1. CONTRACTUAL INSURANCE REQUIREMENTS Avoiding Pitfalls & Potholes Dan CretellaFrank Armstrong O&G Industries, Inc.Willis North America September 16, 2014 Willis Construction Risk Management Conference – Dallas, TX

2. Agenda General Principles Coverage Lines and Common Pitfalls Process, including Verification / Compliance Contractual Insurance Requirements | 1

3. General Principles Exposure Identification Project Delivery Method Construction Risk Considerations: Project Value, Adjacent Properties, Existing Structures, Partial Occupancy, Public Liability, Professional, Environmental Jurisdictional Risk Considerations: Anti-indemnity/AI, Upstream Immunity, Duty to Defend (AI), Statute of Repose, Faulty Work as an “Occurrence” (GL) Lender Requirements Intent – Required Coverage / Terms Risk Transfer / Allocation Contractual wording aligned with intent Clear, unequivocal When available, specify terms subject to standard forms (ISO) or “equivalent” Commercially reasonable terms Verification / Compliance Definition of “good” contractual insurance requirements: When a claim event takes place, the insurance coverage responds as intended. Contractual Insurance Requirements | 2

4. Coverage Possible Requirements Workers’ Compensation General Liability Auto Liability Excess / Umbrella Liability Builders Risk Professional Liability Pollution Liability Contractors Equipment Riggers Liability Railroad Protective Liability Owners and Contractors Protective Contractual Insurance Requirements | 3

5. Coverage WC Considerations USL&H, Harborworkers, Maritime Alternative Employer Endorsement Sole proprietors or others not statutorily maintain WC Separate EL from statutory requirements with specified limits:  BI by acc – each acc  BI by disease – policy limit  BI by disease – each employee Contractual Insurance Requirements | 4

6. Coverage General Liability Considerations Avoid outdated terms (“broad form property damage”, “XCU”, etc.) Specify ISO Form CG 0001 (2004 edition or later) or equivalent Limits: minimum of / no less than and/or single combined limit with excess/umbrella; vary by subcontractor trade? Additional Insured Terms – scope and length of requirement Additional Insured – Primary/Non-Contributory (ISO CG 2001) Project specific aggregate (operations) Completed operations Amendatory Endorsement: Limited Contractual Liability for Covg Personal & Advertising injury (ISO CG 2274) Amendatory Endorsement: Waiver of Rights of Recovery (ISO CG 2404) Amendatory Endorsement: Contractual Liability – Railroad (ISO CG 2417) Unacceptable Exclusions (e.g. residential) Project Specific (GL only Wrap)? Contractual Insurance Requirements | 5

7. Coverage CGL / Additional Insured Considerations ISO AI Endorsements: CG 2010 (operations) and CG 2037 (completed operations) Edition dates matter:  10/01 – “arising out of”;  07/04 – “caused in whole or in part”;  04/13 – additional terms  To the extent permitted by law  Scope of coverage no broader than required by contract  Limits of coverage no broader than required by contract “Saving” clause: To the maximum extent permitted by law Avoid “tying” AI requirements to indemnity provisions Priority of Coverage (Excess/Umbrella) Contract Privity: ISO CG 2033 vs. CG 2038 Contractual Insurance Requirements | 6

8. Coverage Auto Liability ISO Form CA 0001 “Any Auto”, include owned, hired or otherwise operated by/on behalf of MCS 90 Broadened Pollution Liability (CA 9948) Contractual Insurance Requirements | 7

9. Coverage Excess / Umbrella Considerations “minimum of” or “no less than”; and/or combined single limit with primary Follow-form Amend “other insurance” provisions to assure vertical exhaustion (AI) Include EL in underlying Contractual Insurance Requirements | 8

10. Coverage Builders Risk Who is procuring the coverage? All Risk Who are Insureds? Delay Transit Offsite Existing Structures Partial Occupancy Contractual Insurance Requirements | 9

11. Coverage Other Insurance Related Considerations Waivers of Right to Recovery  Typical: “…to the extent of available insurance”  Consider: “…to the extent of available insurance, [including or excluding] any applicable deductible” Contractual Indemnity: Align with CGL Contractual Liability Coverage? Consequential Damages  Mutual waiver  To the extent of available insurance Liquidated Damages Flow Down Provisions (except limits?)  Sub-subcontractor  Employee Leasing Companies  Alternate Employer Endorsement SIR’s and deductibles Notice of Cancellation Reserve right to obtain certified copies of policies Insurers – Authorized / Financial Rating (AM Best A- VII) Compliance failure constitutes default, with allowance to terminate for cause, withhold payment and/or purchase the required insurance at downstream party’s expense Contractual Insurance Requirements | 10

12. Process Practical Considerations Streamline the process Pre-bid / Post Bid Who is negotiating? Risk professional (and/or their respective brokers) should communicate Pay attention to insurers Verification / Compliance Considerations Do nothing and hope coverage is there when needed COI’s COI’s with key endorsements (AI, WOS, XS PNC) COI’s with verification addendums Review policies Completed operations period Contractual Insurance Requirements | 11

13. Questions Contractual Insurance Requirements | 12