... VII.A.10
Contents/Index
21
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Covered Locations........................................... VII.A.10
Additional Coverages...................................... VII.A.12
Covered Causes of Loss ................................ VII.A.14
Theft Exclusions ......................................... VII.A.16
Wear and Tear, Etc.................................... VII.A.16
Fungus, Wet or Dry Rot,
and Bacteria............................................. VII.A.16
Asbestos Materials .................................... VII.A.17
Ordinance or Law ...................................... VII.A.18
Flood and Earthquake............................... VII.A.19
Settling, Cracking, Expansion,
or Contraction .......................................... VII.A.19
Equipment Breakdown Exclusions .......... VII.A.20
Testing Exclusions ...................................... VII.A.20
Faulty Workmanship or Materials........... VII.A.23
Design Error................................................ VII.A.23
Collapse ....................................................... VII.A.23
Loss Covered under Guarantee,
Warranty, or Obligation .......................... VII.A.25
Manufacturers and Suppliers ............. VII.A.26
Contractors............................................. VII.A.26
EXPANDED CONTENTS
Architects and Engineers
Professional Services.............................. VII.A.26
Terrorism Coverage ......................................... VII.A.27
Protective Safeguards Endorsements .......... VII.A.28
Termination of Coverage Provisions............. VII.A.28
Occupancy................................................... VII.A.30
Subrogation ...................................................... VII.A.31
Architects, Engineers, Manufacturers,
and Suppliers........................................... VII.A.33
Reporting Form versus Completed Value... VII.A.34
Completed Value Form............................. VII.A.34
Reporting Form .......................................... VII.A.35
Valuation ........................................................... VII.A.35
Coverage for Overhead and Profit.......... VII.A.36
Limits and Deductibles .................................. VII.A.36
Deductibles ................................................. VII.A.37
Delayed Completion/Soft Costs
Coverage ........................................................ VII.A.37
What Is Covered ........................................ VII.A.38
Denial of Access (Civil Authority)........... VII.A.41
Coverage for Expenses
To Reduce Loss ....................................... VII.A.41
Valuation Basis:
Actual Loss Sustained ............................ VII.A.41
Coinsurance and Monthly Limitations ... VII.A.42
Exclusions.................................................... VII.A.42
Limits and Deductibles ............................. VII.A.43
Indemnity Period ........................................ VII.A.43
Arranging Delayed Completion
Coverage ................................................... VII.A.44
Other Construction-Related Coverages........ VII.A.44
Efficacy or Systems Performance
Coverage ................................................... VII.A.45
Force Majeure Coverage .......................... VII.A.45
Stipulated Loss Coverage ......................... VII.A.46
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
BUILDERS RISK COVERAGE CHECKLIST ....VII.A.101
FAULTY WORKMANSHIP EXCLUSION:
PURPOSE AND EFFECT .......................................VII.B.1
Purpose of this Discussion ..............................VII.B.2
History and Development of the
Faulty Workmanship Exclusion .....................VII.B.3
Exploring the Meaning of
Faulty Workmanship .....................................VII.B.6
Case Law ...........................................................VII.B.8
Importance of All Risk Coverage..................VII.B.10
Evaluating the Faulty Workmanship
Exclusion.........................................................VII.B.10
Intent of These Exclusions.............................VII.B.12
Some Additional Cases ................................VII.B.13
Summary and Conclusions ............................VII.B.16
THE AMERICAN LONDON STURGES
FORMS .....................................................................VII.D.1
History of the ALS Forms................................VII.D.1
ALS Forms and Coverage Considerations ....VII.D.1
ALS 1967 Specimen Copy...............................VII.D.3
ALS 1972 Specimen Copy...............................VII.D.7
Paragraph-by-Paragraph Comparison
of ALS 67 and ALS 72 ...............................VII.D.15
Form Comparison of ALS 67 and
ALS 72............................................................VII.D.19
FOREIGN BUILDERS RISK ................................... VII.E.1
Markets................................................................ VII.E.1
Contractors All Risk and Erection All Risk ... VII.E.2
Contractors All Risk ..................................... VII.E.2
General Exclusions .................................. VII.E.2
Coverage Period ...................................... VII.E.2
Material Damage .................................... VII.E.3
Third-Party Liability ................................. VII.E.4
Debris Removal ....................................... VII.E.5
Erection All Risk ........................................... VII.E.5
General Exclusions .................................. VII.E.5
Coverage Period ...................................... VII.E.6
Material Damage .................................... VII.E.6
Third-Party Liability ................................. VII.E.8
Contractors All Risks Specimen Policy.......... VII.E.9
Erection All Risks Specimen Policy.............. VII.E.19
BUILDERS RISK INSURANCE
AND WAIVERS OF SUBROGATION................... VII.P.1
Subrogation Against Insureds ......................... VII.P.1
Parties Protected by the Waiver..................... VII.P.3
Property Subject to the Waiver ...................... VII.P.5
Property Not under Construction .............. VII.P.8
Duration of Waiver ............................................ VII.P.8
Strategies for Avoiding Subrogation ............ VII.P.11
ISSUES IN BUILDERS RISK ................................VII.X.1
Market for Builders Risk Insurance................VII.X.2
Deciding on the Appropriate Forms ..............VII.X.2
The Importance of a Good Foundation ........VII.X.3
Building versus Structure .................................VII.X.4
Temporary Structure versus Contractors
Equipment ........................................................VII.X.5
sdfgh Contents/Index
22
33RD REPRINT
SEPTEMBER 2008
Other Covered Property................................... VII.X.7
External Loss--Meaning and Impact .............. VII.X.7
CHAPTER VIII:
PROFESSIONAL LIABILITY
CONTRACTORS PROFESSIONAL
LIABILITY OVERVIEW .......................................... VIII.A.1
CONTRACTORS DESIGN-BUILD
PROFESSIONAL LIABILITY................................. VIII.B.1
Traditional Design-Bid-Build Method............. VIII.B.1
Design-Build Construction .............................. VIII.B.2
Methods of Selection ................................ VIII.B.4
Unique Characteristics of Design-Build........ VIII.B.5
Single Point Accountability.................. VIII.B.6
Simplicity ................................................ VIII.B.6
Accelerated Delivery............................. VIII.B.6
Quality of the Work.............................. VIII.B.7
Transfer of Design Liability.................. VIII.B.7
Disadvantages of Design-Build................. VIII.B.8
