Construction Contracts: Crafting Insurance and Indemnification - - PowerPoint PPT Presentation

presents

Construction Contracts: Crafting Insurance and Indemnification Clauses

presents

and Indemnification Clauses

Negotiating Provisions to Allocate Risk and Minimize Liability

A Live 90-Minute Teleconference/Webinar with Interactive Q&A

Today's panel features: James P. Bobotek, Senior Associate, Pillsbury Winthrop Shaw Pittman, Washington, D.C. Tamara L. Boeck, Of Counsel, Stoel Rives, Boise, Idaho Scott D Cahalan Partner Smith Gambrell & Russell Atlanta Scott D. Cahalan, Partner, Smith Gambrell & Russell, Atlanta

Wednesday, August 25, 2010 The conference begins at: The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 am Pacific 10 am Pacific

You can access the audio portion of the conference on the telephone or by using your computer's speakers. Please refer to the dial in/ log in instructions emailed to registrants.

Construction Contracts: Construction Contracts: Construction Contracts: Construction Contracts: Crafting Insurance and Crafting Insurance and Indemnification Clauses Indemnification Clauses Indemnification Clauses Indemnification Clauses

James P. Bobotek Pillsbury Winthrop Shaw Pittman LLP

Tips for drafting insurance provisions Tips for drafting insurance provisions Tips for drafting insurance provisions Tips for drafting insurance provisions

 Carefully consider the type of project and all potential risks so that they may be properly allocated and/or transferred;  Cl l id tif h t f i d  Clearly identify each type of coverage required, necessary endorsements, limits and sublimits (ask the client’s risk manager or insurance broker to weigh in on this);  Identify the duration of each type of coverage, taking into consideration applicable statutes of limitations and statutes of repose;  Require that certificates of insurance and copies of policies with all required endorsements be provided before any work commences and also as a condition precedent to payment;

3 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

commences and also as a condition precedent to payment;

Tips for drafting insurance provisions Tips for drafting insurance provisions Tips for drafting insurance provisions Tips for drafting insurance provisions

 Require that certificates of insurance and policies be provided upon each policy renewal or inception of new coverage;  Identify the specific forms and/or coverages under which your client is to be made an additional insured;  Ensure that deductibles and/or self-insured retentions may be satisfied by payment by anyone.

4 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Coverages Under a Typical CGL Policy Coverages Under a Typical CGL Policy g yp y g yp y

• Coverage A – Bodily Injury and Property

Damage

• Coverage B

Personal and Advertising Injury

• Coverage B – Personal and Advertising Injury
• Supplementary Payments

5 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Coverage A – Bodily Injury and Property Damage Property Damage

 I i A t  Insuring Agreement

• What the insurer giveth

 Exclusions  Exclusions

• What the insurer taketh away

6 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

C A I i A t Coverage A - Insuring Agreement

We will pay those sums that the insured becomes legally obligated to pay as becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. pp

ISO Form CG 00 01 12 07

7 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Coverage A Insuring Agreement Coverage A - Insuring Agreement

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies.

 Who is “the insured”?

• Named Insured – important to ensure dec page is correct
• Insured (Who Is An Insured section)
• employees, officers, directors (acting in scope of employment)
• real estate managers
• newly formed/acquired organizations (grace period)
• Additional insureds

8 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

C A I i A t Coverage A - Insuring Agreement

We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily to pay as damages because of bodily injury" or "property damage" to which thi i li this insurance applies.

ISO F CG 00 01 12 07

9 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

ISO Form CG 00 01 12 07

"Bodily injury" means bodily injury, sickness or disease sustained by a person sustained by a person, including death resulting from any of these at any y y time.

ISO Form CG 00 01 12 07

10 10 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

"Property damage" means:

• a. Physical injury to tangible property, including all

resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or injury that caused it; or

• b. Loss of use of tangible property that is not physically
• injured. All such loss of use shall be deemed to occur at

the time of the "occurrence" that caused it the time of the occurrence that caused it.

ISO Form CG 00 01 12 07

11 11 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Coverage A - Insuring Agreement g g g

This insurance applies to "bodily injury" and "property damage" only if: property damage only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; (2) The "bodily injury" or "property damage" occurs during the policy period during the policy period . . .

12 12 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

"O " id t "Occurrence" means an accident, including continuous or repeated g p exposure to substantially the l h f l diti same general harmful conditions.

• Seems straightforward – but not
• Major issue in construction defect

cases – is faulty workmanship an ?

13 13 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

• ccurrence?

Products Products-

• Completed Operations

Completed Operations

 Separate sub-limits in a CGL policy  Failure to obtain and procure leads to many breach of contract claims.  Three-part test for coverage.

14 14 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Products-Completed Operations Products Completed Operations

 Must Occur Away from Your Premises.

• To be included within the products completed operations hazard
• To be included within the products-completed operations hazard,

the bodily injury or property damage must occur away from premises owned or rented by the named insured.

• Bodily injury or property damage that takes place on the named
• Bodily injury or property damage that takes place on the named

insured premises is not within the products-completed operations hazard (this can be amended by endorsement, however).

