10B — August 26 - September 15, 2016 — 2016 Governor’s Conference — Owners, Developers & Managers — M id A tlantic
Real Estate Journal
www.marejournal.com
2016 G overnor ’ s C onference By Carin Della Badia, Lewis-Chester Associates, Inc. “Risk Transfer”
I
n an age where everyone is quick to place blame, “Risk Transfer” is a very
adequate Risk Transfer Pro- visions. Additional Insured status is a contractual obligation. The Commercial General Liability form indicates in order for it to respond to an Additional Insured status, it must state so in the signed and execut- ed contract making this a contractual obligation. This means that when you obtain a certificate of insurance from a vendor or contractor, even if it states on the certificate that you are named as “Additional Insured” is not valid unless it is so required within the signed contract. The insurer is then obli-
gated to indemnify and de- fend the additional insured in accordance with the policy terms and conditions. The fact that the additional insured pays no premium does not diminish the insurer's obliga- tion to the additional insured. When the contractor/ven- dor, in his contract with you, agrees to hold you harmless and indemnify you he agrees to legally defend you and pay claims made against you as a result of his work or control of your location. To make sure he has the resources to pay these claims he agrees to car- ry insurance with sufficient limits and terms to guarantee
you will be protected. Within the contract the re- quired limits should be stated. The minimum limits rec- ommended are Commercial General Liability $1,000,000 occurrence/$2,000,000 ag- gregate and must include products/completed opera- tions coverage. Additional limits of Umbrella coverage with a minimum amount of $4,000,000 excess should also be required. Larger contrac- tors building on a large scale often carry $25 Million and upwards of $100M. Their limits may be impaired or, in other words, other claims may have already been made
against their in force insur- ance. When there is an au- tomobile exposure the Auto Liability limit must also be $1,000,000 and should also be included under the Umbrella policy. Worker’s Compensa- tion for statutory limits are necessary in all states where work is being performed and should include coverage for sole proprietors, partners & LLC’s if it is not a corpora- tion. If they cannot produce evidence of such coverage, your Worker’s Compensation policy will become primary and you will be charged an additional premium as if they were your direct employees. Indemnity provisions, often referred to as hold harmless agreements, are one of the primary sources by which in- sureds can shift or apportion risk in a contract. Indemnity provisions may include any, or all, of three obligations to (1) indemnify, (2) defend and (3) hold harmless the other party. "Indemnify" means to reimburse the other party fol- lowing a loss. "Defend" means to pay the other party's legal expenses as it defends itself against a third party claim. "Hold harmless" may have different meanings, but most generally it is stated and un- derstood as follows: To the fullest extent permit- ted by laws and regulations, the contract/vendor shall indemnify defend and hold harmless the owner and of- ficers, directors, partners, employees, agents and other consultants and subcontrac- tors of each and any of them from and against all claims, costs, losses and damages (in- cluding but not limited to all fees and charges of engineers, architects, attorneys and oth- er professionals and all court or arbitration or other dispute resolution costs) arising out of or relating to the perfor- mance of the Work regard- less of whether or not caused in part by any negligence or omission of an individual or entity indemnified hereunder or whether liability is imposed upon such indemnified party by Laws and Regulations re- gardless of the negligence of any such individual or entity. To summarize the use of risk transfer agreements does not guarantee that an insured or contractor will be protected from all liability for the acts or omissions of its contractors or vendors, however, these continued on page 13B
imp o r t an t t o o l . T h e i n s u r a n c e pr ov i s i ons that will en- able the risk transfer is to include: Ad- ditional In- sured, Hold
Carin Della Badia
Harmless & Indemnification clause in your favor within the contractual agreement. Before putting together a contract, it is important to meet with an attorney to put together one that includes
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