Session 4: A Fist Full of Dollars: Utilizing Surety Bonds & - - PowerPoint PPT Presentation
Session 4: A Fist Full of Dollars: Utilizing Surety Bonds & Payment Protection Strategies Brian Clifford Shawna Eikenberry Associate Counsel Surety Bond Basics Obligee = The Protected Party Principal = The
►Obligee = The Protected Party ►Principal = The Contractor/Subcontractor Obtaining the Bond ►Surety = The “Financial Backstop”/Issuer ►Penal Sum = The Surety’s Maximum Liability (with some
exceptions, such as attorneys’ fees for Payment Bonds)
►Forms: AIA A312-2010, statutory forms, and “manuscript” forms
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Payment Bond
►Benefits the subcontractors/sub-subcontractors and suppliers of
the Principal
►Also benefits the Obligee by protecting from mechanic’s liens and
►Owner and unpaid sub-tiered claimants may make a claim on the
bond – often within strict time limits
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Performance Bond
►Benefits the Principal ►Obligates the Surety to complete performance of the Obligee’s
work after a default (or to pay for the excess costs incurred by the Principal to have such work completed by others)
►The remaining balance of the contract price is made available (or
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Bid Bond
►Benefits the Principal ►Ensures that a contract (with required Payment and Performance
Bonds) will be executed at the bid price
►Surety’s liability is the difference between the bid price and the
next bid amount that is required to be accepted (up to the Penal Sum)
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Lien Bond
►Benefits the Property Owner ►Ensures that a mechanic’s lien will be either discharged or paid ►Depending on the jurisdiction, such bonds may allow the lien to be
removed as an encumbrance to the Owner’s title to the property
►Other options: title insurance endorsements (often with escrowed
funds), Irrevocable Letters of Credit, Cash Deposits
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Other Common Bonds “Maintenance” Bonds – Ensure performance of warranty, etc. work
►Right-of-Way Bonds – Ensure completion of private work
impacting public right-of-ways (and other similar development requirements)
►License Bonds – Posted with the licensing agencies to protect
consumers from covered risks
►Fidelity “Bonds” – Insurance policies protecting against employee
dishonesty losses
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►Safety Signs, LLC v. Niles-Wiese Constr. Co., Inc.,
840 N.W.2d 34 (Minn. 2013)
►Subcontractor is unpaid for Phase I-related traffic-control services
and pavement-marking work on City airport project
►It files a Notice of Claim with the Prime Contractor and the Surety
► Surety served at address listed in Payment Bond ► Prime Contractor served at address listed in subcontract
►Prime Contractor pays full amount due to Subcontractor for
Phase I work
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►Subcontractor continues on project and completes Phase II-related
work
►Prime Contractor receives payment from City for such work, but
fails to pay full amount due to Subcontractor
►Subcontractor again files a Notice of Claim with the Prime
Contractor and the Surety
► Surety again served at address listed in Payment Bond ► Prime Contractor again sent Notice at address listed in subcontract
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►Notice to Prime Contractor return “Unclaimed – Unable to
Forward”
►Surety responds to Claim by requesting “proof of claim”
information and documentation
► Surety also included a “reservation of rights”
►After submission, Surety notifies Subcontractor that the Prime
Contractor disputed the claim and therefore the Surety was denying payment
► Prime Contractor copied at a P.O. Box address
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►Subcontractor files suit against Prime Contractor and Surety for
payment on subcontract and on Payment Bond
►Prime Contractor defaults
► Appears to be insolvent and “judgment proof”
►Surety answers the lawsuit and moves for Summary Judgment
► It claims that although it was served at the address listed in the
bond, the notice to the Contractor was sent to an address different than the one listed in the bond – which is contrary to the applicable public works statute
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►Subcontractor challenges that Surety has standing to protest
against the notice sent to a different (and defaulted) party
►Subcontractor also provides evidence that the notice to the Prime
Contractor was sent to the address:
► Listed in the subcontract ► Listed on the Prime Contractor’s website ► Used on all Project invoices ► Used for correspondences between the Prime Contractor and the
Subcontractor
► Used (without objection and with positive results) for the Notice of
Claim for Phase I
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►The District Court rejects the Surety’s claims and granted
summary judgment to the Subcontractor on the notice issue
►Subcontractor moves for summary judgment on liability and
damages – and District Court grants the motion
►Surety appeals, and Court of Appeals reverses summary judgment
►Subcontractor appeals to the Minnesota Supreme Court
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►Minnesota Supreme Court demands strict compliance with statute
► ”Form over Substance?”