15 15 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Products Products-

• Completed Operations

Completed Operations

 Must arise out of “Your Product” or “Your Work,” terms defined in the CGL.

• Your Product

Includes goods or products manufactured sold

• Your Product. Includes goods or products manufactured, sold,

handled, distributed, or disposed of by the named insured, others trading under the named insured’s name, and includes a person

• r organization whose business assets a named insured has

acquired acquired.

• Your Work. Includes operations performed by the named

insured or on the named insured’s behalf, including material, parts, or equipment in connection with the operations. Operations

• r work performed on behalf of the named insured means that

work done by a subcontractor is still considered your work.

16 16 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Products Products-Completed Operations Completed Operations Products Products Completed Operations Completed Operations

 Does not apply if the work has not yet been completed or

• abandoned. The work is considered to be completed the

earlier of:

• When all the named insured’s work as required in a contract has been

finished.

• When all the work at a job site has been completed if the named

insured’s contract requires work under the same contract but at another job site.

• For example, a mechanical sub has a contract to repair the HVAC systems for

at three different locations. Once the sub has completed the repair of the HVAC equipment at the first location, that job is considered to be complete. Thus, any bodily injury or property damage that may arise from that first location is included within the products-completed operations hazard, even if the other two jobs are not finished.

• When that part of the work done at a job has been put to its intended use

by someone other than another contractor or subcontractor working on the same project.

17 17 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

the same project.

Products Products-

• Completed Operations:

Completed Operations: Sample Clause Sample Clause Sample Clause Sample Clause

The Contractor shall maintain all required insurance coverage in full force and effect until Final Completion of the Work, except that the products and completed operations coverage under the that the products and completed operations coverage under the CGL and pollution legal liability insurance, and coverage under the professional liability insurance, required under this Exhibit shall be maintained (or if applicable, an extended reporting period will be exercised) for the period of any applicable statute of limitations or five years following Final Completion of the Work, whichever is longer.

18 18 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Tamara L. Boeck

19

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

August 25, 2010 • Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Umbrella/Excess Insurance

Umbrella/Excess Insurance

• Workers Compensation

B ild ’ Ri k

• Builder’s Risk
• Professional Liability
• Controlled Insurance Programs

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Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Umbrella/Excess Insurance

Umbrella/Excess Insurance

– Financial Practicality Does it correspond to the underlying coverage – Does it correspond to the underlying coverage – Nature of the coverage – project or company

21

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Workers Compensation

Workers Compensation

– Driven by state requirements Know whether there are state exceptions for – Know whether there are state exceptions for indemnity, e.g. Gonzales v R. J. Novick

• Constr. Co. (1978) 20 C3d 798, 144 CR 408
• Constr. Co. (1978) 20 C3d 798, 144 CR 408

(subcontractor paid via indemnity clause with general contractor for its own workers’ injury).

22

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Builder’s Risk

Builder s Risk

– Understand the scope of the policy to dovetail with other project insurance e g special with other project insurance, e.g. special environmental, natural resources, debris/waste removal, additional duration for project – Ensure policy requirements are incorporated

23

into the construction contract, e.g. fire watch, security, off-site storage, etc.

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Professional Liability

Professional Liability

– Is the project a DB, and who is obtaining coverage for the professionals? coverage for the professionals? – How broadly is “professional” defined in the policy? policy?

24

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

• Controlled Insurance Programs

g

– Who is obtaining the program? – What does it encompass? p – Limits sufficient? Project or Rolling? – Who can satisfy the SIR? Who can satisfy the SIR?

• Forecast Homes, Inc. v. Steadfast Insurance

Company (2010) 181 CA4th 1466,105 CR3d 200

25

(holding that only the named insured subcontractors, not the general contractor, had the right to satisfy the SIR per occurrence amounts).

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

g y p )

d d Insurance and Insurance and I d ifi i I d ifi i Indemnification Indemnification

Scott D. Cahalan Scott D. Cahalan

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Green Building Risks

Green Building Risks

 Green Building Risks

Green Building Risks

 Property damage

Property damage

 Certification denial or delay

Certification denial or delay

 Certification denial or delay

Certification denial or delay

 Code compliance

Code compliance D f t D f t

 Defects

Defects

 Building performance

Building performance P l i j P l i j

 Personal injury

Personal injury

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Green Building Property & Casualty

Green Building Property & Casualty

 Green Building Property & Casualty

Green Building Property & Casualty Insurance Insurance

 Green Building Replacement

Green Building Replacement

 Green Building Replacement

Green Building Replacement

 Green Upgrade

Green Upgrade

 Commissioning

Commissioning

 Commissioning

Commissioning

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Green Building Liability Insurance

Green Building Liability Insurance

 Green Building Liability Insurance

Green Building Liability Insurance

 Indoor Environmental Endorsement

Indoor Environmental Endorsement

 Reputation Endorsement

Reputation Endorsement

 Reputation Endorsement

Reputation Endorsement

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Indoor Environmental Endorsement covers

Indoor Environmental Endorsement covers

 Indoor Environmental Endorsement covers

Indoor Environmental Endorsement covers

 bodily injury that is “sustained within a green

bodily injury that is “sustained within a green building and caused by any substance or odor building and caused by any substance or odor building and caused by any substance or odor building and caused by any substance or odor produced by or originating from HVAC produced by or originating from HVAC equipment or any other equipment or product equipment or any other equipment or product q p y q p p q p y q p p whose purpose is indoor climate, air quality, or whose purpose is indoor climate, air quality, or water quality control.” water quality control.”