When Is Design-Build Appropriate? ...... VIII.B.10
Insurance Issues............................................. VIII.B.12
Surety Issues .................................................. VIII.B.12
Design-Build Risk Management................... VIII.B.13
COVERAGE FOR DESIGN LIABILITY
IN TRADITIONAL POLICIES ................................VIII.E.1
Builders Risk Coverage ....................................VIII.E.1
General Liability Coverage...............................VIII.E.3
Contractors Professional Liability
Exclusion Endorsements ..........................VIII.E.4
Total Professional Liability
Exclusion ...............................................VIII.E.5
Limited Professional Liability
Exclusion ...............................................VIII.E.5
Umbrella Coverage ...........................................VIII.E.6
Professional Liability Insurance ......................VIII.E.7
Coordinating Coverages...................................VIII.E.8
CONTRACTORS PROFESSIONAL
LIABILITY INSURANCE ....................................... VIII.H.1
Coverage Trigger .............................................. VIII.H.4
Retroactive Date ......................................... VIII.H.4
Notice of Circumstance Provisions.......... VIII.H.4
Extended Reporting Period ....................... VIII.H.6
Covered Organizations ............................... VIII.H.9
Covered Persons ....................................... VIII.H.11
Covered Services ...................................... VIII.H.12
Covered Acts ............................................. VIII.H.14
Who Performed the Services?.......... VIII.H.14
When Were the
Services Performed? ........................ VIII.H.14
Is Negligence Required
To Trigger Coverage? ....................... VIII.H.15
Covered Damages .................................... VIII.H.17
Covered Territory....................................... VIII.H.17
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Policy Term......................................................VIII.H.19
Exclusions ........................................................VIII.H.19
Express Warranties or Guarantees ........VIII.H.23
Faulty Workmanship.................................VIII.H.23
Damage to Owned
Property Exclusion..................................VIII.H.24
Contractual Liability..................................VIII.H.25
Pollution......................................................VIII.H.27
Mold............................................................VIII.H.27
Means and Methods of Construction...VIII.H.28
Defense and Settlement of Claims ............VIII.H.28
Consent To Settle Provisions..................VIII.H.29
Deductibles......................................................VIII.H.30
Mediation Credit..................................VIII.H.33
Limits................................................................VIII.H.33
Policy Conditions............................................VIII.H.35
Notice of a Claim .....................................VIII.H.35
Subrogation................................................VIII.H.37
Other Insurance ........................................VIII.H.39
Valid and Collectible ........................VIII.H.39
Project-Specific Coverage...................VIII.H.40
Prior or Subsequent Insurance .........VIII.H.40
Examples...............................................VIII.H.40
Cancellation ...............................................VIII.H.41
Rating ...............................................................VIII.H.42
Project-Specific Professional
Liability Insurance........................................VIII.H.44
Protective Errors and
Omissions Insurance...................................VIII.H.45
Limits ..........................................................VIII.H.46
CONTRACTORS PROFESSIONAL LIABILITY
CHECKLIST ........................................................VIII.H.101
CONTRACTORS PROFESSIONAL LIABILITY
POLICY ANALYSES................................................ VIII.I.1
ACE Insurance Company ...................... VIII.I, ACE1
Arch Specialty Insurance Company.... VIII.I, Arch1
CNA Insurance Company ..................... VIII.I, CNA1
Lexington Insurance Company .... VIII.I, Lexington1
Liberty Mutual
Insurance Group .................. VIII.I, Liberty Mutual1
RA&MCO ........................................VIII.I, RA&MCO1
The St. Paul Travelers
Insurance Company ........ VIII.I, St. Paul Travelers1
XL Environmental ...................................... VIII.I, XL1
Zurich Insurance Company ................VIII.I, Zurich1
EMPLOYMENT PRACTICES LIABILITY
INSURANCE ...........................................................VIII.O.1
Coverage in Traditional Policies.....................VIII.O.1
General Liability Policies............................VIII.O.2
Coverage ABodily Injury....................VIII.O.3
Coverage BPersonal Injury................VIII.O.3
Umbrella Policy......................................VIII.O.4
Workers Compensation Policy..................VIII.O.5
D&O Liability Policy....................................VIII.O.5
Analysis of EPLI Forms...................................VIII.O.7
Covered Persons and Organizations .......VIII.O.8
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23
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Covered Employees..................................VIII.O.9
Spousal Coverage..................................VIII.O.9
Covered Acts .............................................VIII.O.10
Discrimination.......................................VIII.O.10
Harassment ...........................................VIII.O.11
Wrongful Termination .........................VIII.O.12
Workplace Torts ...................................VIII.O.12
All Risk EPLI Coverage ..................VIII.O.15
Third-Party Liability Coverage ............VIII.O.15
Covered Damages.....................................VIII.O.16
Covered Defense Costs and Claims
Settlement Provisions ............................VIII.O.19
Claims Settlement Procedures ..........VIII.O.19
Counsel Selection................................VIII.O.20
Duty To Defend....................................VIII.O.21
Defense Cost Provisions ..........................VIII.O.21
Covered Territory.......................................VIII.O.22
Policy Limits, Deductibles,
and Coinsurance..........................................VIII.O.22
Policy Limits...............................................VIII.O.22
Selecting Policy Limits .......................VIII.O.22
EXPANDED CONTENTS
Exhaustion of Limits ...........................VIII.O.23
Deductibles ................................................VIII.O.23
Batch Clause ........................................VIII.O.23
Coinsurance Provisions ............................VIII.O.23
Conditions........................................................VIII.O.24
Arbitration Provisions ...............................VIII.O.24
Definition of Claim.................................VIII.O.24
Other Insurance Provisions .....................VIII.O.26
Severability Provision................................VIII.O.26
Exclusions ........................................................VIII.O.27
Criminal, Fraudulent,
or Intentional Injury ...............................VIII.O.27
Americans With Disabilities Act ............VIII.O.28
Strikes and Lockouts ................................VIII.O.29
Wage and Hour Claims .........................VIII.O.29
Bodily Injury...............................................VIII.O.30
Liability under Workers Compensation
