About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

31 Constr. Law. 15 (2011)
Confronting Conventional Wisdom on Builders Risk: From Named-Insured Status to Concurrent Causation

handle is hein.journals/conlaw31 and id is 175 raw text is: AM confronting Conventional Wisdom on Builders Risks. From Namedminsured Status to Concurrent Causation S. Dana and J IIlles H. costner Bv Mar! A/l. EellY TSIOI)M-1 I I Cnristopner . .Dunn Buildrs risk insurance re- ceives little attention in le- a scholarship compared to other areas of insurance and many at orneys con- sider builders risk insur- ance relatively static These practitioners may realize tha builders risk provides frst-party, no-fault insur- ance against the risk of loss to construction projects,' Jares . Costner but to often perceive that builders risk insurance may be treated like commercial general liability policies. This is a misconception. This confusion probably occurs because large con- struction projects invole myriad insurance policies, and practitioners may not adequately distinguish among them. Indeed, large commercial projects often include eight different types of insurance, including commercial general liability nsurance, workers compensation and employers' liability isuraince, automAobile liability insuir- ance, umbrella an d excess liability insuran cc, professional liability insuraince, and pollution liability insurance in ad- dition to builders rsk ins uraince. Wth the exception of builders risk thesc insurance programns share a common Mark M. Bell is an associate o lr Lansden Dortch & Davis, PLLC in Nashville, Tenness e Christopher S. Dunn is a partner of Waller Lansden Dortch & Davis, PLLC in Nashvill, Tennessee and is the chair of the Forum s Owners and Lenders Divisior (Division 12). Jamnes H Costrer, CPCU ARM, is senior vice president of the Property Practice Willis Risk Solutions North Arierica. thread identified by the word liability. Because seven of the eight insurance policies address lia- bility, many practitioners mentally merge builders risk with the other policies without reflection and attempt to treat builders isk Just like any other liability policy.4 Addition- ally, because the area of co mercial general liability is well developed with treatises devoted exclusively to the topic, practitioners may feel a level of false comfort when import- ing liability principles into their builders risk policies. Builders risk insurance, however, is fundamentally dif- erent from the other liability insurance policies identified above. Owners and contractors procure liability insurance policies to protect them from third-party claims.6 Con- versely, owners purchase first-party builders risk insur- ance to protect the owner from losses the owner would otherwise suffer directly7 This fundamental distinction is often missed by the builders risk insurance contract provi- sions, including those published by industry trade groups such as the AIA ConsensusDOCS, EJDC, and DBIA construction forms. Because many practitioners fail to distinguish between builders risk and liability insurance, there exists a prevail- ing view that owners should provide named-insured status to contractors, subcontractors, and suppliers. Speaking from the owner's perspective, we believe that this conven- tional wisdom is misplaced, and we explain our disagree- ment with the majority view below. We then discuss a trend of claims payment resistance in the insurance in- dustry and describe areas where insurers have increasingly resisted paying on claims. We believe that the named-in- sured issues detailed in this article could expose policy- holders to a new breed of policy denials. Problems With Includin gContractors as Named nsureds From the Owner's Perspective We write from the owner's perspective for two reasons: first, sophisticated owners typically procure builders risk coverage, second, and more importantly, there are distinct advantages to having the owner procure build- ers risk insurance. Naturally, the owner typically has the greatest interest in the property. Although contractors, subcontractors, and suppliers may have an interest in the property, the extent of their interest may only equal the amount of work that has been completed since the previ- ous application for payment. Additionally, many owners seek to enhance their standard builders risk policies by securing business interruption coverage, delayed opening coyerage, and other forms of 'soft cost' coverage. These enhancements are typically only available when the owner procures the insurance. Fa2 11

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most