More on Additional Insured Endorsements

It appears that insurers marketing products to the construction industry are likely to use their own additional insured endorsement language, rather than the ISO language, and thereby limit the coverage provided to an additional insured (this according to an article by Craig F. Stanovich on the IRMI web site). Mr. Stanovich gives an example of an additional insured endorsement that provides coverage only if the acts or omissions of the named insured were negligent --- which excludes any coverage for the additional insured if the theories of liability alleged are breach of warranty or strict liability. His other examples are just as troublesome. It seems that any party desiring to limit its exposure by being named an additional insured on another party's CGL policy must require that the additional insured endorsement language be provided for review and be acceptable to the party seeking to be covered. To read Mr. Stanovich's article, click here.

Further Erosion of Spearin

This one is for construction lawyers who represent owners. A recent case out of the Ohio Court of Appeals overturned a large delay damage award to a contractor, whose claim was based on defective plans and specs. The trial court had awarded the contractor $800,000 in delay damages based on the Spearin doctrine (the owner's implied warranty of plans and specs), having been persuaded in part by the fact that the contractor had submitted 176 RFIs and the architect had issued over 50 field work orders and ASIs during a period of just three months.

The Court of Appeals, in overturning the trial court, said this: "Spearin does not stand for the proposition that owners, by virtue of having furnished the plans and specifications for the job, will indemnify and hold contractors harmless for all delays occasioned by changes in the work...not within the complete control of the contractor. This is true even where, as here, the contractor issued a large number of RFIs."

Even better for owners, the Court went on to say: "The Court finds that the record fails to demonstrate that the substantive concerns addressed in any one RFI or group of RFIs rendered the owner-furnished plans unbuildable or otherwise wholly inadequate to accomplish the purpose of the contract." (emphasis added).

This is a high hurdle for contractors to get over, and it is music to the ears of owners and architects! The case is Dugan & Meyers Const. Co., Inc. v. Ohio Dept. of Adm. Servs., 834 N.E.2d 1 (Ohio Ct. App.2005)

"Of Course I'm Covered, I'm an Additional Insured!"

Nearly every general contractor knows by now that it needs to be an additional insured on its subcontractors' commercial general liability policies. But that may not assure coverage, particularly if the subcontractor is working on more than one of the contractor's projects. According to a recent article on the International Risk Management Institute's website, some insurers restrict coverage by designating a certain location or project as the "covered operations". In that case, the contractor's additional insured coverage is limited to that location only. It appears that a contractor must review the exact language of the additional insured endorsement on its subcontractors' policies to be certain of the coverage it thinks it is getting. We'll talk more about unanticipated pitfalls of additional insured coverage in upcoming posts, but to read more about this example, click here.

For the want of a nail a kingdom can be lost

Sometimes the smallest pieces of a huge project lead to catastrophic losses as demonstrated in the limked story about the Fla. high-voltage towers. Quality control at all phases of construction is the best way to protect against such costly outcomes.

Timely conferences scheduled in upcoming months

Conferences in Washington D.C. and Beijing, China will address the global economy and future of the construction industry. Stay tuned.

April 25-27, 2006Kempinski Hotel, Beijing Lufthansa Center
Building upon the success of the 2004 Global Construction Summit in Beijing, McGraw-Hill Construction, the parent of well-known international magazines Engineering News-Record and Architectural Record, will co-organize the 2006 Global Construction Summit with the China International Contractors Association again. The event will draw senior executives from leading real estate developers, contractors, design firms, financiers, and government agencies around the world. They will share best practices and brainstorm solutions to problems in the increasingly global $4.2-trillion construction marketplace.
For complete information on this event click here.

Get a first-hand view of industry trends and the economic forecast that will affect the construction industry in 2007. Join us in Washington for the 68th annual Outlook Executive Conference on Thursday, October 26 and Friday October 27 at the Capital Hilton, Washington, DC. This Conference will give you the vital information you need to plan for business success in the year 2007 and beyond.

Outlook 2007 begins with an evening reception on October 26 at 6:00pm, followed by an information-packed program on October 27 at the Capital Hilton in Washington, D.C.
For complete information on this event click here.