Extended Liability Insurance

March 16, 2012

Q: Have you been seeing extended liability insurance requirements for new construction projects?

A: Yes I have and some are very troubling. Early this week a member sent me a great example of this. It was a new state agency provision from a Midwestern state that adopted new contract language requiring each contractor to extend the insurance coverage for a period of ten years “for the benefit of the owner.” That would require the owner (agency) to be listed as an additional insured party for that period and it requires notice of switching carriers, changing ownership, etc. Beyond this the requirement added a waiver of subrogation in the favor of the owner. This basically says that our members insurance carrier would agree that if they had to pay a claim related to the project, they would not go back against other parties involved to recoup losses or damages that arose from others involved on the project. So imagine extending your liability well beyond the warranty period, having to explain this anytime you shop for rates on general liability insurance, consider selling your business, etc. It’s crazy in my opinion.

The bottom line is this: make sure you know exactly what you are signing with these contracts and have someone in your office bring these troubling terms and conditions to your attention before you sign anything. Many times these items can be struck from your contract or at least negotiated down to a reasonable timeframe. –CW

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