Love Me Tender. A Primer on Indemnification, Insurance and Related Issues and Tips to Aid in Obtaining the Coverage you Bargained for in that Contract

Transcription

1 Love Me Tender A Primer on Indemnification, Insurance and Related Issues and Tips to Aid in Obtaining the Coverage you Bargained for in that Contract Jennifer K. Mason jmason@clarkhill.com Christopher M. Brubaker cbrubaker@clarkhill.com January 12, 2016 Western Pennsylvania Association of Corporate Counsel Rivers Club clarkhill,.com

2 OVERVIEW Big Picture The Tender Letter Contract Formation Insurance Policy Review 2

3 WHAT S IT ALL ABOUT? Protecting/Insulating your Company from a Claim and Knowing you will be covered for indemnity and protected from attorneys fees and expenses if an accident occurs; An ounce of prevention is worth far more than a pound of cure; Make sure the agreements say what you mean; (See Exhibit A) Do not rely on certificates of insurance; GET THEM AND MAKE SURE THEY ARE SPECIFIC but ALSO insist on reviewing certified policy language; When you are the low man on the pole, make sure you have enough coverage in place. Consider layering coverage to keep premium costs down 3

4 TENDER TIME What is a tender? (See Exhibit B) When should you tender? To whom should you tender? What you need to make a tender: Contract Insurance Policy Any specific endorsements/certificates specifically naming you as an additional insured 4

5 TENDER LETTER EXAMPLES Dear Sir/Madam (Insurance Agent/Broker): Pursuant to (A) s contract with (B), (A) was required to name (C) as an additional insured on its liability policies. We have received the Certificate of Insurance naming (C) as an additional insured. It is attached hereto as Exhibit 1. Based on (B)'s direct claims against (C), as well as crossclaims of (A); (D) and (E), we believe that (A)'s insurer owes a duty to provide (C) with a defense and indemnification. Please see the crossclaim of (C) against (A) incorporating the contract and requesting indemnification, attached as Exhibit 2. In addition to filing the crossclaim, we previously requested that (A) notify you of the claim, as it appeared they had not done so upon the filing of the crossclaim. As such, we are hereby demanding that (A)'s insurer provide (C) with a defense and indemnification in this matter. Please immediately provide this tender to each of (A)'s liability insurers. Please feel free to contact us with any questions. CC A and its counsel 5

6 CONTRACTUAL LANGUAGE There is no one size fits all language beware boiler plate Be specific it will only help in the event of an incident Remember that indemnification and providing insurance are separate obligations Make sure the provisions are consistent Both internally and with other relevant agreements Be careful about choice of law provisions states have different approaches regarding the permissible scope of indemnification clauses and the magic words necessary to trigger the right to indemnity Example of specific language that worked in Pa. for a specific type of claim (Employee of a subcontractor injured-(exhibit A)) and an example of a contract where it did not work (Exhibit C) 6

7 CONTRACTUAL LANGUAGE COMMON ISSUES Indemnity Provisions are Construed Narrowly Bernotas v. Super Fresh Food Markets, Inc., 863 A.2d 478 (Pa. 2004); Ruzzi v. Butler Petroleum Co., 588 A.2d 1 (Pa. 1991) Waiver of Workers Compensation Immunity Must expressly state that it is waived General language to the fullest extent allowed by law is not sufficient Bester v. Essex Crane Rental Corp., 619 A.2d 304 (Pa. Super. 1993) Statutory employer doctrine 77 P.S. 52, 461 and

8 SAMPLE CONTRACT LANGUAGE Waiver of Workers Compensation Immunity the Sub-Contractor shall indemnify, defend and hold harmless the Contractor, Owner and their respective officers, directors employees and agents ( Indemnified Parties ) from and against all claims, damages, demands, losses, expense, fines, causes of action, suits or other liabilities (including all costs, reasonable attorneys fees, consequential damages, and punitive damages), *** and; regardless whether the claim is presented by an employee of SubContractor. *** The Indemnification shall not be limited in any way by any limitation of the amount or type of damages, compensation or benefits payable by or for the Sub-Contractor under any workers compensation acts, disability benefits acts or other employee benefits acts. In claims against any Indemnitee by an employee of the Contractor, a Subcontractor, anyone directly or indirectly employed by them, or anyone for whose acts they may be liable, the foregoing indemnification obligation shall not be limited by a limitation on amount or type of damages, compensation, or benefits payable by or for the Contractor or a Subcontractor under workers compensation acts, disability benefit acts, or other employee benefit acts. 8

9 ADDITIONAL INSURED STATUS Best to be added by endorsement as an additional named insured Don t Rely on Certificates of Insurance these only provide a snap shot of coverage and limits at that point in time Insist on reviewing actual policy language there are many variations of the automatic additional insured endorsement and they are not created equal Keep in mind special circumstances such as whether any of the parties to be indemnified are architects, engineers or other professionals Specify types of coverage for which additional insured status is required and limits to be provided Review the exclusions to make sure coverage is not excluded for the type of work being done 9

