| If you are a General Contractor (GC), you most | | | | listed as an Additional Named Insured on the sub's |
| assuredly carry Comprehensive General Liability | | | | policy. |
| insurance for your business. If you've spent any time | | | | So, the insurance companies have begun to issue |
| reading your policy (fat chance), you may remember | | | | policy endorsements that deny coverage when there |
| that the terms and conditions of the policy require | | | | is a loss due to the sub's operations and the GC did |
| you to protect yourself and your insurer. | | | | not get the Hold Harmless Clause into his contract |
| Specifically, when you hire sub-contractors, you are | | | | and proof that the sub named the GC as an |
| supposed to require that the "sub" execute a Hold | | | | Additional Insured. The insurers are figuring that the |
| Harmless agreement as part of the contract, in which | | | | only way to get the attention of the General |
| the sub agrees to protect the general contractor | | | | Contractors is to put some of the GCs' assets on |
| from liability for acts of which the sub is found legally | | | | the table. |
| liable. Further, the sub is supposed to name the | | | | On August 4, 2009, the California Court of Appeals |
| general contactor as an Additional Named Insured, | | | | issued the ruling in North American Capacity Ins. Co. v. |
| which provides a legal defense to the GC. At that | | | | Claremont Liability Insurance Company. The ruling |
| point, the GC's policy becomes excess over the sub's | | | | upheld this Contractors Warranty Endorsement, and |
| coverage. | | | | stated that the insurance company could take an |
| I used to be a General Contractor, and I know GCs | | | | excess position even if the subcontractor had no |
| pretty well. They, being a somewhat independent | | | | insurance, simply because it was their duty to have |
| bunch, frequently do business with subs on little more | | | | insurance. Therefore, the endorsement and coverage |
| than a handshake or a phone call. These subs are | | | | could proceed AS THOUGH the subcontractor had |
| people they've used repeatedly, and a high level of | | | | the coverage in place. |
| trust is in place. The idea of getting all that contract | | | | To quote the ruling: |
| paperwork executed before the first hammer is lifted | | | | "We find the "clear and explicit" meaning of the |
| or spade turned is just a pain in the backside. So, it | | | | contractors warranty endorsements, as used in their |
| regularly gets ignored. | | | | "ordinary and popular sense" by a layperson |
| Unfortunately for GCs, the insurance companies have | | | | establishes a precondition of coverage as to work |
| been taking it in the wallet as they have absorbed | | | | done by subcontractors for whom (the GC) failed to |
| liability for the GCs when they fail to get that Hold | | | | secure both a written hold harmless agreement and a |
| Harmless in place. So, the risk management efforts | | | | certificate of insurance. The trial court therefore did |
| that the GCs are supposed to do aren't getting done. | | | | not err in finding the contractors warranty |
| And that has the affect of transferring the risk to | | | | endorsement enforceable under the facts of this |
| the insurance companies. | | | | case." |
| They get to pay when the GC's contract fails to | | | | Now that the insurance companies have a favorable |
| contain a Hold Harmless Clause. | | | | court decision in their back pockets, you should |
| They get to pay when the GC doesn't require his | | | | expect your insurance carrier to play for keeps. A |
| subs to maintain their own insurance. | | | | potential liability claim denial will bring a new discipline |
| They get to pay when the GC doesn't get himself | | | | to the business life of the General Contractor. |