Page 253 - Urban Construction Project Management

208 Chapter Ten
and deductibles, covering the projects risks for a reasonable premium and from a well-
established, reputable, and highly rated insurance company. The CM/GC often must
purchase a series of policies to provide comprehensive insurance coverage for the firm
and the project. It is important that the policies be read, along with the description of
the coverage, list of exclusions, qualifications, definitions, deductibles, amount of cov-
erage, policy limits, excess coverage, and umbrella coverage to provide appropriate
insurance coverage. Insurance policies are often relied on to help resolve claims on a
construction project, and to manage project risks that the CM/GC does not want or
cannot afford to be exposed to.

WAIVER OF SUBROGATION AND INDEMNIFICATION

An important feature of construction insurance policies is the waiver of subrogation
clause. This clause provides that the insurance carrier, after settling and paying a claim,
cannot pursue the damages paid for by the insured parties’ insurance carrier, against the
party responsible for the actual damages. By including this clause, the CM/GCs can
insulate themselves from such subrogation claims from a subcontractor working on the
project, and have the subcontractor’s primary insurance carrier resolve the claim
through their insurance policy.

Another provision in insurance policies is the indemnification clause, whereby sub-
contractors and their insurance companies have to provide the primary insurance for
the work the subcontractor is performing on the project. This is a contractual
requirement between the parties. If there is a lawsuit that arises against multiple par-
ties working on the project, the subcontractor that performed the work has to indem-
nify and defend the CM/GC, owner, consultants, and other named parties on the
insurance certificate and policy. The subcontractors’ insurance company and their
legal staff do this.

TYPES OF INSURANCE

Commercial General Liability Insurance

This type of insurance provides coverage for claims by third parties against the CM/GC
and all additional named insured parties. A pedestrian who has an accident while pass-
ing by a construction site would be covered under this type of insurance policy.

Builders Risk Insurance
This type of insurance provides coverage against the insured’s loss to the property dur-
ing the construction process. A break in a water service in the building during the
construction process, which damages electrical, mechanical, elevator, and plumbing
systems would be covered under this type of insurance policy. It is a primary coverage
rather than against a claim from a third party. One needs to define the policy period for
which it is in effect, which could be when the project is completed or a date thereafter.