September 22, 2015
Article 11 of the A201 sets out the standard provisions for the insurance coverages for the project. The details of the coverage should be covered in the Agreement form chosen for use by the parties. §11.1.1 sets out the types of risks that the Contractor’s insurance must cover, without specifying a particular policy or form. When looking at the Insurance requirements, the Owner should consider requiring that the Contractor obtain insurance from carriers that meet a designated rating from a recognized source, such as A.M. Best. The Owner should also consider requiring a specific policy form to ensure that the desired coverages and limits are provided.
From the Contractor’s perspective, the A201 §11.3.1 requires the Owner to obtain a builders risk policy to insure the project against damages during construction. As with the Contractor’s insurance, the Contractor may wish to specify a particular rating for the carrier, or particular policy provisions. If the Owner does not obtain a property insurance policy, §11.3.1.2 allows the Contractor to obtain the policy, and seek payment for that policy from the Owner by an appropriate change order.
§11.1.4 requires the Contractor to include the “Owner, the Architect and the Architect’s consultants as additional insureds” during the operations, and also covering the Owner for completed operations.
A201, §11.3.7 also requires that the Owner’s and Contractor’s policies include a waiver of subrogation. The purpose of the waiver of subrogation is to keep the insurer from seeking recovery for any claims paid from the other project participant. This allows the parties some security in knowing that if the matter is covered by the policy, the insurance will resolve the risk to the amount of the policy.
All of these are standard requirements for construction contracts. The Owner should take care to ensure that the required limits are large enough to cover anticipated risks. The Contractor will need to ensure that it is able to obtain the required policies for the limits required.
One of the most important provisions in any construction contract is the indemnity provisions. §3.18 requires the Contractor to indemnify and hold harmless the “Owner, Architect, Architect’s consultants, and agent and employees of any of them,” but only to the extent that the claim is caused by the negligence of the Contractor, or someone for whom the Contractor is liable. §3.18 goes on to state that the indemnification duty exists “regardless of whether or not such claim, damage, loss or expense is caused in party by a party indemnified hereunder.” There is no reciprocal indemnity from the Owner to the Contractor.
There are also additional indemnity obligations relating specifically to hazardous materials in §10.3.3, §10.3.5, and §10.3.6. Unlike the general indemnity contained in §3.18, §10.3.3 does provide for the Owner’s indemnification of the Contractor (and the Architect and
the Architect’s consultants) from losses resulting from working in areas of hazardous materials that were not brought to the site by the Contractor.
In considering indemnity clauses, Owners, and higher tier Contractors, will often attempt to require the Contractor to provide indemnification and defense of any claims even if the Owner is partly responsible for the claim. Often these are presented as requiring defense and indemnity except in situations where the Owner’s sole negligence is the cause of the claim. While several states have enacted anti-indemnity statutes that would limit the Owner’s ability to seek these types of provisions, Nevada does not currently have such a statute. However, the Nevada Supreme Court has set strict requirements on these types of indemnity provisions.
In 2010, the Nevada Supreme Court held “[A] contract of indemnity will not be construed to indemnify a party against loss or damage resulting from its own negligent acts unless such intention is expressed in clear and unequivocal terms.”4 The Nevada Supreme Court
went on to hold “a general provision indemnifying the indemnitee ‘against any and all claims,’ standing alone, is not sufficient.”5
So, while it is possible to require one party to indemnify the other party, even as to the negligence of the party seeking indemnification, that intent must be specifically stated in the indemnity agreement.