 Must be a certified green buildings at time of loss.

Must be a certified green buildings at time of loss.

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Reputation Endorsement covers

Reputation Endorsement covers

 Reputation Endorsement covers

Reputation Endorsement covers

 Adverse green publicity event, and

Adverse green publicity event, and

 Adverse green defense costs

Adverse green defense costs

 Adverse green defense costs

Adverse green defense costs

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Adverse Green Defense Costs

Adverse Green Defense Costs

 Adverse Green Defense Costs

Adverse Green Defense Costs

 Reimburses insured for the cost of defending

Reimburses insured for the cost of defending against an adverse green claim in a civil lawsuit against an adverse green claim in a civil lawsuit against an adverse green claim in a civil lawsuit against an adverse green claim in a civil lawsuit “demanding monetary or non “demanding monetary or non-

• monetary relief,

monetary relief, and alleging [the insured’s] failure to meet or and alleging [the insured’s] failure to meet or g g g g comply with industry recognized green building comply with industry recognized green building standards at one or more insured buildings.” standards at one or more insured buildings.”

 Must be a certified green buildings at time of loss.

Must be a certified green buildings at time of loss.

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Subcontractor Default Insurance (“SDI”)

Subcontractor Default Insurance (“SDI”)

 Subcontractor Default Insurance ( SDI )

Subcontractor Default Insurance ( SDI )

 Alternative to subcontractor performance bonds

Alternative to subcontractor performance bonds

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 SDI Advantages over Bonds

SDI Advantages over Bonds SDI Advantages over Bonds SDI Advantages over Bonds

 Cost Savings

Cost Savings

 Longer Duration

Longer Duration g

 Contractor Control

Contractor Control

 Consistency

Consistency

 Faster, Non

Faster, Non-

• Adversarial Claims

Adversarial Claims

 Higher Limits

Higher Limits g

 Broader damages

Broader damages

 Bad faith damages

Bad faith damages

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 SDI disadvantages over Bonds

SDI disadvantages over Bonds g g

 Financial risk

Financial risk

 Not appropriate for all contractors

Not appropriate for all contractors i d d l i f b i d d l i f b

 No independent analysis of subcontractors

No independent analysis of subcontractors

 Defaults more likely

Defaults more likely

 No payment protection for subcontractors

No payment protection for subcontractors

 No payment protection for subcontractors

No payment protection for subcontractors

 No legal precedence

No legal precedence

 Single source

Single source

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Selecting Insurance Selecting Insurance Selecting Insurance Selecting Insurance

 Contractor’s

Contractor’s Pollution Pollution Liability Liability Insurance Insurance covers covers y

 Third

Third party party claims claims for for environmental environmental liabilities liabilities associated associated with with job job-

• site

site operations

• perations of
• f contractors

contractors Cl i Cl i f di ti di ti t t i t i f ll ti ll ti

 Claims

Claims for for remediation remediation costs costs stemming stemming from from pollution pollution incidents incidents resulting resulting from from contractor’s contractor’s covered covered operations

• perations

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Additional Insureds Additional Insureds Additional Insureds Additional Insureds

 Naming additional insureds requires a separate endorsement to the basic CGL coverage, which can either specifically name the parties that are additional insureds or designate a general category of persons entitled to such coverage under a blanket endorsement.  The terms of the endorsement will control the nature and extent of such additional insured coverage, including whether and to what extent and duration completed-operations coverage is included.  Some additional insured endorsements specifically omit coverage for completed operations; others don’t.  One size does not fit all.

37 37 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Tips For Drafting Additional Insured Requirements Tips For Drafting Additional Insured Requirements Tips For Drafting Additional Insured Requirements Tips For Drafting Additional Insured Requirements

 Specify the form endorsements through which the additional insured coverage is provided.  Require that the additional insured coverage be “primary and non-contributory.”  Understand the difference between additional insured and additional named insured.  Do not rely on certificates of insurance to confirm additional insured status.|

38 38 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds – Sample Provision Sample Provision Additional Insureds Additional Insureds Sample Provision Sample Provision

Th O th A hit t th L d th O ’ R t ti th I d ifi d The Owner, the Architect, the Lender, the Owner’s Representative, other Indemnified Parties, and other persons or entities designated by the Owner in writing (together, the “Additional Insureds” and each an “Additional Insured”) shall each be included in all policies required hereunder to be maintained by the Contractor and Subcontractors (except for workers’ compensation and professional liability insurance) as additional (except for workers compensation and professional liability insurance) as additional insureds for claims against them relating to this Project, with the understanding that any affirmative obligation imposed upon the insured Contractor and Subcontractor (including without limitation the liability to pay premiums) shall be the sole obligation of the Contractor and Subcontractor, and not of the Additional Insureds. All of the the Contractor and Subcontractor, and not of the Additional Insureds. All of the Contractor’s and Subcontractors’ liability policies shall be endorsed so as to indicate that such policies provide primary coverage (without any right of contribution by any other insurance or self-insurance, including any deductible or retention, maintained by an Additional Insured) for all claims against the Additional Insureds arising out of the performance of this Contract by the Contractor or Subcontractors, or anyone for whom the Contractor or a Subcontractor may be liable. These policies shall include a separation of insureds/severability of interests clause for claims against the Additional Insureds due to the negligence, act, omission or other conduct of the C t t it S b t t f h th C t t

39 39 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Contractor or its Subcontractors, or anyone for whom the Contractor or a Subcontractor may be liable.