and Similar Laws ...................................VIII.O.30
Contractual Liability ................................VIII.O.31
Prior Knowledge of Potential
Claim Incidents .......................................VIII.O.31
Claims Reported to Prior Insurers .........VIII.O.32
Insurance Plan Benefits ...........................VIII.O.32
WARN Act Liability...................................VIII.O.33
Nonpecuniary Relief .................................VIII.O.34
Breach of Express Employment
Contracts..................................................VIII.O.34
Coverage Triggers...........................................VIII.O.35
Value-Added Provisions .................................VIII.O.35
Underwriting Considerations........................VIII.O.36
EMPLOYMENT PRACTICES LIABILITY
INSURANCE CHECKLIST ................................VIII.O.101
CONSTRUCTION MANAGEMENT
PROFESSIONAL LIABILITY INSURANCE.........VIII.Q.1
What Is CM?.....................................................VIII.Q.1
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
How Is the CM Exposure Routinely
Handled? ......................................................... VIII.Q.2
What Is CM Professional Liability
Insurance?....................................................... VIII.Q.2
Underwriting Background .............................. VIII.Q.3
Most Common Exclusions.............................. VIII.Q.5
Recommendations and Conclusions ............ VIII.Q.6
CHAPTER IX: WRAP-UP/OCIP
INTRODUCTION TO WRAP-UPS.......................... IX.A.1
Background ..........................................................IX.A.1
Sponsorship ......................................................... IX.A.3
Benefits of a CIP ................................................ IX.A.4
Reduced Litigation ........................................ IX.A.4
Conflict Resolution ................................... IX.A.5
Compliance with Regulatory Standards .... IX.A.7
Control of Insurance Coverage ................... IX.A.7
Limits of Liability......................................IX.A.8
Solving Insurance Availability Problems.... IX.A.9
Improved Productivity ................................. IX.A.10
Cost Control ................................................. IX.A.10
Enhanced Ability To Use
Small Contractors ..................................... IX.A.11
What Constraints Apply to CIP Use?............ IX.A.12
Project Size .................................................. IX.A.12
Control ........................................................... IX.A.13
Legal Jurisdiction ........................................ IX.A.13
Costs.............................................................. IX.A.13
Ability and Inclination To Administer
a Wrap-Up.................................................. IX.A.14
Runoff............................................................ IX.A.15
Wrap-Up Dos and Donts ............................... IX.A.15
FEASIBILITY STUDY AND PLAN OF ACTION.. IX.C.1
Who Should Perform the Study ...................... IX.C.1
General Guidelines.............................................. IX.C.3
Jurisdictional Qualifications ......................... IX.C.3
Adequate Size................................................ IX.C.4
Multiple Contractors...................................... IX.C.5
Limited Number of Sites ............................. IX.C.5
Project Duration............................................. IX.C.5
Control of Contractors .................................. IX.C.6
Design for Safety .......................................... IX.C.7
Site Security................................................... IX.C.8
Support for Risk Control .............................. IX.C.8
Plan of Action ..................................................... IX.C.8
Time Schedule ............................................. IX.C.10
Required Services........................................ IX.C.11
Exposure Data and Risk Identification .... IX.C.13
Qualification and Selection of
Service Providers............................................ IX.C.13
CIP Manager or Administrator.................. IX.C.14
Insurance Broker.......................................... IX.C.14
Broker/Administrator Compensation .. IX.C.15
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24
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Insurer............................................................ IX.C.18
Risk Control Services.................................. IX.C.18
Medical Services ......................................... IX.C.19
Claims Management Services................... IX.C.19
Contractors.................................................... IX.C.20
INSURANCE PROGRAM DESIGN ........................IX.H.1
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
Defense Cost Coverage...........................IX.H.6
Scope of Coverage........................................IX.H.6
Insureds ...........................................................IX.H.8
Cross Liability Coverage..........................IX.H.9
Contractual Liability Coverage...................IX.H.10
Property Damage Liability..........................IX.H.10
Completed Operations ................................IX.H.12
XCU Coverage ..............................................IX.H.13
Liability Deductibles ....................................IX.H.13
Other Considerations ..................................IX.H.14
Other Liability Coverages ................................IX.H.14
Railroad Protective Liability........................IX.H.14
Professional Liability....................................IX.H.15
Pollution Liability..........................................IX.H.15
Products Liability .........................................IX.H.15
Workers Compensation Insurance .................IX.H.16
Possible Coverage Extensions ...................IX.H.16
Other States Coverage .......................IX.H.16
Stop Gap Coverage................................IX.H.16
Federal and Maritime Coverages ........IX.H.17
Voluntary Compensation Coverage .....IX.H.17
Subrogation Waiver ...............................IX.H.17
Policy Issuance.............................................IX.H.17
Coverage Commencement
and Termination..............................................IX.H.18
Builders Risk ......................................................IX.H.19
Rating and Risk Finance Structures ..............IX.H.20
Guaranteed Cost Insurance .......................IX.H.21
Loss Sensitive Plans ...................................IX.H.21
Deductible Plans.....................................IX.H.21
Retrospective Rating Plans ...................IX.H.22
Dividend and Retention Plans .............IX.H.22
Wrap-Up Captive..........................................IX.H.23
Cash Flow .....................................................IX.H.23
Tax Implications ...........................................IX.H.23
Term of Adjustment ....................................IX.H.23
Comments on Non-CIP Insurance..................IX.H.24
Standard Lines .............................................IX.H.24
Aircraft Liability............................................IX.H.25
Design Errors and Omissions....................IX.H.25
Wrap-Up DIC Coverage ..............................IX.H.25
Contractors Tools and Equipment............IX.H.26
CIP Insurance Manual......................................IX.H.27
MITIGATING CONTRACTOR CONCERNS .......... IX.L.1
Inequity in the Risk Allocation......................... IX.L.2
Conflicts of Interest ............................................ IX.L.3