►“Substantial Compliance” with statute that required that the Notice
“addresses as stated in the bond” (Minn. Stat. § 574.31(2)(a)) was not permitted
►The statute says that “no action shall be maintained…unless” the
pre-suite notice requirements were met
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►The Subcontractor could not show waiver based (1) the Phase I-
related claim or (2) the Surety using a similar P.O. Box address for the Prime Contractor as the Subcontractor used for the Phase II Notice of Claim
►The Court also allowed the Surety to challenge the
Subcontractor’s compliance with the statute – even if the violation did not involve notice to the Surety
►Thoughts?
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►U.S. ex rel. BAC Funding Consortium, Inc. v. Winchester Fire Ins.
Co., 998 F.Supp.2d 1330 (S.D.Fla. Nov. 4, 2013)
►U.S. Corps of Engineers’ Project for “Water Conveyance Structure”
in Miami-Dade County
►Prime Contractor obtains financing from Bank, which will act as
disbursing agent
►Bank advances funds to pay Prime Contractors’ subcontractors
and suppliers, and is reimbursed from government’s payments
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►As required by the Miller Act, the Prime Contractor also obtained a
Payment Bond
►Bank pays the subcontractors, but is not reimbursed for more than
$500,000 in payments
►Bank files suit against the Surety, and the Surety moves for
dismissal for “failure to state a claim”
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►Motion to Dismiss is granted ►Miller Act payment bonds are “to protect subcontractors and
suppliers who provide labor and materials for a federal project,” and not others
►It has long been held that loans for payments to such protected
entities do not, themselves, constitute “labor and materials”
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►Bank tried to claim “equitable subrogation” to the rights of the
subcontractors it paid for the work
►The basic assertion was that, as a matter of fairness, the Bank
could utilize the payment bond rights of the companies it sent money to for the project work
►The Court said no – the Bank was a “volunteer” to the financing
arrangements and could not utilize “equitable” theories
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►Bank also asserted right against the payment bond under an
“equitable assignment” theory
►Again, the basic assertion was that, as a matter of fairness, the
subcontractors should have been deemed to have impliedly assigned their bond rights to the Bank in exchange for the payments advanced
►One problem: since the subcontractors were paid for their work on
the project (albeit by the bank), they had no rights against the payment bond to assign
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►Another problem: there were no assignment documents from the
subcontractors to the Bank
► And the lien waivers that were provided as a part of the
payment process weren’t “assignments in disguise”
►Question: What if the Bank would have obtained assignments of
the subcontractors’ rights against the bond?
► Because the Bank paid for the Project labor and materials, it
probably “extinguished” the payment bond claims
► If it wanted rights to the bond, it should have been a named
Obligee
►Thoughts?
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►Technica LLC ex rel. U.S. v. Carolina Cas. Ins. Co., 749 F.3rd 1149
(9th Cir. 2014)
►Sub-subcontractor is unpaid for more than $600,000 of work on a
California-located federal project by a subcontractor
►It asserts a claim against the Miller Act payment bond of the Prime
Contractor
►Prime Contractor and Surety file for summary judgment based on
the undisputed fact that the Sub-subcontractor was not licensed in California, as required by law
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►The District Court grants the motion, finding that the unlicensed
status of the Subcontractor was a complete defense to the payment claim
►The California statute “precludes any contractor from maintaining
an action for collection of compensation for services if the contractor was not a licensed contractor during performance of the contract”
►The Sub-subcontractor appealed
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►The Court of Appeals finds that the California law “restricts the
substance of the rights” afforded under the Miller Act
►Conditioning contractors’ rights under the Miller Act on compliance
with state laws would “wreak havoc on the uniform application of the Miller Act”
►Thoughts?