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 10 11 85

• Provides the additional insured with coverage for liability arising

g y g

• ut of the named insured’s work for the additional insured;
• Provides coverage not only while the named insured’s work is in

progress, but also for the named insured’s completed operations;

• Meets a contractual requirement that owners impose on general

contractors, and general contractors require of subcontractors -- that the additional insured has coverage for claims arising out of the completed work the completed work

40 40 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 10 03 97

• Provides the additional insured with coverage only for liability

g y y arising out of the named insured’s ongoing operations;

• Intended to limit the term of the additional insured’s insurance

coverage to the time period during which the named insured is t ll f i ti actually performing operations;

• Does not include coverage for completed operations.

41 41 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 10 10 01

• Provides the additional insured with coverage only for liability arising out
• f the named insured’s ongoing operations;
• Expressly excludes injuries or damages suffered after (i) the “named”

insured’s work at the site of the cove operations has been completed, or (ii) the relevant portion of named insured’s work has been put to its ( ) p p intended use;

• Intended to limit the term of the additional insured’s coverage to the time

period during which the named insured is actually performing operations;

• Intended to deny coverage for completed operations;
• Intended to deny coverage for completed operations;
• Adopted in conjunction with CG 20 37 10 01, a new standard form

endorsement that will, if used in conjunction with this form, provide coverage similar to the CG 20 10 11 85

42 42 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 37 10 01

• Provides additional insured with coverage products-completed

g p p

• perations hazard arising out of the named insured’s work;
• Only applies to completed operations;
• No coverage for premises or operations;
• When used in conjunction with CG 20 10 10 01, provides

coverage similar to CG 20 10 11 85.

43 43 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 10 07 04

• Provides the “additional” insured with coverage only for liability caused in

whole or in part by the acts or omissions of either (i) the named insured

• r (ii) someone acting on behalf of the named insured;
• Limits coverage to ongoing operations for the additional insured;
• Excludes injuries or damages suffered after (i) the named insured’s work
• Excludes injuries or damages suffered after (i) the named insured s work

at the site of the covered operations has been completed, or (ii) the relevant portion of named insured’s work has been put to its intended use;

• Intended to limit the coverage provided to the additional insured to liability
• Intended to limit the coverage provided to the additional insured to liability

caused at least in part by the named insured’s ongoing operations;

• Intended to eliminate coverage for the additional insured’s sole

negligence.

44 44 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Additional Insureds Additional Insureds - Policy Endorsements Policy Endorsements Additional Insureds Additional Insureds Policy Endorsements Policy Endorsements

 CG 20 37 7 04

• Provides the additional insured with coverage for the products-

l t d ti h d d i h l i t b th completed operations hazard caused in whole or in part by the acts omissions of either (i) the named insured or (ii) someone acting on behalf of the named insured;

• Intended to limit the coverage provided to the additional insured

to liability caused at least in part by the named insured’s completed operations;

• Not intended to provide coverage for the additional insured’s sole

negligence; negligence;

• When used in conjunction with CG 20 10 07 04, meets typical

contract requirement to provide additional insured coverage coverage for both ongoing and completed operations.

45 45 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Certificates of Insurance Certificates of Insurance Certificates of Insurance Certificates of Insurance

 Most certificates of insurance are issued on a standard form prepared by ACORD Corporation for the insurance industry.  A standard certificate identifies the producer (an agent or  A standard certificate identifies the producer (an agent or broker), the insured, and the insurers affording coverage.  The certificate also gives basic information about the policies to which it refers, including the names of the insurance to which it refers, including the names of the insurance companies affording coverage, the type of insurance, the policy numbers, the effective dates and expiration dates of the policies, and the liability limits of the policies. There is space to describe operations, exclusions, etc., added by endorsement to the policies listed, or to identify special policy provisions.

46 46 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Certificates of Insurance Certificates of Insurance Certificates of Insurance Certificates of Insurance

 What they are:

• Evidence of insurance issued to the policy’s named insured.

 What they are not:

• Evidence of coverage for additional insureds.
• Evidence of waivers of subrogation.
• Evidence of any other special endorsements to the named

insured’s insurance policies.

• Clarendon Am Ins Co v Aargus Sec Sys

Inc 870 N E 2d

• Clarendon Am. Ins. Co. v. Aargus Sec. Sys., Inc., 870 N.E.2d

988, 994 (Ill. App. Ct. 2007);

• Rodless Props., L.P. v. Westchester Fire Ins. Co., 40 A.D.3d 253,

835 N.Y.S.2d 154, 155 (2007).

47 47 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Certificates of Insurance Certificates of Insurance Certificates of Insurance Certificates of Insurance

 Can certificates of insurance be used to support an estoppel theory?

