Top Jurisdictional Issues
Every Contractor Should Know
Mike Bradshaw-Regional Technical Director, Willis
Todd Schweitzer-AVP, Zurich Insurance Co.
September 21, 2012
DISCLAIMER (We are not attorneys!)
Willis and Zurich are pleased to provide you with this
presentation. Willis is an insurance consulting and brokerage
firm. Zurich is a insurance company.
Willis and Zurich, it directors, officers, employees, agents,
parent companies and any and all subsidiaries, divisions, and
affiliates does not provide legal advice and nothing contained
herein should be taken as or considered to be legal advice.
Willis and Zurich take no responsibility for any actions taken or
not taken on the basis of this presentation.
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Table of Contents
1. Contractual Risk Transfer Issues
2. Allocation Issues
3. Statute of Limitation/ Repose
4. Contractual Damage Limitations
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Types of Indemnity Agreements
• Broad Form
• Intermediate Form
• Comparative (Limited) Form
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Broad Form Indemnity
You transfer all risk of loss described in the contract regardless
of who is at fault.
The indemnitor is responsible for all damages, even if the
indemnitee is solely at fault.
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Intermediate Form Indemnity
You transfer all risk of loss described in the contract, except
when the loss is entirely your fault.
The indemnitor is responsible for all damages even if they are
just one percent at fault.
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Comparative (Limited) Indemnity Form
The indemnitor is responsible for only “it’s share” of liability
arising from the contract.
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Contractual Risk Transfer Issues
Indemnity Agreement Interpretations:
 State law determines enforceability
 Courts will construe the plain language of the contract to
determine the intent of the parties
 Courts generally construe the agreement as a whole. They
consider all parts, (hold harmless and insurance provisions).
 Courts allow the admission of evidence outside the contract
where the intent of the parties is unclear.
 Courts will generally enforce the indemnity provisions against
the drafter of the contract when the language is ambiguous.
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Anti-Indemnity Statutes – What are they?
These are statutes that limit the scope of legal liability that one
party may transfer to another through a contract. They vary
from state to state.
The majority of states have some form of anti-indemnity statute.
The majority of states prohibit an indemnitee from assigning its
sole negligence to an indemnitor.
The majority of states will allow indemnification for vicarious
liability.
A minority of states will uphold a contract where the indemnitor
indemnifies an indemnitee for its sole negligence….if it is
“clearly stated” in the contract.
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Anti-Indemnity Statutes Summary
States that prohibit indemnity for the sole negligence of the
Indemnitee:
AK, AZ, CA(1), GA, HI, ID, IN, LA, MD, MI, NJ, NH, SD, TN, VA &
WV
States that void provisions for indemnification for losses arising
from the indemnitee’s negligence, whether sole or concurrent.
AR, CO, CT, DE, FL, IL, KS, KY, MA, MN, MO, MS, MT, NC, NE,
NM, NY, OH, OK, OR, RI, SC, TX, UT,
States that allow the indemnification of the sole negligence by
the indemnitee.
AL, DC, IA, LA, ME, ND, OK, PA, VT & WY
(1) CA prohibits indemnity for concurrent negligence in contracts dated 01/01/2013.
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Anti-Indemnity Statutes Applied to
Additional Insured Status
There are a number of states that prohibit anti-additional
insured requirements, (prohibit requirements in subcontracts
requiring subcontractors to add upper tier contractors and
owners as additional insured to the sub’s policies).
CO, KS, MT, NM, OK, OR, TX & UT
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Additional Insured Issues
In addition to the indemnification provisions found in
construction contracts, most contracts also call for the lowertiered sub to named the upper-tiered contractor and owner as
additional insured on the sub’s policy.
Some of the problems associated with this requirement are:
• The claims or damage did not “arise out of” the sub’s work
• Even if the claims or damage arise out of the sub’s work, the
damages were caused after the sub’s work was completed and
are excluded under completed operations exclusion.
• The sub’s policy are excess to any policies owned by the GC
• The contractor failed to tender a proper request for defense
and indemnity
• The GC relied on a COI in affirming its status as an AI
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Additional Insured Issues (cont.)
• Courts have interpreted the “arising out of” clause very
broadly so as to afford coverage to the AI, regardless of
whether the named insured had any contributory negligence.
• Many carriers are trying to restrict coverage afforded to AI by
changing policy language, for example: From “arising out of” to
“caused in whole or in part by the NI’s acts or omissions…”
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AI Concerns-What to Consider
Upper-Tiered Contractors and Owners:
Review all AI endorsements and coverage to make sure it
provides the protection you have required in your contract.
Lower-Tiered Contractors:
Work with your broker and insurers to make sure you are
complying with the insurance terms in your construction
contracts
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What are “Right to Repair” laws?
They are laws that allow a builder to address an owner’s claims
of construction defects and provides a builder the chance to
cure before the owner can commence litigation
States with Right to Repair laws:
AZ, CA, CO, FL, GA, HI, ID, IN, KS, KY, MS, MO, MT, NV, NH, ND,
OR, SC, TN, TX, VA, WA, WV, WI.
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Allocation Issues
Triggers of Coverage
• Manifestation
• Continuous
• Injury in Fact
• Exposure
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Allocation Issues
• Pro Rata
• All Sums
• Choice of Law
• Horizontal verses Vertical Exhaustion
• Excess Coverage Impact
• Wrap Insurance Implications
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Statutes of Limitations/Repose
Statute of Limitations:
A state or federal law that refers to the period in which a suit
must be brought. SOL’s may be “tolled”.
They can run from a low of 2 years (AL) to a high of 10 years (RI)
Statute of Repose:
Is the time period within which all suits must be brought. This is
an absolute bar.
They can run from a low of 4 years (TN) to a high of 13 years in
(AL)
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Concerns with SOL/SOR
• They vary State to State
• There is NO SOR on federal projects
• When does the SOL being to run?
• When does the SOR begin to run?
• What are “tolling” issues?
• How long should you keep your construction
contracts/records?
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Damage Limitations
• Limitation of Liability Clauses
• Contract Limitations – Consequential; Liquidated
• “As Is” Provisions – Land Purchases / Property Sales
• Contract verses Tort Remedies
•
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Joint and Several Liability
Top Jurisdictional Issues Every
Contractor Should Know
Questions?
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Top Jurisdictional Issues Every
Contractor Should Know
Thank You!
Mike Bradshaw
&
Todd Schweitzer
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