While a new or renovation construction project is in the planning phases, it is important to emphasize the need for the site owner to recognize that while some liability can be transferred through indemnification provisions within contracts and certain contractual wording within insurance policies, there is also a need for ongoing risk management planning and execution amongst all parties before and throughout the project.
Contractual Risk Transfer Guide – Cincinnati Insurance
Review site owner contractual indemnifications with contractors. A thoughtful contract reviewed by legal counsel may help to mitigate the cost of a loss, and perhaps prevent unnecessarily paying for disputes and claims that may be the responsibility of third parties including sub-contractors. Warranty and force majeure clauses that limit liability should be reviewed for adequacy and specificity and disclaimers should conform to local jurisdictional and other code requirements.
While reviewing performance specifications, include a review of the contractor’s plan for site safety and security during potential temporary shutdowns or infrequent activity. Increased risk exists for temporary job shutdowns in construction that may have a significant adverse impact on a project. Fire, Water, Theft, Vandalism, and Severe Weather are some of the perils that may severely impact sites. In the event of interruption, site owners should require upfront risk assessment of the contractor’s site control plan and be prepared to conduct and document the pre-shutdown inspection with notes, photos, and video.
Certificates of Insurance should be requested and filed which name the site owner as an additional insured for ongoing operations and completed operations on contractor’s and sub-contractors’ policies, specifying those policies as primary, non-contributory, and granting a waiver of subrogation in favor of the site owner. The certificates should contain current effective dates and specify adequate limits for the exposure.
Remodeling affects replacement cost of a home, building or structure and an update must be made on the insurance policy to ensure adequacy of reconstruction costs to rebuild in the event of what is deemed a covered total loss.