• Majority – no:
• TIG Ins. Co. v. Sedgwick James of Washington, 184 F. Supp. 2d 591

(S.D. Tex. 2001), aff’d, 276 F.3d 754 (5th Cir. 2002); R d d St t F I C 728 A 2d 1202 (D C 1999)

• Redmond v. State Farm Ins. Co., 728 A.2d 1202 (D.C. 1999).
• Minority - yes:
• Marlin v Wetzel County Board of Education 569 S E 2d 462 (W Va

Marlin v. Wetzel County Board of Education, 569 S.E.2d 462 (W. Va. 2002).

48 48 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09

49 49 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09 Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09

This certificate is issued as a matter of information only and confers no rights upon the certificate holder This certificate confers no rights upon the certificate holder. This certificate the coverage afforded by the policies below. This certificate

• f insurance does not constitute a contract between the

issuing insurer(s), authorized representative or producer, and the certificate holder.

50 50 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09 Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09

IMPORTANT: If the certificate holder is an ADDITIONAL INSURED the policy(ies) must be endorsed If INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an

• endorsement. A statement on this certificate does not

confer rights to the certificate holder in lieu of such endorsement(s).

51 51 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09 Acord Certificate of Insurance Acord Certificate of Insurance 9/09 9/09

Notice of cancellation provision changes Notice of cancellation provision changes  Prior Acord form language:

• Should any of the above described policies be cancelled

before the Expiration date thereof, the issuing insurer will endeavor to mail _______ days written notice to the certificate holder named to the left, but failure to mail such certificate holder named to the left, but failure to mail such notice shall impose no obligation or liability Of any kind upon the insurer, its agents or representatives.

 9/09 A d f l  9/09 Acord form language:

• Should any of the above described policies be cancelled

before the expiration date thereof, notice will be delivered in accordance with the policy provisions.

52 52 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

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Acord Certificate of Insurance Acord Certificate of Insurance – 9/09 9/09 Acord Certificate of Insurance Acord Certificate of Insurance 9/09 9/09

 Suggested language in response to the 9/09 Acord form:

• All policies shall be endorsed to state that such insurance

shall be non-renewed, canceled or modified to reduce the limits only after written notice to the Owner from such i i il d t th O i insurance company or companies, mailed to the Owner in the same method as would be required under the law of the jurisdiction in which the Project is located for mailing such notice to the first named insured, no less than thirty (30) , y ( ) days in advance.

53 53 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

INDEMNITY AGREEMENTS INDEMNITY AGREEMENTS INDEMNITY AGREEMENTS INDEMNITY AGREEMENTS

• Intermediate Form Indemnity
• Broad Form Indemnity
• Comparative (Limited) Form Indemnity

54 54 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS

Broad Form Indemnity: The indemnitor agrees to Broad Form Indemnity: The indemnitor agrees to be responsible for any and all liability arising out of the contractually-provided products or services, including liability that is the result of the sole negligence of the indemnitee. Most states prohibit,

• r severely limit, the use of broad form indemnity
• se e e y

t, t e use o b oad o de ty provisions in construction contracts.

55 55 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS

Intermediate Form Indemnity: The indemnitor Intermediate Form Indemnity: The indemnitor agrees to be responsible for liability arising out of the contractually-provided products or services that is the result of the indemnitor's sole fault or is the result of the indemnitor s sole fault or negligence, as well as liability for which the indemnitee and indemnitor are jointly at fault. The indemnitor is not responsible for liability incurred as indemnitor is not responsible for liability incurred as a result of the sole fault or negligence of the indemnitee.

56 56 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS TYPES OF INDEMNITY AGREEMENTS

Comparative (Limited) Form Indemnity: The Comparative (Limited) Form Indemnity: The indemnitor agrees to be responsible for liability arising out of the contractually-provided products or services that is the result of the indemnitor's fault or negligence, but only to the extent of such fault or

• negligence. This type of agreement mirrors the

eg ge ce s type o ag ee e t

• s t e
• bligations imposed by tort law.

57 57 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

AIA A201 Indemnity Provision AIA A201 Indemnity Provision AIA A201 Indemnity Provision AIA A201 Indemnity Provision

The unedited AIA A201 provides that the contractor The unedited AIA A201 provides that the contractor (indemnitor) will indemnify the owner (indemnitee) for loss caused by the negligent acts or omissions

• f the contractor its subcontractors or others
• f the contractor, its subcontractors, or others

providing goods or services on behalf of these

• entities. This constitutes a comparative form

indemnity provision which limits the contractor's indemnity provision, which limits the contractor s indemnification obligation "only to the extent of" its negligence.