10 SAMPLE EXCLUSIONS EXCLUSION CONSTRUCTION MANAGEMENT ERRORS AND OMISSIONS This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART The following exclusion is added to paragraph 2., Exclusions of Section 1 Coverage A Bodily Injury And Property Damage Liability and Paragraph 2., Exclusions of Section 1 Coverage B Personal And Advertising Injury Liability: This insurance does not apply to bodily injury, property damage or personal and advertising injury arising out of: The preparing, approving or failure to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings and specifications by any architect, engineer or surveyor performing services on a project on which you serve as construction manager; or Inspection, supervision, quality control, architectural or engineering activities done by or for you on a project on which you serve as construction manager. This exclusion does not apply to bodily injury or property damage due to construction or demolition work done by you, your employees or your subcontractors. 10

11 SAMPLE EXCLUSIONS EXCLUSION CONTRACTORS PROFESSIONAL LIABILITY This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART The following exclusion is added to paragraph 2., Exclusions of Section 1 Coverage A Bodily Injury And Property Damage Liability and Paragraph 2., Exclusions of Section 1 Coverage B Personal And Advertising Injury Liability: This insurance does not apply to bodily injury, property damage or personal and advertising injury arising out of the rendering of or failure to render any professional services by you or on your behalf, but only with respect to either or both of the following operations: Providing engineering, architectural or surveying services to others in your capacity as an engineer, architect or surveyor; and Providing, or hiring independent professionals to provide, engineering, architectural or surveying services in connection with construction work you perform. 11

12 SAMPLE ADDITIONAL INSURED LANGUAGE Be on the look out for endorsements such as the following: SCHEDULE Any person or organization to whom or to which you are obligated by virtue of a written contract or by the issuance or existence of a written permit, to provide insurance such as is afforded by this policy. A. SECTION II WHO IS AN INSURED is amended to include as an additional insured the person(s) or organization(s) shown in the SCHEDULE, but only with respect to liability for bodily injury, property damage or personal and advertising injury caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations; and/or your work defined for the additional insured(s) designated above included in the products-completed operations hazard. 12

13 SAMPLE LANGUAGE SPECIFYING COVERAGE The Contractor shall purchase from and maintain in a company or companies lawfully authorized to do business in the jurisdiction in which the Project is located such insurance as will protect the Contractor from claims set forth below :.1 claims under workers compensation, disability benefit and other similar employee benefit acts which are applicable to the Work to be performed;.2 claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor s employees;.3 claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor s employees;.4 claims for damages insured by usual personal injury liability coverage;.5 claims for damages, other than to the Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom;.6 claims for damages because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; 13

14 SAMPLE LANGUAGE SPECIFYING COVERAGE CONTINUED.7 claims for bodily injury or property damage arising out of completed operations, which coverage shall be maintained for no less than two (2) years following final payment; and.8 claims involving contractual liability insurance applicable to the Contractor s obligations under Paragraph 3.18 as insurable..9 liability insurance shall include all major divisions of coverage and be on a comprehensive basis including:.1 Premises, Operations (including X, C, and U coverages as applicable)..2 Independent Contractors Protective..3 Products and Completed Operations..4 Personal Injury Liability with Employment Exclusion deleted..5 Contractual, including specified provision for Contractor s obligation under Paragraph Owned, non-owned and hired motor vehicles..7 Broad Form Property Damage including Completed operations. 14

15 SAMPLE LANGUAGE SPECIFYING LIMITS The insurance required by Subparagraph shall be written for not less than limits of liability specified below or required by law, whichever coverage is greater. Coverages, whether written on an occurrence or claims-made basis, shall be maintained without interruption from date of commencement of the Work until date of final payment and termination of any coverage required to be maintained after final payment. ***.2 Comprehensive General Liability Insurance (including Premises-Operations; Independent Contractors Protective; Products and Completed Operations; Broad Form Property Damage):.1 Bodily Injury: $1,000,000 Each Occurrence $2,000,000 General Aggregate.2 Property Damage: $2,000,000 Each Occurrence $2,000,000 General Aggregate $ 100,000 Fire Damage Legal Liability 15

16 SAMPLE LANGUAGE SPECIFYING LIMITS - CONTINUED.3 Products and Completed Operations Insurance shall be maintained for a minimum period of two (2) years after final payment or the state of the Work statute of limitations for each type of claim whichever is longer, and the Contractor shall continue to provide evidence of such coverage to the Owner on an annual basis during that period..4 Property Damage Liability Insurance shall include coverage for the following hazards: X (Explosion) C (Collapse) U (Underground).5 Contractual Liability (Hold Harmless Coverage): $1,000,000 Bodily Injury: Each Occurrence $1,000,000 Property Damage: Each Occurrence $2,000,000 Property Damage: General Aggregate.6 Personal Injury and Advertising Injury with Employment Exclusion deleted: $1,000,000 Each Occurrence $2,000,000 Aggregate 16

17 SAMPLE LANGUAGE SPECIFYING LIMITS - CONTINUED.7 If any General Liability policy includes a General Aggregate, such General Aggregate shall be not less than $2,000,000. Further, each such General Liability Policy shall be endorsed to have General Aggregate apply to this Project only..8 Each General Liability policy procured pursuant to this Article 11 shall add Owner and Architect as additional insureds by endorsement to each applicable insurance policy and ongoing and completed operations. 17

18 JENNIFER K. MASON One Oxford Centre 301 Grant Street, 14th Floor Pittsburgh, PA Suncrest Towne Centre Morgantown, WV The opinions expressed herein are strictly those of the author.

19 Christopher M. Brubaker One Commerce Square 2005 Market Street, Suite 1000 Philadelphia, PA The opinions expressed herein are strictly those of the author.