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►Baistar Mech., Inc. v. Cont’l Ins. Co., 2014 WL 2156657 (D.D.C.
May 22, 2014)
►Subcontractor performs work at the Brazilian Embassy ►Prime Contractor’s payment bond required that any lawsuit be
commenced prior to “the expiration of one year from the date…on which the last labor or service was performed by anyone…under the Prime Contract”
► This is substantial similar to the AIA A312-2010 form
►As early as February 2011, the Subcontractor had invoiced the
Prime Contractor the total amount of the subcontract price
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►But it provided equipment training at the Project site more than six
months later (by September 30, 2011)
►Due to a $350,000+ payment dispute, the Subcontractor and the
Prime Contractor enter into a 1-year “tolling agreement”
►When no resolution was reached, the Subcontractor filed a lawsuit
against the Surety on July 15, 2013
►The Surety filed a motion for summary judgment based on the
“contractual statute of limitations”
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►The District Court granted the motion ►The Subcontractor’s allegation that it performed “consulting
services” with respect to the HVAC system it had installed was insufficient to extend the deadline for filing a suit on the bond
► The Court found this was not work that was part of the original
Prime Contract
► Instead, it was “merely for the purpose of correcting defects, or
making repairs” to the previously-completed work
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►The fatal blow: the General Contractor’s affidavit that all work
required under the Prime Contract was completed when the Subcontractor finished the on-site HVAC equipment training
►Although the Court accepted a “trigger date” that was months after
the final invoice was sent by the Subcontractor, that was still too early for the Subcontractor’s bond claim to survive
►The Subcontractor’s delay between tendering the claim to the
Surety and actually filing suit on the bond sunk its case
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►It is unclear why the Prime Contractor/Subcontractor “tolling
agreement” did not include the Surety
► This was a fatal error for the Subcontractor’s rights on the payment
bond
►Thoughts?
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Parent Guaranty/Indemnities
►Commits the financial resources of another entity (usually a parent
Principal’s contractual obligations
►Often utilized when dealing with Single-Purpose Entities and
common in construction lending transactions (for the benefit of the lenders)
►Wide range of terms, including “covered risks,” length of financial
support, and net worth and liquidity commitments
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Irrevocable Letters of Credit
►A banking instrument that operates similar to a check ►Beneficiary has the right to “cash” the ILoC by endorsing the
instrument and providing a statement in accordance with the document
►Bank and “posting party” have limited abilities to prevent payment,
but may have a claim back against the Beneficiary for recovery of funds and resulting damages
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Construction Escrow and Disbursing Agreement
►A multi-party agreement between the Owner, Lender and Title
Company, usually with the Prime Contractor as a non-party signatory
►Outsources Sworn Statement/Lien Waiver submittal process to
title company, which issues “date-down” endorsements to the Lender’s Mortgage/Trust Deed Policy
►Usually supported by Personal Undertakings from the Owner and
(if a “pay-general” system is used) the Prime Contractor
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“Lockbox Account”
►A multi-party agreement that restricts access to Project proceeds ►Sometimes utilized in conjunction with financing agreements and
ILoC’s to allow the bank to maintain control of distributions
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Pledges of Other Assets
►The protected party is granted rights in other collateral (such liquid
financial instruments, securities, real estate, Accounts Receivable, equipment, etc.)
►May be subject to Uniform Commercial Code requirements for
Security Interests
►Value of assets may fluctuate, and restrictive covenants may be
needed
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Construction Risk 2.0
Jason Wilsey, Vice President Willis of Minnesota, Inc.
construction
– Reduce cost – Improve cash flow & margin – Protect earnings – Make informed decisions – Don’t end up like this guy…
*Happy Gilmore 9th Green at 9 clip
state)
ramping up oversight and penalties
seasonal weather (blizzards, hurricanes)
classify you as a “design professional”
These are “The Good Old Days”
Unfortunately, we will look back and remember these as when things were easier…
Warming Up
Hot!
