Wrap Insurance for Construction Projects Understanding Scope of Coverage and Resolving Coverage and Indemnification Disputes

Transcription

1 Presenting a live 90 minute webinar with interactive Q&A Wrap Insurance for Construction Projects Understanding Scope of Coverage and Resolving Coverage and Indemnification Disputes WEDNESDAY, DECEMBER 14, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: James P. Bobotek, Senior Associate, Pillsbury Winthrop Shaw Pittman, Washington, D.C. Ruth S. Kochenderfer, Of Counsel, Steptoe & Johnson, Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 DECONSTRUCTING WRAP-UPS James P. Bobotek Pillsbury Winthrop Shaw Pittman LLP Ruth S. Kochenderfer Steptoe & Johnson LLP

6 James P. Bobotek is with Pillsbury Winthrop Shaw Pittman LLP in Washington, DC, where he concentrates his practice on a variety of insurance coverage, risk management and risk allocation issues, with an emphasis on those arising in the construction industry. A frequent speaker and author on construction-related insurance coverage issues, Mr. Bobotek counsels clients in formulating risk management strategies, obtaining insurance cover, and developing contractual insurance requirements. Mr. Bobotek regularly assists policyholders in analysis, litigation and resolution of insurance coverage claims and disputes, and also represents, owners, developers, and contractors in preparation, review and negotiation of development, design, construction, and related agreements. Ruth S. Kochenderfer is of counsel in the Washington office of Steptoe & Johnson LLP, where she is a member of the litigation group. Ms. Kochenderfer focuses on complex litigation, with extensive experience advising and representing insurance insurers. She has handled numerous matters involving ggeneral and professional liability coverage issues, including matters addressing construction, products liability, environmental liability, and asbestos issues. She has been involved in a variety of matters involving wrap-up insurance programs. *The positions contained herein are solely those of the presenters, and do not represent the views of Pillsbury or Steptoe & Johnson, or of any client. The information provided by the presenters does not constitute a legal opinion and should not be regarded as a substitute for legal advice. 6

7 What Is a Wrap-Up? 7

8 8

9 An Insurance Program CGL primary & excess or umbrella Workers Compensation Builders Risk* Professional Liability* 9

10 Types of Wrap-Ups Owner-Controlled Insurance Policies ( OCIPs ) Contractor-Controlled Insurance Policies i ( CCIPs ) 10

11 CONSTRUCTION DEFECT CASE Occupant Owner/Developer Insurance Insurance Contractor Design Consultants Insurance Subcontractors Insurance Material Suppliers & Vendors Insurance Building Product Manufacturers Insurance 1 11

12 CONSTRUCTION DEFECT CASE WITH AN OCIP Occupant Owner/Developer OCIP Contractor Contractor Design Consultants Subcontractors Material Suppliers Insurance Building Product Manufacturers Off Site Insurance Insurance 12 Insurance 1

13 CONSTRUCTION DEFECT CASE WITH A CCIP Occupant Owner/Developer Insurance CCIP Contractor Design Consultants Insurance Subcontractors Insurance Material Suppliers & Vendors Insurance Building Product Manufacturers Insurance 1 13

14 Advantages of a Wrap-Up Higher limits dedicated to project Uniformity of policy terms and provisions Selection of carrier(s) Reduce insurance costs (estimated 2% to 5% savings) Centralized cost control and administration Formal safety program Reduce litigation 14

15 Disadvantages of a Wrap-Up Administrative costs Non-managing participants i partial loss of control over insurance program Potential coverage gaps Still need other insurance (off-site, professional, auto) Regulatory restrictions/size limitations State of Alaska Dep t of Com. v. Alyeska Pipeline Serv. Co.,, 262 P.2d 593 (Alaska 2011) 15

16 How Wrap-Up CGL Policies Differ from Other CGL Policies Project specific Site specific (on site v. off site) Large deductibles d or SIRs Who is an insured 16

17 More Differences Fixed duration Limited products/completed operations coverage period Notice provisions 17

18 And More Differences Insurance bid instructions Project manuals May have specific claims handling instructions, reporting for workers compensation, and the like 18

19 Liability Component Similar to Other CGL Policies i Insuring agreement Exclusions Conditions Definitions 19

20 Wrap Up Coverage Issues 20

21 Choice of Law Law of the site Place of contracting/delivery Insured s principal place of business Which h insured? 21

22 Notice 22

23 Providing Notice Who must give notice Notice for one insured, notice for all insureds? Notice for one policy, notice for all policies? 23