58 58 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

AIA A201 Indemnity Provision AIA A201 Indemnity Provision AIA A201 Indemnity Provision AIA A201 Indemnity Provision

3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's Consultants, and agents and employees of any of them from and against claims, damages, losses, and expenses, including but not li it d t tt ' f i i t f lti f f limited to attorneys' fees, arising out of or resulting from performance

• f the Work, provided that such claim, damage, loss, or expense is

attributable to bodily injury, sickness, disease or death, or to injury to

• r destruction of tangible property (other than the Work itself), but
• nly to the extent caused by the negligent acts or omissions of
• nly to the extent caused by the negligent acts or omissions of

the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss, or expense is caused in part by a party indemnified hereunder. Such obligation h ll t b t d t t b id d th i ht shall not be construed to negate, abridge, or reduce other rights or

• bligation of indemnity which would otherwise exist as to a party or

person described in this Paragraph 3.18. [Emphasis added.]

59 59 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek General Conditions of the Contract for Construction, Document A201, American Institute of Architects, 2007 edition.

Sample Comprehensive Indemnity Provision: Sample Comprehensive Indemnity Provision: Basic Indemnification Basic Indemnification Basic Indemnification Basic Indemnification

To the fullest extent permitted by law, the Contractor shall defend, indemnify and hold harmless the Owner, Lender, Lender’s construction consultant, Architect, consulting engineers, Owner’s Representative, and their respective agents and employees (the “Indemnified Parties” and each their respective agents and employees (the Indemnified Parties and each an “Indemnified Party”) from and against any and all claims, damages, fines, penalties, losses and expenses, including reasonable attorney’s fees and expert witness fees (“Indemnified Claims” and each an “Indemnified Claim”) arising directly or indirectly from the performance of the Work Claim ), arising, directly or indirectly, from the performance of the Work, breach of this Contract, or a Contractor Party’s negligence or willful misconduct with respect to the Project, provided that such Indemnified Claim is attributable to bodily injury, sickness, disease, or death or to injury t d t ti f t ibl t ( th th th W k it lf t th t t to or destruction of tangible property (other than the Work itself to the extent amounts are recovered pursuant to builder’s risk insurance), regardless

• f whether or not such Indemnified Claim is caused in part by an Indemnified

Party.

60 60 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Sample Comprehensive Indemnity Provision: Sample Comprehensive Indemnity Provision: Economic Loss Economic Loss Indemnification Indemnification Economic Loss Economic Loss Indemnification Indemnification

The Contractor shall also indemnify, defend, and hold harmless the Indemnified Parties from and against Indemnified Claims for the Indemnified Parties from and against Indemnified Claims for economic loss (that is, Indemnified Claims not attributable to bodily injury, sickness, disease, or death or to injury to or destruction of tangible property), but only to the extent such economic loss was caused by a breach of this Contract or a Contractor Party’s negligence or willful misconduct with respect to the Project, regardless of whether such Claim is caused in part by an Indemnified Party.

61 61 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Sample Comprehensive Indemnity Provision: Sample Comprehensive Indemnity Provision: Catch Catch-

• all Provision

all Provision

Such obligations shall not be construed to negate, abridge, or

• therwise reduce any other right or obligation of indemnity which

would otherwise exist as to any Indemnified Party. Nothing herein shall be construed to require the Contractor to indemnify an Indemnified Party for an Indemnified Claim caused by or resulting solely from that Indemnified Party’s own negligence. It is agreed that with respect to any legal limitations now or hereafter in effect that with respect to any legal limitations now or hereafter in effect and affecting the validity and enforceability of the indemnification

• bligation under this Section _____, such legal limitations are

made a part of the indemnification obligation to the minimum made a part of the indemnification obligation to the minimum extent necessary to bring Section _____ into conformity with the requirements of such limitations, and as so modified, the indemnification obligation shall continue in full force and effect.

62 62 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

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Tips for drafting solid indemnity clauses Tips for drafting solid indemnity clauses Tips for drafting solid indemnity clauses Tips for drafting solid indemnity clauses

 “To the fullest extent permitted by law”;  Do not run afoul of state-specific statutory anti-indemnity provisions; provisions;  Don’t forget to consider indemnity for economic loss – this may require revisions to the waiver of consequential damages provision; provision;  Make first-party damages, or damages sustained directly by the indemnitee, a part of the indemnity agreement;  Include language that allows for fees and costs associated  Include language that allows for fees and costs associated with enforcing the indemnity obligation.

63 63 Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek Construction Contracts: Crafting Insurance and Indemnity Clauses James P. Bobotek

Overview of Anti Overview of Anti-

• Indemnification Statutes

Indemnification Statutes – Generally, broad types of anti-indemnification Generally, broad types of anti indemnification statutes:

1) Prohibiting indemnification for negligence and willful acts; 2) Mixed prohibiting full risk shifting for certain claims or requiring it meet certain standards; claims or requiring it meet certain standards; 3) Viewed as “Risk allocation” verses anti-indemnity

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Construction Clauses: Insurance and Indemnity

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Anti Anti-Indemnity Statutes Indemnity Statutes Anti Anti Indemnity Statutes Indemnity Statutes

• Examples:

p

– CA: Restricts transfer of risk for sole negligence or willful misconduct. Additional provisions include greater restriction related to residential housing greater restriction related to residential housing. Allows Owner and design professional to allocate risk more freely. – NC: Restricts indemnification in a design or construction contract for liability arising out of bodily injury or property damage proximately caused by or

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injury or property damage proximately caused by or resulting from the negligence, in whole or part of the indemnitee.

