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Plan to avoid disputes relating to insurance matters

California construction contracts can be complex. With so many details regarding the scope of work, cost, payment terms and authority, you may overlook the project’s underlying insurance requirements. The experienced team at Tsao-Wu & Yee LLP has detailed knowledge of contractual indemnity issues and insurance law. This can help you resolve disputes without going to trial and minimize legal expenses.

According to Risk Management Magazine, reviewing the insurance requirements, terms of coverage and the amounts needed to cover any losses related to the project can be beneficial if any parties involved file claims months later. Some factors to consider during contract negotiations include the following:

  • Whose insurance provides compensation for a loss?
  • Are there provisions in case the insurance coverage is insufficient?
  • Are there coverage “gaps” between the terms of the primary insurance and excess insurance policies?
  • Is the entity that suffers the loss covered under “additional insured” or “named insured”?

Addressing these questions before they become issues may help you avoid disputes and litigation. A wrap-up policy is also known as a contractor-controlled insurance program or owner-controlled insurance program. It provides general liability coverage for multiple parties involved in the project under one policy, including the subcontractors, owner and general contractor. With one of these policies in place, it may negate the need for issue resolution as it covers many injuries and damages.

Make sure you understand the concepts covered in the contract, such as “your work” and “ensuing loss.” Review the deductibles and sub-limits, effective policy dates, exclusions and restrictions. If there is a provision of any type that you disagree with or don’t understand, address it before signing the contract. This can help prevent misunderstandings and unnecessary fees after the project is underway. Visit our webpage for more information on this topic.

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