Knowledge Corner

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A common requirement you’ll find in a construction contract is for any hired contractor to provide additional insured status to parties within the contract. The purpose of this requirement is to protect an Owner, General Contractor and/or another Trade Contractor from potential claims that may arise from work the hired contractor is performing. By having the Owner and General Contractor listed as additional insureds on the hired contractor’s policy, this transfers the potential risk for work done back to the hired contractor.

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When working on a construction project, the company you are working for may ask to be an Additional Named Insured or an Additional Insured. It’s easy to believe that they are the same thing, but in reality, there are some significant differences between the two.

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Often, the terms named insured and additional insured get lumped together to be interchangeable. However, that is not the case. Keep reading to learn about each one!

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Does the Wrap-Up exclusion found in many Trade Contractors’ General Liability program fill you with dread? This exclusion has historically been a troublesome risk transfer issue.

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There may come a time during the course of a construction project when a contractor’s relationship is terminated. There are a number reasons this may occur such as:

• The contractor’s financial trouble
• Disputes regarding the quality of the work
• Failing to adhere to the contract documents, or project schedule
• Failing to pay trade contractors and material suppliers    

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Reinsurance is when an insurance company transfers risk to other parties by a formal agreement—thereby lessening its liability on catastrophic or multiple losses. Essentially, it can be defined as insurance for insurers, and it enables insurance companies to remain solvent after major claim events such as hurricanes.

It's important to know that both Treaty and Facultative reinsurance policies can be proportional or non-proportional in structure. Here are some differences between proportional and non-proportional reinsurance that your insurance company should know. 

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A General Indemnity Agreement (GIA) is a legal document that outlines the Surety/client relationship. As a contractor, it is important to understand the terms and language found in this document. Here’s a quick reference regarding some of the significant terms you may encounter:

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A General Indemnity Agreement (GIA) is essential in terms of risk transfer, and it is a necessary component of obtaining surety bonds. The GIA is a legal instrument used by surety companies to ensure they are “made whole” by any losses covered under their bonds. In the event a Surety suffers a loss as a result of the contractor’s failure, the contractor must reimburse the Surety for such losses.

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A change order is work that is added or eliminated from the original scope of work of a construction contract. This may positively or negatively change the contract amount or the completion date of the project. Change orders are common, and it is rare for a construction project to be completed without any changes to the original scope of work.

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All contractors know there are significant risks on every project that are inherent in the construction industry. A contractor's potential risk exposure may be significantly increased through the inclusion of an indemnification clause—also known as a hold harmless clause—in its contract with the owner.