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

Example Example Example Example

• Blaylock Grading v Neal Everett Smith et

Blaylock Grading v. Neal Everett Smith et.

• al. (NC 2008):

Blaylock hired Smith to perform land – Blaylock hired Smith to perform land

• surveying. Smith was off on setting the marks

by about 1.7 feet. It required Blaylock to y q y import fill, costing Blaylock in excess of $500,000 in additional expenses.

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Construction Clauses: Insurance and Indemnity

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• Blaylock (cont):

Blaylock (cont):

– The contract contained a “Risk Allocation” provision which stated: [D f d t ’ li bilit t l i tiff] f d ll i j i l i [Defendants’ liability to plaintiff] for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50 000 the amount of [defendants’] fee (whichever is amount of $50,000, the amount of [defendants ] fee (whichever is greater) or other amount agreed upon when added under Special Conditions. Such causes include, but are not limited to, [defendants’] negligence errors omissions strict liability breach

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[defendants ] negligence, errors, omissions, strict liability, breach

• f contract or breach of warranty.

Construction Clauses: Insurance and Indemnity

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Example Example Example Example

• Blaylock (cont):

Blaylock (cont):

– Smith offered to pay his $50,000 and walk. Blaylock rejected the offer and Blaylock Blaylock rejected the offer and Blaylock prevailed at trial. – On appeal, the Court cited to a NC Supreme On appeal, the Court cited to a NC Supreme Court decision upholding a similar risk allocation provision. Bottom-line: equal

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bargaining strength allows the parties to enforce their contact.

Construction Clauses: Insurance and Indemnity

August 25, 2010 • Boeck – Boise/Sacramento

• For similar outcome see:

For similar outcome, see:

– Moore & Associates, Inc. v. Jones & Carter, Inc., Case No. 3:05-0167, U.S. Dist. Ct. Middle Dist. Nashville, Tennessee (December 13, 2005) (holding maximum damages $18,109.98 in lieu of the claim for

• ver $200 000 in damages)
• ver $200,000 in damages).
• “In order for [contractor] to obtain the benefit of a fee which

includes a lesser allowance for risk funding, [contractor] agrees to limit J&C's liability arising from J&C's professional

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agrees to limit J&C s liability arising from J&C s professional acts, errors or omissions such that the total liability of J&C shall not exceed J&C's total fees for the services rendered on the project.”

Construction Clauses: Insurance and Indemnity

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p j

Anti Anti-Indemnity Indemnity Anti Anti Indemnity Indemnity

• Example

Example

– FL Cannot require indemnification in a construction contract for

liability for damages to persons or property caused in whole or in y g p p p y part by the indemnitee UNLESS the contract contains a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract and it was part of the project specifications or bid documents, if any. In no event can the contract require indemnification for damages to persons or property caused by the indemnitee's gross negligence; willful wanton or intentional misconduct; and

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negligence; willful, wanton, or intentional misconduct; and punitive damages (unless caused by the indemnitor).

Construction Clauses: Insurance and Indemnity

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Anti Anti-Indemnification Statutes Indemnification Statutes Anti Anti Indemnification Statutes Indemnification Statutes

• Example

p

– AL 45.45.900. A provision, clause, covenant, or agreement contained in, collateral to, or affecting a construction contract that purports to indemnify the promisee against liability for damages for (1) death or b dil i j t (2) i j t t (3) d i d f t (4) bodily injury to persons, (2) injury to property, (3) design defects, or (4)

• ther loss, damage or expense arising under (1), (2), or (3) of this

section from the sole negligence or wilful misconduct of the promisee or the promisee's agents, servants, or independent contractors who are p g , , p directly responsible to the promisee, is against public policy and is void and unenforceable; however, this provision does not affect the validity of an insurance contract workers' compensation, or agreement issued by an insurer subject to the provisions of AS 21 or a provision clause

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an insurer subject to the provisions of AS 21, or a provision, clause, covenant, or agreement of indemnification respecting the handling, containment, or cleanup of oil or hazardous substances as defined in AS 46. Construction Clauses: Insurance and Indemnity

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Anti Anti-Indemnification Statutes Indemnification Statutes Anti Anti Indemnification Statutes Indemnification Statutes

• City of Dillingham v. CH2M Hill Northwest, Inc., 873 P.2d

1271 (Al k 1994) Th Al k S C h ld h AS 1271 (Alaska 1994). The Alaska Supreme Court held that AS 45.45.900 barred parties from negotiating away liability to any

• extent. Note that the court specifically found that the Alaska

p y legislature had considered – and rejected – an amendment to the anti-indemnity statute that would have explicitly exempted limitation of liability clauses limitation of liability clauses.

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Construction Clauses: Insurance and Indemnity

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• See also

See also,

– Saia Food Distribs. & Club, Inc. v. SecurityLink from Ameritech, Inc., 902 So. 2d 46 (Ala. 2004) (holding maximum damages the owner could recover was $5,800, the purchase price of the equipment).