*Insert Whatchu Takin Bout Willis video
including condominiums
This insurance does not apply to "bodily injury", "property damage" or "personal and advertising injury" arising out of or in any way related to premises if those premises, in whole or in any part, are or were at any time, marketed, sold, occupied,or used as residential premises. Residential premises include, but are not limited to:
"mixed- use buildings"; and 2. Appurtenant common areas, structures, facilities and grounds associated with the residential premises. Residential premises also include any conversion of property to or from any of the residential premises described above. Residential premises do not include nursing homes, assisted living facilities, hospitals. dormitories, jails, prisons, military housing, apartment buildings, hotels or motels, provided that any such premises, in whole
cooperatives, dwellings,homes, houses, townhomes or townhouses,timeshares or "mixed-use buildings." For the purposes of this endorsement, ''mixed-use buildings" means any structures and improvements thereto which contain both: (i) residential living space and (ii) commercial or industrial space. This exclusion does not apply to "bodily injury", "property damage" or "personal and advertising injury'' arising out of on-going operations performed by you or on your behalf. This insurance is excess over any other valid and collectible insurance (including any deductible portion thereof) availabie to the insured whether primary, excess,contingent or on any other basis.
appealing
urban living
– Transit, Green lifestyle, “Lock and walk”
Construction Defect Liability – what is this?
Generally speaking, a deficiency in the design or construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer's reasonable expectation. (IRMI’s Glossary of Insurance and Risk Management terms)
Statute of Repose – the time period within which a construction defect
action must be brought. In Minnesota, the exposure lasts for 10 years following substantial completion, plus 2 years for late manifestation.
CD-related lawsuits are common in the construction industry, and
condos/TH’s are even more prone to CD claims when compared with commercial or single family residential.
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Electrical Fire in Apartment Project
GC to Electrical Sub
against their insurance carrier
exclusion” in general liability policy
Potential Outcome
the contract path
– Owner/lender – Owner/GC – GC/Sub
OWNER GENERAL CONTRACTOR SUBCONTRACTORS Indemnification / GL Additional Insured Contractual Risk Transfer Contractual Risk Transfer Indemnification / GL Additional Insured
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– Companies move insurance providers – Do you have time to read all sub policies? – How does your policy apply to the new paradigm?
“residential” exclusion applies
– Or if it has been amended – What if the project converts?
and deliver your work confidently
– GC to Owner – Owner to Lender – GC to Sub
current marketplace
Subs all carry completed operations coverage (CGL) up to the statute of repose
– Positive loss performance – Quality risk control procedures
– More certainty – Confidence in your delivery – Focus on what you do best
How do I learn more about these strategies?
Jason A. Wilsey – Vice President 763-302-7102 jason.wilsey@willis.com
►Required Coverages
► Workers’ Compensation/Employers’ Liability ► Commercial General Liability ► Automobile Liability ► Property/Builder’s Risk Coverage
►Optional Coverages
► Excess/Umbrella Liability Insurance ► Professional Liability Insurance ► Pollution Liability Insurance
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►Coverage Limits
► General Liability ►Per Occurrence/Aggregate Limits ► Property Insurance ►General Limits ►Sublimits for Specified Perils or Coverage Extensions ► Excess/Umbrella Insurance ►Limits ►Exhaustion ►Follow Form ►Excess vs. Umbrella
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►Additional Insured Coverage
► Primary and Non-Contributory ► Elimination of Cross-Suit Exclusion ► Elimination of Privity Requirements ► Scope of Additional Insured Coverage ► Relationship of Anti-Indemnity Laws to Additional Insured Coverage
►Subrogation Waivers
► Scope of Waiver ► Waiver Triggers
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►Certificates of Insurance ►Carrier Financial Thresholds ►Cancellation and Notice ►Miscellaneous Requirements
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►In the event contractor is not required to provide or elects not to
provide workers’ compensation coverage, the parties hereby agree that contractor, its owners, agents and employees will have no cause of action against, and will not assert a claim against, the State of Louisiana, its departments, agencies, agents and employees as an employer, whether pursuant to the Louisiana Workers’ Compensation Act or otherwise, under any circumstance.