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Insurance Program Disruption .......................... IX.L.3
Complication of Bid Preparation ...................... IX.L.4
Inability To Receive Timely
Loss Information............................................... IX.L.4
Audit and Claims Management Problems ..... IX.L.5
Administrative Tasks ........................................... IX.L.5
Coordination of Coverage.................................. IX.L.6
Risk Control Program Changes ........................ IX.L.7
A CONTRACTORS GUIDE TO OWNER
CONTROLLED INSURANCE PROGRAMS.......... IX.M.1
The Problem .................................................. IX.M.2
The Solution .................................................. IX.M.2
The Process ................................................... IX.M.2
How To Use this Guide .................................... IX.M.2
Are any Firms, Operations, or Locations
Omitted or Excluded from the OCIP? ......... IX.M.3
Specific Firms or Operations...................... IX.M.3
Furnish and Install Contractors ............... IX.M.4
Staging Areas and
Fabrication Facilities .................................. IX.M.5
Incidental Travel ............................................ IX.M.6
Are There any Periods of Time
Omitted or Excluded from the OCIP? ......... IX.M.6
Warranty Work and Callbacks.................... IX.M.6
Extended Completed Operations ............... IX.M.7
Are There any Other Omissions or Exclusions
That the Contractor Needs To Consider? ... IX.M.8
Automobile Liability...................................... IX.M.8
Design-Build Elements of the Project ....... IX.M.8
Damage to the Work................................... IX.M.9
Hazardous Materials and
Other Pollutants........................................IX.M.10
Aircraft or Watercraft.................................IX.M.10
Contractors Consequential Damages .....IX.M.11
Indemnification............................................IX.M.11
Are There Adequate Limits on the Coverage
That the OCIP Provides? ..............................IX.M.12
Shared Limits of OCIP Coverage.............IX.M.12
Separation of Insureds...............................IX.M.13
How Does the OCIP Relate to the Contractors
Regular Insurance Program?........................IX.M.14
Primary and Excess Coverage..................IX.M.14
Difference in Conditions (DIC) .................IX.M.15
OCIP Exclusion from the Contractors Regular
Insurance Program...................................IX.M.15
How Is a Contractor Supposed To Calculate
Its Premium Deductions? .............................IX.M.16
Basis for Each Deduction .........................IX.M.16
Deductibles and Penalties.........................IX.M.16
Insurance Credit Worksheet .....................IX.M.17
Premium Overruns and Underruns..........IX.M.18
How Does the Owner or Its Broker
Intend To Administer the OCIP?.................IX.M.19
OCIP Documents.........................................IX.M.19
Contractors Responsibilities .....................IX.M.20
Subcontractor Deductions .........................IX.M.20
Contents/Index
25
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Safety Services............................................IX.M.21
Certificates of Insurance............................IX.M.22
Premium Audits...........................................IX.M.23
Loss Runs and Loss Data .........................IX.M.23
Experience Modifier Filings.......................IX.M.24
Claims Management ..................................IX.M.24
Alternative Dispute Resolution .................IX.M.25
Broker/Carrier Service Agreements.........IX.M.25
What Are Some of the Other Issues
That May Need To Be Addressed? ............IX.M.26
Mutual Waiver of Subrogation .................IX.M.26
Safety Incentives .........................................IX.M.26
Substance Abuse Programs......................IX.M.27
Return-to-Work Programs...........................IX.M.27
Subcontracts and Letters of Intent .........IX.M.28
Changes in Program Policies....................IX.M.28
Appendix A
Administrative Checklist of
Things To Ask For ......................................IX.M.29
Appendix B
Action List.......................................................IX.M.30
EXPANDED CONTENTS
WRAP-UP PREMIUM AUDITING .......................... IX.P.1
Setting an Accurate Standard Premium......... IX.P.2
Premium Audits................................................... IX.P.4
Common Errors ................................................... IX.P.5
Contractor Errors............................................ IX.P.5
Insurer Errors .................................................. IX.P.6
Field Errors ................................................ IX.P.7
Premium Processing Errors................... IX.P.11
Premium Adjustment Errors ................. IX.P.12
Be on Guard ...................................................... IX.P.13
Conclusion .......................................................... IX.P.14
CHAPTER X:
CONTRACTUAL RISK TRANSFER
OVERVIEW OF CONTRACTUAL RISK TRANSFER
IN CONSTRUCTION .................................................X.A.1
Basics of Construction Contracting ..................X.A.2
Standard Construction Contracts .................X.A.4
Goal of Risk Allocation ..................................X.A.5
Contract Review and Negotiation .....................X.A.6
Risk Transfer Provisions ......................................X.A.7
Indemnity (Hold Harmless) Provisions ........X.A.7
Scope of Indemnification Obligation .....X.A.8
Broad Form Indemnity............................X.A.10
Comparative (Limited) Form
Indemnity................................................X.A.10
Intermediate Form Indemnity................X.A.11
Statutory Limitations ...............................X.A.11
Insurance Provisions and
Anti-Indemnity Statutes........................X.A.13
Standard Contract Indemnity
Provisions ...............................................X.A.14
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 CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Indemnification of Defense Costs........ X.A.15
Limitation of Liability ................................... X.A.16
Types of Limitations ............................... X.A.16
Enforceability............................................ X.A.17
Waiver of Recovery Rights ......................... X.A.18
CONTRACTUAL LIABILITY COVERAGE............... X.B.1
Standard CGL Policy ........................................... X.B.1
The Insuring Agreement ............................... X.B.2
The Contractual Liability Exclusion ............. X.B.2
Definition of Insured Contract................... X.B.3
Lease of Premises..................................... X.B.4
Sidetrack Agreements .............................. X.B.4
Easements .................................................. X.B.4
Agreements with Municipalities ............. X.B.5
Elevator Maintenance Agreements ........ X.B.5
Indemnity Provisions................................. X.B.5
Excluded Contractual Liabilities .............. X.B.6
Other Policy Exclusions ................................. X.B.9
Contractually-Assumed Defense Costs ..... X.B.10
Supplementary Payments ...................... X.B.11
Contractual Liability Endorsements ........... X.B.13
Assumption of an Indemnitees
Sole Negligence ................................... X.B.13
Contractual Liability Limitation ........... X.B.13
Contractual LiabilityRailroads.............. X.B.13
Contractual LiabilityPersonal
and Advertising Injury ....................... X.B.14
