Requirements to Maintain Insurance as Part of a Construction Contract
See the full video at https://youtu.be/LboD7-AL-rE
Insurers who insure the liability of contractors will often include in their policy a warranty that compels the general contractor to obtain proof that all its subcontractors are insured. In an important case, North American Capacity Insurance Co. v. Claremont Liability Insurance Co., Court of Appeal, Second District, 177 Cal.App.4th 272, No. B207878 (Cal.App. Dist.2 08/04/2009), dealing with a clause rarely litigated, the California Court of Appeals enforced such an agreement and issued a warning to all general contractors who do not comply with similar warranties that they may be eliminating their own coverage. In this case the warranty or condition required that the insured follow its general business practice to get hold harmless agreements and certificates of insurance from its independent contractors. The insured failed to do so and tried to enforce the contracts claiming, unsuccessfully, that it did not need to comply with the warranty.
The warranty provided that coverage afforded by the policy “shall not apply” to operations performed by independent contractors unless the insured:
- “has received a written agreement from each and every independent contractor holding the insured harmless from all liabilities incurred by the independent contractor”; and
- “has obtained certificates of insurance from each and every independent contractor indicating that the independent contractor will maintain similar coverage as provided by this policy. …” (emphasis in the original)
The insurance industry also uses similar warranties that require that each independent contractor name the general contractor, the owner, and/or the developer as additional insureds.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.
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