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**While the minimum Combined Single Limit of $1,000,000 is required for any renovation, the limit is calculated by taking 10% of the building value and rounding it to the nearest $1,000,000 to get the insurance limit. Example: Renovation on a $33,000,000 building would have a calculated $3,000,000 combined single limit of coverage (33,000,000 times .10 = $3,300,000 and then rounding down to $3,000,000). If the calculated limit is less than the minimum limit listed in the above chart, then the amount needed is the minimum listed in the chart. Maximum per
calculated as twice the per occurrence limit.
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COMBINED SINGLE LIMIT (CSL) PER OCCURRENCE Type of Construction Projects up to $1,000,000 Projects over $1,000,000 up to $10,000,000 Projects over $10,000,000 New Buildings: Each Occurrence Minimum Limit $1,000,000 $2,000,000 $4,000,000 Per Project Aggregate $2,000,000 $4,000,000 $8,000,000 Renovations: The building(s) value for the Project is $_______________. Each Occurrence Minimum Limit $1,000,000** $2,000,000** $4,000,000** Per Project Aggregate 2 times per occur limit** 2 times per occur limit** 2 times per occur limit**
►Products and completed operations coverage. This coverage shall
extend through the contract guarantee period and for at least 6 years from final completion of all work.
►Employees as additional insureds. ►The aggregate must be applicable on a per project basis.
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►A policy of commercial general liability insurance, written on an
insurance industry standard occurrence form, including all the usual coverages known as: premises/operations liability; products/completed operations; personal injury; contractual liability; independent contractors liability; and fire damage legal
► Bodily injury and property damage - $2,000,000 each occurrence ► Products or completed operations - $2,000,000 each occurrence
►Any deductible or self-insured retention must be disclosed and is
subject to approval by the Electric Boat Corporation’s risk
deductible shall be the responsibility of the contractor.
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►Commercial general liability insurance, with limits no less than One
Million Dollars ($1,000,000) combined single limit per occurrence and Two Million Dollars ($2,000,000) annual aggregate limit for bodily injury and property damage, including coverage for contractual liability; personal injury; fire damage legal liability; advertisers’ liability; owners’ and contractors’ protective liability; products and completed operations; broad form property damage; and explosion, collapse and underground (XCU) coverage during any period in which Borrower is conducting any activity on, alteration or improvement to the Site with risk of explosions, collapse, or underground hazards.
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►Builder’s Risk Insurance shall be in an amount equal to the greater
construction contract including any amendments and shall be upon the entire work included in the contract. The policy shall provide coverage equivalent to the ISO form number CP 10 20, Broad Form Causes of Loss (extended, if necessary, to include the perils
theft, including theft of materials necessary to provide plans, specifications and supervision of work for the repair and/or replacement of property damage caused by a covered peril, not to exceed 10% of the cost of the repair and/or replacement.
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►The policy shall provide coverage for “all risks” of direct physical
loss or damage to the portions or elements of the Facility under construction, excluding terrorism but including the perils of earthquake, earth movement, flood, storm, tempest, windstorm, hurricane, and tornado and subsidence; shall contain extensions
Facility; and shall contain only those exclusions that are typical for a project of the nature of the Facility.
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Section 1: Insurance Coverages Required Prior to Final Completion of the Project Assets
► Builder’s Risk Insurance for physical loss, destruction, or physical damage to the Work. The
Builder’s Risk insurance will cover the Concessionaire, Design-Build Contractor, the Department, and other Contractors of all tiers until Substantial Completion of all of the Project Assets; provided, that the limits of such coverage may be based on a maximum probable loss analysis, subject to the Department’s approval of such maximum probable loss analysis by an independent third party acceptable to the Department. In no event will the limits of such coverage be less than $250
limited to: Offsite Storage, Property in Transit, Expediting Expenses, Demolition and Increased Cost of Construction, Debris Removal, Mobile Equipment and Professional Fees/Loss adjustment
equipment, machinery, and fixtures that are or will be part of the Project. Coverage will include, but not be limited to, the following: right to partial occupancy; earthquake; earth movement; flood; transit; temporary and permanent works; expediting expenses; debris removal; offsite storage; delayed opening, commissioning; and start-up.
