Insurance products used in the construction industry are always changing. To keep up with legal and practice developments in the insurance industry, the AIA undertook an extensive examination of its insurance and bonds requirements for the 2017 update to key AIA contract documents. Working with industry experts, the AIA has put together a comprehensive set of revisions to the insurance and bonding provisions included in its 2017 owner-contractor agreements.The biggest change for 2017 is a new insurance exhibit to be used with the owner/contractor AIA Documents A101™–2017, A102™–2017, and A103™–2017. The new insurance and bonds exhibit, used in conjunction with the revised Article 11 (Insurance and Bonds) of A201–2017, the General Conditions of the Contract for Construction, results in a flexible set of insurance coverages that can be tailored to the specific needs of your project.
In order to be more expansive and flexible, the new Insurance and Bonds Exhibit differentiates between required coverages and optional coverages. Required coverages for the owner include typical property and general liability coverage. For the contractor, required coverages include commercial general liability coverage, auto liability coverage, workers’ compensation and employers’ liability coverage and other coverages based on the type of project.
For owners, optional insurance coverages include loss of use, business interruption and delay in completion insurance; ordinance or law insurance; and expediting cost insurance. For contractors, optional insurance coverages include railroad protective liability insurance; asbestos abatement liability insurance; and insurance for physical damage to property while in storage or transit.
While the Insurance and Bonds Exhibit requires the owner to purchase builder’s risk “all-risks” insurance sufficient to cover the total value of the entire project, the contractor may optionally provide this coverage. The builder’s risk coverage is required to be maintained until substantial completion of the work.
While the substantive terms pertaining to insurance requirements between the owner and contractor are set forth in the Insurance and Bonds Exhibit, A201–2017 still includes key insurance related terms that are applicable to virtually all projects.
Among the revisions to Article 11 of A201 is the removal of the requirement that the contractor provide certificates of insurance with an obligation on the part of the insurer to notify the owner of a pending lapse in insurance. That provision was ultimately removed from the certificates of insurance issued by most insurers and therefore had to be eliminated from A201 as a requirement. Accordingly, A201–2017 now requires that the owner and contractor, rather than the insurers, each provide the other with notice of an approaching or actual cancellation or expiration of insurance coverage. Additionally, there are provisions that protect the interests of the contractor and subcontractors if the owner fails to purchase any of the insurance as required under by the agreement or contract documents.
Finally, Article 11 contains broad waivers of subrogation for damages covered by fire or other causes of loss to the extent those losses are covered, or required to be covered, by property insurance required by the agreement or other property insurance applicable to the project, including property insurance the owner might have under policies that are separate from those insuring the project. It is particularly important to discuss these waivers with insurers to guarantee it is not prohibited by your policy.
Insurance can be an intimidating topic. The latest set of revisions to A201–2017 and the new Insurance and Bonds Exhibit have been developed to make it easier for you to select insurance for your project. By working with your insurance advisors and selecting the appropriate optional coverages, owners and contractors can rest assured that project risks will be effectively covered.
Learn more and get samples of the 2017 AIA documents.