Working with clients in the construction field, chances are high that you’re already more than aware of the various policies that this area requires. General liability, Workers Compensation, and other areas of coverage are probably already accounted for, and though every business and project is different, there are certain areas of coverage that are required, either by law or by practice, before work on a project begins.
However, while these titles may seem all-encompassing, it is important to note that every policy is different, and while an insured may think they are covered for every hiccup a project may encounter, it’s possible that there are gaps in their coverage — gaps that can end up costing them a significant amount of money.
In this text, we would like to discuss coverages and endorsements we feel, from our many years of experience in the field, are important for insureds to contemplate beyond their normal considerations.
For larger projects — or smaller projects in high-risk fields — certain areas of coverage that fall outside of an insured’s typical expectations are actually a must. For example, some mistakenly think that all coverage related to pollution will be taken care of by their General Liability; however, many projects with a risk of pollution also require Contractors Professional & Pollution coverage. This policy covers losses as a result of contamination stemming from normal operations or transportation of waste materials. If a business hires consultants or subcontractors, they might want to consider Contractors E&O coverage. This covers mistakes that can be attributed to the aforementioned consultants and subcontractors.
Beyond these areas, there are many endorsements to take into consideration. Different endorsements are applicable to different projects, and working with an insured will allow you to get a better understanding of their specific needs.
At a base level, a Waiver of Subrogation is especially important for construction projects. Essentially, when an accident or injury occurs on the jobsite to a contracted, sub-contracted, or sub-sub-contracted worker, insurance companies can follow the chain of command from subcontractor all the way up to the contractor to seek damages. This waiver allows those higher up on the chain of command to protect themselves from downstream parties’ insurance carriers.
This may sound similar to both Primary and Noncontributory Endorsements, though there are some notable differences. To give a brief explanation, a Primary Endorsement requires a subcontractor’s policy to protect a higher level contractor in the event that the actions of a lower level contractor lead to damages, even in cases where the higher level contractor was partially liable. A Primary Endorsement ensures the subcontractor’s policy does this on a primary basis, meaning that in the event of damages, the lower level contractor’s General Liability policy will be the first to pay.
Noncontributory Endorsements are a little harder to define, but in their essence, they require that only one policy be responsible for covering a loss, meaning that a primary party’s insurer is prevented from seeking contributions from the policies of other entities involved. This means that the lower level contractor/subcontractor’s policy is the sole source of recovery in the event of a claim.
Another endorsement is a Per Project Aggregate Limit. This stipulates that the maximum limit an insurer will pay over the course of a policy period (i.e. the ‘aggregate limit of liability’) will apply separately to each project. Adding this ensures that each party’s liability limits are not exhausted by other claims before work on a project begins.
Furthermore, an insured may want to consider a Blanket Additional Insured Endorsement. This endorsement defines the groups to which it should apply, such as general contractors, and allows for additional insureds to be automatically endorsed to the policy at a certain point, typically when required by written contract or other trigger. This is good for subcontractors with many projects, as it allows them to quickly add additional insureds.
These are just a few examples of endorsements, and different insureds require different endorsements based on their area of work.
We understand how confusing and overwhelming these markets can be. Thankfully, we have many years of experience following and dealing with these markets. If you’re seeking coverage for a project, have questions about current coverage for your clients, or just need some assistance in this area, all of us at Conway E&S would be more than happy to assist you. Simply contact us, and we’ll work with you to find a solution that works for you.