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Section 2: Insurance Coverages Required for the Project following the Existing Assets Tolling and O&M Work Commencement Date
► Property and Business Interruption Insurance at replacement cost covering loss, damage, or
destruction to the Project, including improvements and betterments; provided, that the limits of such coverage may be based on a maximum probable loss analysis, subject to the Department’s approval of such maximum probable loss analysis by an independent third party acceptable to the Department. In no event will the limits of such coverage be less than $250
movement; collapse; water (including overflow); leakage; utility interruption; debris removal; business ordinance or law for increased costs of construction; extra expenses; valuable papers; and terrorism. Subject to the applicable deductible, such coverage also will insure against interruption or loss of projected Toll Revenues for at least six months from the occurrence of the risk, resulting from physical damage to the Project and any relevant feeder roads. The Department is to be named as an additional insured on a primary, non-contributory basis. The Concessionaire is responsible for all loss or damage to personal property (including but not limited to materials, fixtures/contents, equipment, tools, and supplies of the Concessionaire.
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►All Risk Builders Risk Insurance or Installation Floater
► If Permittee is undertaking any construction, including
improvements, betterments and/or repairs, Permittee shall provide All Risk Builder’s Risk Insurance or an Installation Floater covering the materials, equipment, machinery and fixtures that are or will be part of the permanent facility. Extensions of All Risk Builders Risk coverage shall include earthquake, flood, materials in-transit and
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► Umbrella and Excess Liability Insurance with the following features:
► Coverage that provides excess coverage for Employers Liability, Commercial General
Liability, and Auto Liability, with the same features as described in sections A, B and D herein with limits not less than $5,000,000. Subcontractor acknowledges that it will provide Umbrella and Excess Liability Insurance on behalf of the Contractor and that the Umbrella and Excess Liability Insurance will be subject to vertical exhaustion before any
Contractor will be triggered. The total insurance coverage provided by Subcontractor for any claim will under no circumstances be less than the combined Primary limits as defined in Section A, plus the Umbrella and Excess limits as defined above. Subcontractor (vendor) further acknowledges that the total amount of insurance coverage provided by its insurance carriers, whether primary, excess, umbrella or other, where Contractor, and others, as specified above, are afforded additional insured coverage, shall apply as first tier/following form coverage. Any other insurance maintained by Contractor,
called upon to contribute to satisfy any loss within the limits specified and required above. Subcontractor shall furnish umbrella/excess policy language evidencing coverage to apply
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►Supplier shall carry Excess Liability Insurance that follows the form
liability only, general liability, and automobile liability in an amount not less than $5,000,000 per occurrence and $5,000,000 in the aggregate.
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►When any professional services, such as architecture, auditing,
construction design, engineering, mechanical design, or other service which requires professional certification and licensing by a governmental entity, is being provided to the Chicago Park District under the Permit, Professional Liability Insurance with limits of not less than $1,000,000 per occurrence for damages arising from any acts, errors or omissions. Coverage shall include severability of interest and cross-suit liability for consultants/sub-contractors. Claims-Made policies shall be renewed each year for a period of two (2) years after completion of the contract and shall have an extended reporting period of two (2) years. When renewed or replaced, the policy retroactive date must coincide with or precede start of work under the Permit.
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►Design Service Requirements
► If Subcontractor or its sub-subcontractor performs design services,
Subcontractor will purchase, furnish and maintain or require its sub-subcontractor to purchase, furnish and maintain professional liability insurance with limits of at least $2,000,000 and with the following coverages: basic professional errors and omissions, punitive damages (where not prohibited by law), contractual liability, with a retroactive date that is no later than the date of inception of design services. Such coverage shall be maintained in effect for a period of five (5) years from the Date of Substantial Completion of the Project or the statute of repose, whichever is longer.
