Additional Insured Protection – General Contractor’s Commercial Liability Insurance
The project owner, let’s call them CCC (Condo Construction Company) want more protection than offered through an additional insured endorsement. On their last project, they ran into a problem caused by inadequate protection using the additional insured form of coverage.
CCC failed to let know the GC on the job that there was an abandoned well on the site. When a worker fell into the concealed well he suffered a broken ankle. CCC was found negligent due to the failure to tell the GC about the well. The ruling found that the GC had no liability, even partly for the injury to their own employee.
CCC suffered another setback when it discovered that the hold harmless and indemnity clauses of the contract cannot be enforced in the state the project was in as state law prohibits indemnification of the negligence of another in a construct contract. Most states have similar language in their statutes.
Based on this terrible experience, CCC no longer had any level comfort as an additional named insured coupled with hold harmless and indemnity clauses.
Owners & Contractors Protective Liability Insurance (OCP)
To give CCC more protection, the GC offered to buy OCP insurance with CCC as the named insured. CCC is not sure and this time consult with their insurance advisor who is against relying on OCP form as adequate protection. The reason is that the broker believes there are too many restrictions on the coverage provided by OCP insurance. Following a lengthy face-to-face conference, CCC felt that a different form of insurance was in order.
Owner’s Interest Liability — Project Specific CGL Insurance (Owner’s Interest)
This type policy provides more protection than the OCP policy or the endorsements and contract language of CGL coverage, hold harmless, and indemnification clauses in the construction contract.
In addition to protection from incidents occurring during construction, protection with an Owner’s Interest policy can extend to incidents after the project ends. For instance, this policy protects CCC from liability for a collapsed balcony after the GC completes the project and leaves the site and after the policy expires. CCC decides to buy this insurance for itself.
When the GC learns about the benefits of the Owners Interest policy they want inclusion in the coverage. Often, the insurance carrier will include as a “named insured” the GC, and the GC also has coverage for the extended time period.
To be clear, while endorsements to the CGL or OCP and protective contract language do go a long way towards protecting the project owner, Owner’s Interest insurance closes gaps left by the old way of doing business. Remember, that the value of an insurance policy is directly related to the risks it covers. Project owners who do not take any responsibility or costs for self-protection may pay more by not covering all potential risks.
Project owners and General Contractors, talk to your insurance advisor before signing your next construction contract.
