1. THE MANY POLICIES INVOLVED IN A CONSTRUCTION PROJECT
Insurance Coverage Update 2018 CLE
THE MANY POLICIES INVOLVED IN A CONSTRUCTION PROJECT
New York City
May 18, 2018
Justin N. Kinney, Esq.

2. CONSTRUCTION PROJECT RISKS
First Party Risks – damage to the project, tools, materials, etc.
Third Party Risks – damage to persons or property of others
Construction Risks – collapse, faulty workmanship, etc.
Design/Professional Risks – common law, statutory/administrative and contractual liability
Auto/Pollution Risks

3. BUILDERS RISK INSURANCE
First party insurance for buildings under construction
Can be all risk or named peril
Most policies manuscripted

4. BUILDERS RISK INSURANCE
SCOPE OF COVERAGE
Typically limited to “course of construction” and project specific
May include: temporary structures, fixtures/machinery, materials and supplies
Numerous coverage add-ons
Should include contractors and subcontractors but interest may be limited (ATIMA)

5. BUILDERS RISK INSURANCE
TYPICAL EXCLUSIONS
Land and existing buildings
Contractors’ tools and equipment
Defects, errors & omissions
Loss of use/consequential damages/soft costs
Anti-concurrent v. “straight” exclusions

6. OCIP/CCIP/WRAP-UP
Single insurance program for larger construction projects
Program sponsor arranges multiple coverages for each insured in exchange for elimination of insurance costs from bids
Typically involves third-party administrator and governed by program manual
Allows sponsor control over insurances in place for project

7. OCIP/CCIP/WRAP-UP SCOPE OF COVERAGE
Traditionally includes general liability, umbrella/excess and workers’ compensation/employer’s liability
Arising out of operations on a designated project
Performed by enrolled contractor or by/on behalf of insured
Covers sponsor and most on-site contractors

8. EXCLUSIONS/LIMITATIONS
OCIP/CCIP/WRAP-UP
EXCLUSIONS/LIMITATIONS
Coverage limited to project site/on-site risks
Damage to real property of owner
Can be limited to ongoing operations
Form stand-alone policy exclusions/limitations

9. OWNERS/CONTRACTORS PROTECTIVE LIABILITY
(OCP)
Liability insurance for project owner
Typically purchased by contractor
Can be alternative to additional insured coverage

10. OWNERS/CONTRACTORS PROTECTIVE LIABILITY
(OCP) - SCOPE/LIMITATIONS/EXCLUSIONS
Covers operations performed for Named Insured by designated contractor
Covers vicarious liability and acts/omissions in connection with general supervision of designated contractor’s operations
Does not cover owner or its employees for other acts/omissions
Limited to designated project
Typically no completed operations coverage

11. CONTRACTORS POLLUTION LIABILITY
NATURE & SCOPE
Covers contractor for pollution-related liability
Can fill gap created by CGL pollution exclusion
Typically covers injury/damage from “pollution event” or “pollution conditions” resulting from insured’s operations, including remediation expense
May be limited to traditional environmental pollution
Can be occurrence or claims-made

12. OTHER CONSTRUCTION PROJECT INSURANCE
Professional Liability/Construction Management Insurance
Automobile Liability Insurance
Subguard/Contractor Default Insurance

13. COMMON LITIGATED ISSUES
Subrogation Rights
To subrogate or not to subrogate. Does a waiver of subrogation in contract documents bar builders risk insurer’s subrogation action against subcontractors?
Anti-subrogation rule

14. COMMON LITIGATED ISSUES
Additional Insured Coverage
“Arising out of” v. “caused by” endorsements
Some causal relationship satisfies “arising out of” standard
Proximate cause required to satisfy “caused by” standard
Certificates of Insurance - Is the issuing broker an agent of the insurer and would coverage otherwise exist?

15. COMMON LITIGATED ISSUES
Additional Insured Coverage (Cont.)
Is contractual privity required?
Is a written contract required?
Is execution required?
Cannot incorporate insurance procurement obligation by reference

16. COMMON LITIGATED ISSUES
Priority of Coverage
Policy language controls over contracts unless priority defined in policy by reference to contract
What “other insurance” clauses do the policies have?
Primary policies cannot be excess to a “true excess” policy
Analysis can be undone by Named Insured’s contractual indemnity obligations

17. COMMON LITIGATED ISSUES
Policy Exclusions
Contractual liability – exceptions for liability in absence of contract and for “insured contract” may swallow exclusion
Business risk exclusions – excluding coverage for certain damages to or arising out of insured’s work or product
OCIP exclusion – can apply if there was an OCIP at any time and regardless of whether provides coverage

18. COMMON LITIGATED ISSUES
Policy Exclusions (Cont.)
Employer’s liability
“the” v. “any”
“insured contract” exception may limit to common law claims
Residential Construction Exclusion
Contractors Limitation Endorsement – is it absolute?

19. CONSTRUCTION PROJECT INSURANCE
QUESTIONS ?