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►Policy of professional liability insurance – appropriate to the
contractor’s operations. Coverages should be for a professional error, act or omission arising out of the scope of services required by this agreement. Such policy(ies) must provide the following limits:
► $5,000,000 per claim
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►All claims based on acts, omissions, injury or damage occurring or
arising in whole or in part during the policy period must be
made policy, coverage must be maintained continuously for a period ending no less than three (3) years after recordation of a notice of completion for builder’s risk or the Compliance Term for general liability and property insurance.
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►When any pollution risk exposure is apparent, Pollution Liability
Insurance shall be provided on a blanket basis covering bodily injury, property damage and environmental restoration for claims arising out of performance of services including handling, clean-up and excavation of waste and hazardous materials. Limits required for each shall not be less than $1,000,000 each accident and general aggregate. Claims-Made policies shall provide an inception or retroactive date prior to the date of this agreement and be renewed each year for a period of three (3) years after termination of this agreement or provide an extended claims reporting period of not less than three (3) years after the termination of this agreement.
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►CGL General Aggregate Limits – Per Project:
► We require that your CGL policy’s General Aggregate limit applies
separately to this project. By doing so we eliminate concerns that the limit could be eroded due to claims from other projects that you are working on. The “Project” box in the CGL section of the Certificate should be checked or the words “Per Project” should be typed in this section.
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►Any policy in a form of coverage that includes a general annual
aggregate limit or provides that claims investigation or legal defense costs are included in the general annual aggregate limit must be in amounts that are double the occurrence or claims limits specified above.
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►The City reserves the right to require an increase in insurance
coverage in the event the City determines the conditions show cause for an increase, unless Borrower demonstrates to the City’s satisfaction that the increased coverage is commercially unreasonable and unavailable to Borrower.
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►Limits of Insurance: Subcontractors insurance coverage shall
apply for the full amount of any loss up to each respective policy limit of liability and shall not be limited to the minimum required limits of this subcontract. In specifying minimum requirements herein, neither Contractor nor Owner assert or recommend this insurance as adequate to Subcontractor’s requirements. Subcontractor is solely responsible to inform itself of types of insurance or additional limits it may need beyond these.
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►Acceptable Additional Insured endorsements include ISO Form CG
2010 1185 or the use of both ISO forms 2033 1001 and 2037 1001
but not limited to ISO form 2010 0704 and/or 2037 0704 or later versions, are subject to review and will not be acceptable if they limit coverage to the Additional Insureds for liability caused by their acts or
will be excess of any other policies for which the parties to be named as additional insureds (per paragraph f above) have additional insured status is likewise unacceptable. A copy of the additional insured endorsement shall be provided to the Contractor for approval prior to commencement of work.
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►The insurance required by General Liability, Automobile Liability,
and Excess Liability (if required) Sections shall include Company, its direct and indirect subsidiaries and affiliates including Limited Liability Companies, as additional insureds with respect to all
purchased by the Contractor (including limits greater than the minimum limits required herein).
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►Developer, TxDOT and the Design-Build Contractor shall be the
named insureds on the policy as their respective interests appear. Developer also may, but it not obligated to, include other contractors as named insured as their respective interests appear. The policy shall be written so that no act or omission of any insured shall vitiate coverage of the other named insureds. Developer may name itself or the Collateral Agent as loss payee under the policy.
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►Subcontractor shall provide the following ISO Endorsements or
their functional equivalents:
a)
CG 20 33 10 01 (Additional Insured – Owners, Lessees or Contractors – Automatic Status when required in Construction Agreement with You)
b)
CG 20 10 10 01 (Additional Insured – Owners, Lessees or Contractors – Scheduled Persons or Organization) if applicable for Owner or other persons or entities
c)
CG 20 37 07 04 (Additional Insured – Owners, Lessees or Contractors – Completed Operations)
d)
CG 24 04 10 93 (Waiver of Transfer of Rights of Recovery Against Others to Us)
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►All liability policies must provide that the insurance is primary to
any other insurance available to the additional insureds with respect to claims arising out of this Agreement, and that insurance applies separately to each insured against whom claim is made or suit is brought and that an act of [sic] omission of the named insureds that would void or otherwise reduce coverage will not void or reduce coverage as to any other insured, but the inclusion
limit of liability.