Business Auto Policy......................................... X.B.14
ADDITIONAL INSURED COVERAGE .................... X.C.1
Purpose of Requiring Additional
Insured Status.................................................... X.C.1
Problems with Hold Harmless
Enforcement.................................................. X.C.2
Right to a Defense of Claims...................... X.C.3
Obtaining Broader Coverage ........................ X.C.5
Commercial General Liability (CGL)
Insurance ............................................................ X.C.6
Named Insured versus
Additional Insured ....................................... X.C.6
Standard Additional Insured
Endorsements ............................................... X.C.9
Scheduled Person or Organization
(CG 20 10) ............................................ X.C.10
Automatic Additional Insured Endorsement
(CG 20 33) ............................................ X.C.13
Completed Operations (CG 20 37)...... X.C.14
Engineers, Architects, or Surveyors
(CG 20 07 and CG 20 32) ................ X.C.15
Equipment Lessor (CG 20 28 and
CG 20 34) ............................................. X.C.16
Designated Person or Organization
(CG 20 26) ............................................ X.C.17
Order of PaymentOther Insurance.......... X.C.18
Nonstandard Endorsements........................ X.C.18
Additional Insured's Negligence ........... X.C.19
Completed Operations Coverage ......... X.C.26
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26
22ND REPRINT
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Blanket Endorsements ............................ X.C.27
Order of PaymentOther Insurance..... X.C.29
Defense of the Additional Insured....... X.C.32
Additional Exclusions.............................. X.C.33
Notice Requirements............................... X.C.34
Limits of Insurance ...................................... X.C.35
Tips for Requesting Additional
Insured Status.................................................. X.C.38
Additional Insured or Additional
Named Insured? ......................................... X.C.38
Cross-Liability Coverage............................... X.C.39
Specify Required Scope of Coverage ....... X.C.39
Consider State Restrictions ................... X.C.41
Designated Limit .......................................... X.C.43
Mutual Additional Insureds......................... X.C.43
HOLD HARMLESS AGREEMENTS
IN THE CONSTRUCTION INDUSTRY................... X.D.1
Indemnification Agreements in General .......... X.D.2
Treatment of Indemnification Agreements
in the Courts...................................................... X.D.4
Public Policy Rationale.............................. X.D.4
Majority Clear and Unequivocal
Approach ....................................................... X.D.5
Minority Express Negligence
Approach ....................................................... X.D.7
Other Rules of Construction....................... X.D.11
Standard Form Indemnification
Agreements ...................................................... X.D.12
AIA Document A201 ......................................... X.D.13
Paragraph 4.18 (1976), Paragraph 3.18 (1987),
and Paragraph 3.18 (1997) ...................... X.D.13
Paragraph 3.18 (1987)................................. X.D.15
Paragraph 3.18 (1997) ................................. X.D.18
Paragraph 3.18 (2007) ................................ X.D.20
Comparison of AIA A201
Indemnity Paragraphs ............................... X.D.21
Court Decisions Involving A201
Indemnity Provisions ................................. X.D.22
Other A201 Indemnity Clauses ....................... X.D.24
ConsensusDOCS 300 Indemnity Clause ....... X.D.28
ConsensusDOCS 200 Indemnity Clause ....... X.D.31
ConsensusDOCS Hazardous
Materials Provisions ........................................ X.D.33
EJCDC Document C-700 (2007)..................... X.D.36
Standard Form Subcontract
Indemnity Clauses........................................... X.D.37
Incorporation by Reference ........................ X.D.41
Duty To Defend Clarified .................................. X.D.41
STATUTORY TREATMENT OF
INDEMNIFICATION AGREEMENTS ........................X.E.1
Insurance Provisions and
Anti-Indemnity Statutes .....................................X.E.6
Status of Anti-Indemnity Statutes ......................X.E.8
THIRD-PARTY-OVER ACTIONS ...............................X.F.1
Implied Indemnity .................................................X.F.2
Express or Contractual Indemnity......................X.F.3
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Theory Behind the Third-Party-Over Action .....X.F.4
The Third-Party-Over ActionContractors
Employee..............................................................X.F.4
The Third-Party-Over Action
Subcontractors Employee...............................X.F.10
The Third-Party-Over Action
No Additional Insured .....................................X.F.13
The Third-Party-Over Action
No Indemnity Agreement ...............................X.F.14
Breach of Contract Issues............................X.F.15
Waiver of Additional Insured
Requirement ......................................................X.F.18
VICARIOUS LIABILITY AND
ADDITIONAL INSURED COVERAGE..................... X.G.1
What Is Vicarious Liability?................................ X.G.1
Scope of Coverage for Additional Insureds.... X.G.2
The Case for Covering Anothers Active
Negligence.......................................................... X.G.3
WAIVERS OF SUBROGATION ............................... X.H.1
Waiver of Subrogation Defined......................... X.H.2
Related Property Insurance Policy
Provisions ............................................................ X.H.3
Typical Uses of Waivers of Subrogation
in Construction .................................................. X.H.5
With Equipment Floaters .............................. X.H.5
With Builders Risk Insurance ....................... X.H.5
With Insurance on Adjacent Property of
the Owner ..................................................... X.H.8
With Insurance on the
Completed Project ....................................... X.H.8
With General Liability, Automobile, and
Workers Compensation Insurance ............ X.H.9
Waivers of Subrogation in Other
Types of Contracts .......................................... X.H.10
Conclusion........................................................... X.H.11
CONTRACT INSURANCE REQUIREMENTS.......... X.I.1
Builders Risk Insurance........................................ X.I.2
Who Purchases Coverage? ............................ X.I.4
Who Is Covered? ............................................. X.I.5
Minimum Limit of Coverage.......................... X.I.5
Minimum Scope of Coverage ....................... X.I.5
Duration of Coverage...................................... X.I.6
Deductibles ....................................................... X.I.6
Order of Payment ............................................ X.I.7
Waiver of Subrogation.................................... X.I.7
Other Required Property Coverages .................. X.I.8
Liability Insurance ................................................. X.I.8
Minimum Limits of Coverage...................... X.I.10
Who Is Covered? ........................................... X.I.10
Minimum Required Limits ............................ X.I.10
Minimum Scope of Coverage ..................... X.I.11
Duration of Coverage.................................... X.I.12
Order of Payment .......................................... X.I.12