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Construction Clauses: Insurance and Indemnity

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Common Law Impact Common Law Impact Common Law Impact Common Law Impact

• What is the impact on the clause?

What is the impact on the clause?

– Early example: W. William Graham, Inc. v. City of Cave City 709 S W 2d 94(Ark 1986) City of Cave City, 709 S.W. 2d 94(Ark. 1986) (holding that an limitation provision in an engineer’s contract was enforceable, but g finding that it applied only to limit the engineer’s liability for negligence, not contract l i )

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claims).

Construction Clauses: Insurance and Indemnity

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Common Law Impact Common Law Impact Common Law Impact Common Law Impact

• How is the clause, even if otherwise valid under the anti-

, indemnity statute or no such statute exists, viewed by the jurisdiction? Cl d l i l – Clear and plain language – Conspicuous – Bargaining strength of the parties – Bargaining strength of the parties – Public policy – Can it be construed as a “cap” rather than an

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p indemnity restriction

Construction Clauses: Insurance and Indemnity

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 Indemnity

Indemnity apportions apportions liability liability among among those those

 Indemnity

Indemnity apportions apportions liability liability among among those those who who share share responsibility responsibility for for an an identified identified loss loss

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 Insurance is a form of indemnification

Insurance is a form of indemnification

 Insurance is a form of indemnification

Insurance is a form of indemnification

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 CGL

CGL excludes excludes liability liability assumed assumed by by the the

 CGL

CGL excludes excludes liability liability assumed assumed by by the the insured insured under under a a contract contract

• r
• r

agreement, agreement, UNLESS UNLESS the the insured insured purchases purchases contractual contractual UNLESS UNLESS the the insured insured purchases purchases contractual contractual coverage coverage endorsement endorsement

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 A/E’s

A/E’s professional professional liability liability policy policy typically typically

 A/E s

A/E s professional professional liability liability policy policy typically typically excludes excludes contractually contractually assumed assumed liabilities, liabilities, UNLESS UNLESS such such liability liability would would have have UNLESS UNLESS such such liability liability would would have have attached attached to to A/E A/E in in the the absence absence of

• f such

such agreement agreement. agreement agreement.

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 A/E’s indemnification obligations should be

A/E’s indemnification obligations should be

 A/E s indemnification obligations should be

A/E s indemnification obligations should be limited to negligence to avoid loss of limited to negligence to avoid loss of coverage coverage coverage coverage

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 Additional

Additional insured insured status status allows allows direct direct

 Additional

Additional insured insured status status allows allows direct direct coverage coverage in in the the event event of

• f a

a third third-

• party

party claim, claim, but but typically typically only

• nly if

if the the claim claim derives derives from from but but typically typically only

• nly if

if the the claim claim derives derives from from the the acts acts or

• r omissions
• missions of
• f the

the named named insured insured. .

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Interaction Between Insurance and Interaction Between Insurance and I d ifi i I d ifi i Indemnification Indemnification

 Some

Some courts courts have have held held that that an an additional additional insured insured

 Some

Some courts courts have have held held that that an an additional additional insured insured provision provision is is void void if if it it is is inextricably inextricably tied tied to to an an indemnification indemnification clause clause that that is is void void under under the the applicable applicable State’s State’s anti anti-

• indemnification

indemnification statute statute. . See, See, e. .g g., , Walsh Walsh Constr Constr. . Co Co. . v v. . Mutual Mutual of

• f Enumclaw

Enumclaw, 92 92 P 3d 122 122 (O (O C A 2003 2003) W E O’N il O’N il C P.3d 122 122 (Or (Or. . Ct Ct. . App App. . 2003 2003); W.E. O’Neil O’Neil Constr Constr. . Co Co. . v v. . General General Cas Cas. . of

• f Illinois

Illinois, 748 748 N N. .E E. . 2 2d d 667 667 (2001 2001) (2001 2001).

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Interplay Between Indemnification Interplay Between Indemnification P i i d I P i i d I Provisions and Insurance Provisions and Insurance

 CGL

CGL excludes excludes coverage coverage for for claims claims for for bodily bodily

 CGL

CGL excludes excludes coverage coverage for for claims claims for for bodily bodily injury injury incurred incurred by by insured’s insured’s employees employees arising arising out

• ut of
• f employment

employment arising arising out

• ut of
• f employment

employment

 But

But express express obligation

• bligation to

to indemnify indemnify for for injuries injuries to to employees employees may may allow allow a claim claim injuries injuries to to employees employees may may allow allow a claim claim under under the the contractual contractual coverage coverage endorsement endorsement

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Scott D Cahalan Scott D Cahalan Scott D. Cahalan Scott D. Cahalan Smith, Gambrell & Russell, LLP Smith, Gambrell & Russell, LLP 1230 Peachtree St NE Ste 3100 1230 Peachtree St NE Ste 3100 1230 Peachtree St., NE., Ste. 3100 1230 Peachtree St., NE., Ste. 3100 Atlanta, GA 30309 Atlanta, GA 30309 (404)815 (404)815-3500 3500 (404)815 (404)815 3500 3500 scahalan@SGRLAW.com scahalan@SGRLAW.com

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