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►Additional Insured Protection to be “Primary and Non-
Contributory”:
► We require subcontractors to have the additional insured language
structured so that it is “primary and noncontributory” as respect insurance contractor maintains. This means that your policy must respond in defense of contractor first and with no contribution of coverage from contractor’s policies.
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►The insurance policies for all Subcontractor’s insurance shall
include a waiver of subrogation as follows: “It is agreed that in no event shall these insurance companies have any right of recovery against ABC Builders, its parents and affiliates, XYZ Development LLC, 123 Development LLC, East 456 Developers LLC, their parent and affiliates (to the extent applicable) or any other additional insured as required in the Owner/Contractor Agreement.”
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►The insurance required by workers’ compensation and employers’
liability, general liability, automobile liability, excess liability (if applicable), and professional liability (if applicable) such Sections shall include full waivers of subrogation in favor of Company, including its direct and indirect affiliates, limited liability companies, unless waiver of subrogation is prohibited by law governing such insurance.
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►Waiver of Subrogation – Rights of subrogation against additional
insureds are waived and Subcontractor will provide Contractor with a copy of ISO Endorsement CG 24 04 10 93 as evidence of coverage.
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►The reverse side of the certificate must list each of the above
items a through f, and the following statement must precede the listing: “This certificate warrants that:”
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►The certificate of contractor’s general liability insurance shall
certify that any policy restrictions or exclusions (such as “care, custody and control”) have been deleted from the policy and no similar restrictive clauses or exclusions have been included.
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►Prior to commencing Work, Subcontractor shall furnish Contractor
with certificate(s) of insurance executed by a duly authorized representative of each insurer, as evidence of compliance with the insurance requirements set forth above. Such certificates of insurance shall be accompanied by copies of endorsements evidencing coverage afforded to Contractor and Owner as additional insureds, and endorsements reflecting insurer’s concurrence with Subcontractor’s waiver of recovery or subrogation rights.
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►The above insurances shall each contain the following wording
verbatim:
► Construction Manager is interested in the maintenance of this
insurance and it is agreed that this insurance will not be canceled, materially changed or not renewed without at least a thirty (30) day advance written notice to the Construction Manager sent by certified mail – return receipt requested. Note: If an “Accord” [sic] certificate of insurance is used, it must not include any wording in the cancellation clause, such as “endeavor to” and “but failure to mail such notice shall impose no obligation or liability of any kind upon the company.”
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►All policies required by this Agreement must be endorsed to
provide no less than thirty (30) days’ written notice to the City before cancellation or intended non-renewal is effective.
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►Contractor shall not permit any subcontractor to enter upon or
continue performance unless subcontractor is and remains insured in accordance with these requirements.
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►When coverage is provided by self-insurance, the contractor shall
not change or decrease the coverage without the Administrative Contracting Officer’s prior approval.
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►Self-insurance – should the contractor be self-insured, for any or
all of the above insurance requirements, a letter from the corporate risk manager, or appropriate finance office, is acceptable – stipulating if actuarially funded and fund limits; plus any excess declaration pages to meet the contract requirements. This letter should also advise how the contractor would protect and defend Electric Boat Corporation as an additional insured in its self- insured layer, and include claims handling directions in the event
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►Contractor shall include all subcontractors as insureds under its
policies or be responsible for verifying and maintaining the certificates provided by each subcontractor.
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►Subcontractors – contractor shall include all subcontractors as
insureds under its policies or shall furnish separate certificate of insurance, as stated above, for each subcontractor. All coverages for subcontractors shall be subject to all the requirements stated herein and applicable to their profession.
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►Sub-subcontractor Insurance Requirements
► Subcontractor shall obtain insurance coverage from each of its
sub-subcontractors or suppliers that is equal to or greater than that required of Subcontractor.
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►Any failure of the Contractor to comply with reporting provisions of
the policy shall not affect coverage provided to the Agency, its
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