Deductibles ..................................................... X.I.13
Waiver of Subrogation.................................. X.I.14
Contents/Index
27
CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
Alternative Liability Coverage
Requirements..................................................... X.I.15
Owners and Contractors Protective Liability
Insurance ...................................................... X.I.15
Project Management Protective Liability
(PMPL) Insurance................................... X.I.15
Railroad Protective Liability Insurance ....... X.I.16
Workers Compensation and
Employers Liability Insurance ......................... X.I.16
Who Is Covered?............................................ X.I.17
Minimum Limits of Coverage ...................... X.I.18
Minimum Scope of Coverage...................... X.I.18
Duration of Coverage .................................... X.I.19
Order of Payment .......................................... X.I.20
Deductibles ..................................................... X.I.20
Waiver of Subrogation.................................. X.I.20
Acceptable Insurance Companies .................... X.I.21
Evidence of Compliance .................................... X.I.22
General Considerations ...................................... X.I.22
Sample Insurance Specifications.................... X.I.101
CERTIFICATES OF INSURANCE ............................. X.J.1
EXPANDED CONTENTS
Standard Certificates ............................................ X.J.1
Manuscript Certificates ........................................ X.J.7
Cancellation............................................................ X.J.7
Coverage Disclaimer ............................................. X.J.9
Certification of Contractual Liability
Coverage ............................................................ X.J.10
Additional Insured Status .................................. X.J.10
Proof of Authority ............................................... X.J.13
Endorsement as Alternative to Manuscript
Certificate........................................................... X.J.14
Scope of Coverage Conflicts ....................... X.J.14
Other Insurance Issue ................................ X.J.16
Notice of Cancellation .................................. X.J.16
Severability of Interests ................................ X.J.16
Other Considerations..................................... X.J.17
Suggestions for Tailoring Certificate
Language ........................................................... X.J.17
Certificate Management..................................... X.J.21
Verifying Compliance .................................... X.J.21
Selecting and Training Certificate
Management Staff ................................. X.J.23
Obtaining Certificates .............................. X.J.23
Obtaining Full Compliance...................... X.J.24
Waiving Requirements ............................. X.J.25
Monitoring Ongoing Compliance ................ X.J.26
Maintaining Records...................................... X.J.26
CERTIFICATE TRACKING SYSTEMS.....................X.K.1
System Capabilities..............................................X.K.4
Viewing and Sorting Data ............................X.K.4
Electronic Images ......................................X.K.5
Compliance Verification .................................X.K.5
Report Generation...........................................X.K.6
Letter Generation ............................................X.K.7
Customization ..................................................X.K.8
Hardware/Software Requirements ...............X.K.8
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Nontechnical Considerations ............................. X.K.9
Experience ....................................................... X.K.9
Customer Service ......................................... X.K.10
Cost................................................................. X.K.10
Professional Responsibility.......................... X.K.11
System Evaluation and Comparison .............. X.K.11
Cert2000........................................................ X.K.12
Certifitrac+ ..................................................... X.K.13
Certificate Management Solutions ............ X.K.15
ConfirmNet .................................................... X.K.16
Ins-Cert.com .................................................. X.K.18
Insurance Data Services ............................. X.K.20
Periculum Services Group........................... X.K.21
Conclusion........................................................... X.K.22
RAILROAD PROTECTIVE LIABILITY
INSURANCE................................................................X.L.1
Bodily Injury and Property Damage Liability...X.L.2
Covered Location and Operations................X.L.3
Covered Acts or Omissions...........................X.L.3
Exclusions .........................................................X.L.4
Expected or Intended Injury ....................X.L.4
Contractual Liability ...................................X.L.4
Completed Work ........................................X.L.5
Acts or Omissions of the Insured ..........X.L.5
Workers Compensation.............................X.L.6
Pollution .......................................................X.L.7
Damage to Owned, Leased or
Entrusted Property...................................X.L.7
Physical Damage to Property.............................X.L.8
Policy Conditions ..................................................X.L.8
Cancellation ......................................................X.L.8
Other Insurance ...............................................X.L.9
Premium and Premium Audit .......................X.L.9
Transfer of Recovery Rights ..........................X.L.9
Contractual Liability to Railroads................X.L.10
Limits of Insurance.............................................X.L.11
Railroad Protective Liability Endorsements ....X.L.11
Rating....................................................................X.L.12
CONTRACT PROVISIONS
AND ENVIRONMENTAL LIABILITY.......................X.M.1
Scope of Work.....................................................X.M.2
Construction ContractNo
Environmental Responsibility......................X.M.3
Remediation Contract...............................X.M.4
Phases of Services ...................................X.M.4
Changes.................................................................X.M.5
Differing Site Conditions....................................X.M.6
Standard of Care .................................................X.M.8
Ordinary Negligence Standard.....................X.M.8
Higher Standards of Care.............................X.M.9
Warranty ..............................................................X.M.11
Cost Estimates ..............................................X.M.12
Responsibilities of Parties ................................X.M.12
Compliance with Laws................................X.M.14
Requirements Applicable to
Subcontractors............................................X.M.17
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Permits and Licenses ....................................... X.M.17
Health and Safety............................................. X.M.18
Training .......................................................... X.M.19
Disposal of Materials ....................................... X.M.20
Indemnification .................................................. X.M.21
Client Indemnifies Consultant.................... X.M.21