24 Who Is an Insured All contractors with whom [Owner or Contractor] contractually agreed to provide Insurance & All tiers of Subcontractors of such Contractors... 24

25 Who Is an Insured Subcontractor delivers unassembled scaffolding. Insured? Waco Scaffolding Company v. National Union Fire Ins. Co. of Pitts, 1999 WL (Ohio Ct. App. Oct. 28, 1999) 25

26 Who Is an Insured OCIP covers the Owner, Contractor and Subcontractor t of all tiers, but not excluded d entities as defined herein. Excluded entities means vendors, suppliers, fabricators,, material dealers, drivers and others who merely transport, pick up, deliver or carry materials, personnel, parts or equipment or any other items or persons to or from the Project site

27 Who Is an Insured Some wrap-up programs use named insured endorsements that rely on the enrollment process to effect coverage for the contractors and subcontractors. Under this approach, a blanket endorsement may provide that enrolled contractors are included and the wrap-up administrator is expected to enroll only those that are eligible. ibl Downside - a breakdown in the enrollment process may result in a coverage issue. 27

28 Who Is an Insured Subcontractor fabricates structural steel and installs some metal fabrications. Employee injured delivering steel beams to another subcontractor. t Is subcontractor who delivered the steel an Insured under the OCIP? American Protection Ins. Co. v. Acadia Ins. Co., 814 A.2d 989 (Me. 2003) 28

29 Workers Compensation If workers compensation coverage provided under a wrap up, is such coverage the exclusive remedy of a subcontractor s s injured employee? 29

30 Workers Compensation IS the Exclusive Remedy HC Beck, Ltd. v. Rice, 284 S.W.3d 349 (Tex. 2009) Stevenson v. HH & N/Turner, 2002 US Dist. LEXIS (E.D. Mich. 2002) Bishel v. Connecticut Yankee Atomic Power Co., 771 A.2d 252 (Conn.App.Ct. 2001) 30

31 Workers Compensation IS NOT the Exclusive Remedy Culp v. Archer-Daniels Midland Co., No. 4:08 CV3197 (D. Neb. Apr. 17, 2009) Pride v. Liberty Mutual Ins. Co., 2007 US Dist. LEXIS (E.D. Wis. 2007) Pogue v. Oglethorpe Power Corp., 477 S.E.2d 107 (Ga. 1996) 31

32 SIRS and Deductibles Who pays SIRs or deductibles? Typically addressed in the contract documents. Some OCIPs include sole agent endorsements making the first named insured responsible. How many SIRs or deductibles apply? 32

33 Priority of Coverage Other insurance 33

34 Priority of Coverage 34

35 Priority of Coverage Royal Ins. Co. v. Wausau Ins. Co., No. CA916366E, 1994 Mass. Super. LEXIS 184 (Mass. Super. Ct. July 1, 1994) National Union Fire Ins. Co. of Pittsburgh, Pa. v. American & Foreign Ins. Co., No. CV PA (PLAX), 2006 U.S. Dist. LEXIS (C.D. Cal. Feb. 9, 2006) 35

36 Wrap Up Exclusion This insurance does not apply... [to your operations] at the location described... as a consolidated (wrap up) insurance program has been provided... 36

37 Wrap Up Exclusion 37 This exclusion applies whether or not [the wrap up]: (1) Provides [identical] coverage... (2) Has limits adequate to cover all claims; or (3) Remains in effect.

38 Additional Insureds If a wrap up is in place, why would an entity need to be named as an additional insured? Additional insured coverage under a wrap up? 38

39 Indemnity Provisions If a wrap up is in place, why would an entity need to be indemnified? Does a wrap up provide any coverage for indemnity obligations? 39

40 Indemnity Provisions Contract documents may require contractors and subs to defend and indemnify owner, contractors and/or subs in the tiers above them. Since all participating contractors are insureds under the wrap up CGL policy, the wrap up CGL policy's contractual liability coverage may respond to indemnity transfers, subject to all other terms and conditions. An ISO CGL policy may provide contractual liability coverage under the insured contact exception to the contractual liability exclusion. 40

41 Multiple Claimants and Multiple Insureds Shared Limits Are they adequate? Can the insurer settle one case when faced with multiple l cases, the sum total t of which h exceed the limits? Number of Occurrence Issues Separation of Insureds 41

42 Thank You! 42