Exemption from liability towards the client
Jul 29, 2018
Failure to Ensure a “Small” Contractor Signs the Insurance Addendum — Led to a Large and Problematic Claim
By: Itzik Simon
This concerns clients of our firm (we will not mention their names for client confidentiality), a construction company insured through us for many years. The company operates in a very organized manner regarding its agreements with subcontractors and suppliers, and in every work contract a proper insurance addendum is included (an insurance clause defining the requirements for insurance and proof of coverage). The company ensures that it receives signed proof of insurance from each contractor’s insurance company.
The key point: the insurance clause includes a waiver of liability toward the client regarding damage to the contractor’s property. In other words: if the contractor wants to insure it with comprehensive coverage as required, he will have insurance; if he prefers not to insure, he will know in advance that the client will not be responsible for any damage to his property on site.
And yet, as I always passionately argue, Murphy’s laws work overtime in the construction industry:
In a construction project the company carried out about a year ago, one of the contractors arrived with expensive heavy machinery to perform a short-term job lasting only a few days. Someone there (the project manager, the site manager, or whoever it was) decided to cut corners and skip a proper work contract and insurance addendum.
As fate (or Murphy) would have it, the expensive machinery—worth several million—was severely damaged when a wall collapsed on it during the work.
So, you might ask — did he have insurance? Not at all.
And who does he hold responsible for the damage? Of course: our client, who hired him for the job.
What can we learn from this incident?
As it implies: there is damage, there is a claimant, and there is a client who could have avoided all this headache if they had consistently followed the procedure of signing a proper work contract with every contractor and, of course, including a clear insurance addendum.
Failure to ensure that a "small" contractor signs the insurance supplement - led to a large and problematic claim
By Itzick Simon
These are clients of our firm (we will not mention their names for reasons of client confidentiality), a construction company that has been insured through us for many years. The company operates in a very orderly manner in all its dealings with its subcontractors and suppliers, with each work contract incorporating a neat insurance appendix (an insurance section that defines the requirements regarding insurance - and certificates of insurance) and the company is careful to obtain from them certificates of insurance signed by their insurance companies.
The highlight: The insurance section defines a clause exempting the client from liability for damage caused to the contractor's property. This means: if he wants to insure himself with comprehensive insurance as required - then he will have insurance, if he prefers not to insure - he will know in advance that the client will not be responsible for damage caused to his property on the site.
And here, as I always passionately argue, Murphy's Laws work overtime in the construction industry:
In a construction project that the company carried out about a year ago, one of the contractors arrived with valuable CMA tools to perform short-term work lasting only a few days. Someone there (the project manager, the foreman, or whoever it was) decided to cut corners and forgo a proper work contract and insurance supplement.
Fate (or Murphy) dictated that the expensive CMA vessel, which cost several million, was severely damaged by a wall that collapsed on it while the work was being carried out.
So you ask - did he have insurance? Why not?
Ask who he sees as responsible for the damage? - Of course: our client who ordered the work from him.
And what do we learn from the event?
As implied - there is damage here, there is a plaintiff here, and there is a client here who could have saved all the headaches if he had bothered to sign a regular procedure with each contractor, and of course include a clear insurance appendix.
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