Consultant Indemnifies Client.................... X.M.22
Environmental Liability ................................ X.M.24
Mutual Indemnification............................... X.M.26
Limitation of Liability........................................ X.M.28
Confidentiality .................................................... X.M.29
Dispute Resolution............................................ X.M.30
Recovery of Dispute Resolution Costs..... X.M.30
Time Limit for Legal Action ...................... X.M.31
Third-Party Rights.............................................. X.M.31
Warnings Regarding Use of
Consultants Report .................................. X.M.32
Severability ......................................................... X.M.34
Survival ............................................................... X.M.34
RISK ALLOCATION IN THE AIA
GENERAL CONDITIONS (A201).............................X.P.1
Indemnity Provisions ............................................X.P.2
Insurance Requirements.......................................X.P.4
General Liability Insurance.............................X.P.5
Additional Insured Status...............................X.P.6
Builders Risk Insurance ..................................X.P.7
Waivers of Subrogation .......................................X.P.9
Waivers of Consequential Damages ...............X.P.11
Design Responsibilities ......................................X.P.14
Differing Site Conditions ...................................X.P.16
Site Safety............................................................X.P.17
Hazardous Materials...........................................X.P.18
Mediation and Arbitration .................................X.P.21
Mediation ........................................................X.P.22
Arbitration .......................................................X.P.23
Conclusion............................................................X.P.24
OWNERS AND CONTRACTORS PROTECTIVE
LIABILITY INSURANCE ........................................... X.Q.1
The OCP Liability Coverage Form .................... X.Q.2
Insuring Agreement........................................ X.Q.3
Exclusions......................................................... X.Q.3
Contractual Liability .................................. X.Q.5
Damaged or Impaired Property.............. X.Q.5
Completed Operations.............................. X.Q.6
Acts or Omissions of the Insured.......... X.Q.7
Supplementary Payments............................ X.Q.12
Who Is an Insured ....................................... X.Q.12
Limits of Insurance ...................................... X.Q.13
Conditions ...................................................... X.Q.13
Cancellation.............................................. X.Q.14
Changes .................................................... X.Q.15
Examination of Books and Records..... X.Q.15
Inspections and Surveys........................ X.Q.15
Other Insurance....................................... X.Q.15
Premiums and Premium Audit ............. X.Q.16
Definitions ...................................................... X.Q.16
12TH REPRINT
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Contractor .............................................. X.Q.16
Insured Contract ................................... X.Q.18
Suit.......................................................... X.Q.18
Work ....................................................... X.Q.18
Endorsements ................................................ X.Q.18
Injury To Leased Workers ...................... X.Q.19
Additional InsuredEngineers,
Architects Or Surveyors ...................... X.Q.20
Underground Resources
And Equipment ..................................... X.Q.20
Arbitration Endorsements ...................... X.Q.21
Amendment of Limits of Insurance
(Designated Project or Premises) ...... X.Q.21
Earlier Notice of Cancellation
Provided by Us...................................... X.Q.21
Personal Injury Liability .......................... X.Q.21
Pesticide or Herbicide Applicator
Coverage................................................. X.Q.21
Additional InsuredState or
Political SubdivisionsPermits ............X.Q.22
Employment-Related Practices
Exclusion................................................. X.Q.22
Waiver of Rights of Recovery
Against Others to Us ........................... X.Q.22
Construction Project Management
Protective Liability Coverage .............. X.Q.22
Fungi or Bacteria Exclusions................. X.Q.23
War or Terrorism Exclusion ................... X.Q.23
OCP Policy versus Additional Insured
Status................................................................. X.Q.24
CONTRACTUAL RISK TRANSFER SUMMARY... X.T.1
Indemnitee ............................................................ X.T.1
Indemnitor ............................................................. X.T.2
General Considerations ....................................... X.T.4
CONSTRUCTION CONTRACT REVIEW
CHECKLIST ................................................................ X.U.1
CHAPTER XI:
CONTRACT CLAIMS LITIGATION
CONSTRUCTION CONTRACT CLAIMS ..............XI.A.1
CHANGE ORDERS...................................................XI.B.1
Problems Involving Change Orders .................XI.B.3
Authority To Order Changes........................XI.B.3
Notice...............................................................XI.B.3
Actual Notice ............................................XI.B.4
Constructive Notice..................................XI.B.4
Waiver ........................................................XI.B.5
Constructive Changes ...................................XI.B.5
Cardinal Change ............................................XI.B.5
Duty To Perform Changes ...........................XI.B.6
Effect of Bilateral Modification on
Duty To Perform Cardinal Changes ...XI.B.7
Performance Delays ......................................XI.B.7
Contents/Index
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CONSTRUCTION RISK MANAGEMENT
CONTENTS/INDEX
PROJECT SPECIFICATION CLAIMS ....................XI.C.1
Spearin Doctrine .................................................XI.C.1
Design-Build Contracts ..................................XI.C.2
Duty To Inform ....................................................XI.C.2
Rules of Contract Interpretation .......................XI.C.3
Ambiguities .....................................................XI.C.3
The Whole Contract Rule .......................XI.C.3
The Specific Provision Rule....................XI.C.4
The Custom and Usage Rule.................XI.C.4
The Practical Construction Rule ............XI.C.5
Parol Evidence Rule .................................XI.C.5
Insertions Rule ..........................................XI.C.5
Estoppel......................................................XI.C.5
Impossibility ...............................................XI.C.6
DIFFERING SITE CONDITIONS............................ XI.D.1
Site Conditions Clauses .................................... XI.D.3
CONDITIONAL PAYMENT CLAUSES ...................XI.E.1
Pay-When-Paid versus Pay-If-Paid .....................XI.E.1
Majority View .................................................XI.E.4
Minority View .................................................XI.E.5
Other Considerations.....................................XI.E.6
EXPANDED CONTENTS
Barriers to Enforcement................................XI.E.7
Void by Statute .........................................XI.E.8
Provisions Against Public Policy ............XI.E.9
