Risk Transfer: 30 Questions for Consolidated Insurance Programs, aka Wrap-Ups

March 2019 Edition

by American Subcontractors Association and Richard B. Usher, Hill & Usher, LLC

  1. Will all subcontractors be “named insureds” for the CIP-provided coverages?
  2. What limits will be available to subcontractors, by line of coverage?
  3. What are the deductibles per line of coverage, and who is responsible for payment?
  4. Is there a reinstatement of liability limits if they are exhausted?
  5. Are all the excess layers of coverage “follow-form” of the primary?
  6. How will losses greater than the excess liability limit be handled?
  7. The Statutes of Repose with regard to construction defect claims can be eight to 10 years or longer. How will contractors and subcontractors be guaranteed coverage for completed operations?
  8. Will the completed operations coverage provided by the CIP match the duration of the statute?
  9. Will subcontractors be indemnified if CIP coverage lapses or is inadequate?
  10. Will products liability coverage be included for contractors and subcontractors performing work for their products which are manufactured, assembled or otherwise worked upon away from the project site?
  11. If a CIP-insured contractor is responsible for causing an injury claim to another on-site contractor’s employee, will the loss be allocated to the responsible party via subrogation to the CIP liability policy?
  12. How will high experience modifications be handled? High EMRs and high insurance costs that result in greater insurance cost credits, favor the less safe contractor.
  13. Will contract indemnity be “limited form”?
  14. Will “additional insured” requests be prohibited?
  15. Will subcontractors’ insurance costs be adjusted to include compensation for their brokers and their administrative costs?
  16. Will subcontractors’ insurance costs be adjusted to include reimbursement for cost impact to their insurance program outside the CIP?
  17. Will subcontractors be reimbursed from CIP funds to support early-return-to-work and modified-duty cost reduction programs?
  18. Will all contractors and subcontractors share in retrospective premium adjustments? Will sharing be pro-rata?
  19. Who is responsible for uninsured Builder’s Risk losses?
  20. How is the Builder’s Risk coverage structured in terms of coverage and exclusions such as:
    1. Is “soft cost” coverage provided? Is “delay in opening” coverage provided?
    2. What are the limits for construction materials in transit or at a temporary storage location?
    3. Are flood and earthquake coverages provided? Are the limits high enough to cover both the hard and soft costs of complete construction?
    4. Is there pollution cleanup and removal coverage for losses resulting from covered Builder’s Risk perils? If so, what is the limit?
    5. Does the policy cover resulting loss caused by faulty or defective:
      1. Design or specifications?
      2. Workmanship, repair, construction, renovation, remodeling or grading and compaction?
      3. Materials used in repair, construction, renovation or remodeling?
    6. Are the labor and materials (including land) involved in grading or other site preparation covered? Is water covered, when used in the construction process? Are grass, plants, shrubs or trees covered for their full replacement cost?
    7. Is coverage provided for increased cost due to ordinances, regulations or laws?
    8. Is the interest of the architect/engineer included? Is there a professional services exclusion? Does coverage include reasonable compensation for architect’s services and expenses required as a result of an insured loss?
    9. Does the policy permit beneficial occupancy?
    10. Is there a mutual waiver of subrogation including subcontractors? A coinsurance clause?
    11. Is coverage included for contractor’s and subcontractors’ profit and overhead?
    12. Is testing coverage provided?
    13. Is coverage provided for damage to existing or adjoining properties?
    14. Are expediting expenses covered? Does this include extra expense to continue the project?
    15. When does coverage end for the construction team?
  21. How will the discovery and cleanup of on-site pollution be handled?
  22. Will the CIP issue “additional insured” status for subcontractor’s rental equipment?
  23. Who will manage claims during the project? After project completion?
  24. How often will claims reviews take place during the project? After project completion? Will the entire construction team participate in the claims reviews?
  25. How often will loss runs be issued? After project completion?
  26. Who will consolidate and distribute safety statistics?
  27. Who is responsible for reporting loss and payroll information for unit statistical reports? Will all subcontractors receive copies prior to filing?
  28. Who is responsible for monitoring certificates of insurance?
  29. Will there be a full-time CIP administrator dedicated to the project?
  30. When will individual contractors receive complete copies of all insurance policies provided by the CIP?


Richard B. Usher is principal managing member of Hill & Usher, LLC, an insurance and surety firm in Phoenix, Ariz. He can be reached at (602) 956-4220 or rbu@hillusher.com.




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