Conflicting Contract Provisions ..............XI.E.9
General Contractor Interference...........XI.E.10
Contractual Privity with Surety ............XI.E.10
States Position on Enforcement...............XI.E.11
STATES POSITIONS ON CONDITIONAL
PAYMENT CLAUSES IN CONSTRUCTION
SUBCONTRACTS ..................................................... XI.F.1
PROJECT SCHEDULING CLAIMS ....................... XI.G.1
Owners Scheduling Responsibilities .............. XI.G.1
Contractors Scheduling Responsibilities........ XI.G.2
Schedule Changes ........................................ XI.G.2
Subcontractors Scheduling Rights ................. XI.G.3
Schedulers Implied Duties............................... XI.G.3
Duty To Schedule and
Coordinate Work ........................................ XI.G.4
Duty Not To Delay, Hinder, or
Interfere with Work ................................... XI.G.5
Duty To Cooperate ....................................... XI.G.6
Duty To Grant Reasonable
Time Extensions ......................................... XI.G.7
Scheduling Claims ........................................... XI.G.10
Abandonment of the Project Schedule .. XI.G.10
Concurrent Delay ........................................ XI.G.11
Acceleration Leading to Disruption ......... XI.G.11
Suspension of Work................................... XI.G.12
DELAY DAMAGES .................................................. XI.H.1
Calculating Delay Damages ............................. XI.H.2
Liquidated Damages.......................................... XI.H.5
No Damages for Delay Clauses.............. XI.H.6
Uncontemplated Delays ......................... XI.H.7
Owner Interference ................................. XI.H.7
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Owner Fraud, Concealment,
or Misrepresentation ............................. XI.H.8
Extremely Long Delay ............................. XI.H.8
Delay Claim Scheduling Analysis .................... XI.H.9
As-Planned Schedules .................................. XI.H.9
As-Built Schedule ........................................ XI.H.10
As-Built Schedule Including Delays ......... XI.H.10
Adjusted Schedule Reflecting Completion
Absent Delays ........................................... XI.H.10
LITIGATION RISK ASSESSMENT TECHNIQUES
FOR CONSTRUCTION DISPUTES ....................... XI.L.1
Benefits of an LRA............................................. XI.L.2
Facilitates Settlement ................................... XI.L.2
Better Settlements ........................................ XI.L.3
Improved Litigation Strategies .................... XI.L.3
Required Skills..................................................... XI.L.4
Stages of an LRA ............................................... XI.L.4
Types of LRAs ..................................................... XI.L.5
Timing of the Assessment................................ XI.L.6
Hypothetical Illustration ..................................... XI.L.6
Background Information............................... XI.L.8
Company As Options............................ XI.L.10
Preparing the LRA Models ........................ XI.L.10
Influence Diagrams................................ XI.L.11
Decision Trees ........................................ XI.L.12
The Decision to Fight or Settle .......... XI.L.19
Using LRAs in Trial Strategies
and Preparation .............................................. XI.L.26
CHAPTER XII: SURETY
SURETY OVERVIEW ..............................................XII.A.1
Surety and Insurance Contrasted ...................XII.A.2
Types of Construction Bonds ..........................XII.A.6
Bid Bond ........................................................XII.A.6
Performance Bonds......................................XII.A.7
Payment Bonds .............................................XII.A.9
Underwriting.......................................................XII.A.9
Bond Costs ..................................................XII.A.11
Evaluating a Surety Company .......................XII.A.11
CONTRACT BOND UNDERWRITING .................XII.B.1
Qualification Process.........................................XII.B.1
Financial Condition ......................................XII.B.4
Liquidity ....................................................XII.B.7
Profitability................................................XII.B.8
Stability and Capitalization..................XII.B.10
Accounting Issues and Methods ......XII.B.11
Business Plan ...................................................XII.B.12
Plans for Growth...................................XII.B.12
Survival ...................................................XII.B.13
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Work Schedule............................................XII.B.15
Company Management .............................XII.B.16
Improving the Quality of
Your Submission............................................XII.B.17
FINANCIAL STATEMENT REVIEW
CHECKLIST ..........................................................XII.B.101
A SURETYS REVIEW OF THE
FINANCIAL STATEMENTS ....................................XII.E.1
Ratio Analysis .....................................................XII.E.1
Gross Profit Analysis .........................................XII.E.4
Analysis of Estimating Skills............................XII.E.6
CASH BUDGETING ................................................ XII.F.1
Job Cash Flow Budget ..................................... XII.F.1
Job Operating Budget....................................... XII.F.1
Job Cash Flow Budget ..................................... XII.F.1
Company Cash Flow Budget ........................... XII.F.1
Projected (Pro Forma) Balance Sheets
and Statement of Earnings ........................... XII.F.2
Importance of Projected Financial State-
ments with Cash Planning Process............. XII.F.2
TAX PLANNING ..................................................... XII.G.1
THE MILLER ACT .................................................. XII.K.1
Notice Requirements ........................................ XII.K.3
Requirements for Filing Suit ........................... XII.K.4
State Statutes (Little Miller Acts) ............... XII.K.4
Eligible Claimants ........................................ XII.K.5
Notice Requirements ................................... XII.K.5
Filing Requirements..................................... XII.K.6
HOW TO SELECT A PROFESSIONAL
SURETY AGENT ....................................................XII.M.1
Responsibilities ..................................................XII.M.2
Professional Qualifications...............................XII.M.3
Request for Information Exhibit .....................XII.M.6
LEGAL REMEDIES WHEN SURETIES
BECOME INSOLVENT ............................................XII.R.1
Potential Sources of Recovery.........................XII.R.2
State Guaranty Associations.......................XII.R.2
Security Deposits..........................................XII.R.3
Liability of Public Entities
(Public Projects Only)................................XII.R.4
Liability of Negligent Architect ..................XII.R.5
PAYMENT BOND CLAIMS:
A SURVEY OF SURETIES LEGAL
OBLIGATIONS IN HANDLING CLAIMS .............XII.T.1
Bad Faith Claims................................................XII.T.2
Statutory Claims ...........................................XII.T.2
STATE-BY-STATE REVIEW OF
SURETIES LEGAL OBLIGATIONS
IN HANDLING BOND CLAIMS........................... XII.U.1
U.S. TREASURY DEPARTMENT
SURETY LIST .........................................................XII.W.1