If you take a look at the bottom of any page of your (or your client’s) insurance contract, it is most likely a copyrighted form issued by Insurance Services Office, Inc. (ISO). ISO develops standardized insurance policy language and forms that most insurer companies use in order to create insurance policies for consumers.
ISO has recently released several Colorado-specific forms with policy language that takes into account Colorado’s 2007 anti-indemnity legislation, C.R.S. § 13-21-111.5. The Colorado anti-indemnity law limits a defendant’s liability to “the degree or percentage of the negligence or fault attributable” to the defendant. Pursuant to this law, the forms limit liability coverage to injury or damage caused by the insured, or by those acting on the insured’s behalf.
What does this mean for you or your clients?
We previously discussed on this blog that it is more important than ever to procure the proper insurance for your construction business. You can find that entry here. Many general contractors and developers have relied on a few of their subcontractors to procure the correct insurance that pays for the defense of, and indemnifies, the general contractor and/or developer from any suits. However, C.R.S. § 13-21-111.5 limits each subcontractor’s indemnity share to the degree of fault they are held liable.
For example, it is not uncommon for one subcontractor to be found 70% at fault in a construction defect action. If this subcontractor did not procure the correct additional insurance in favor of the general contractor or developer, those parties would lose the ability for the AI carrier to pick up 70% of the costs of defending the suit.
What should you or your clients do?
If you are a general contractor or developer, you need to ensure every subcontractor[1] working on your projects is procuring both ongoing and completed operations coverage that includes you as an additional insured for both coverages. To do so, you should speak with your insurance coverage attorney and ensure your subcontractors are getting the following forms (or the equivalents) as a part of their policies:
- A form CG 32 29 06 10, naming you as an additional insured, or a CG 32 27 06 10 (automatic additional insured status if agreed by contract), to cover ongoing operations, such as workers compensation litigation.
AND
- A form CG 32 28 06 10, naming you as an additional insured, to cover completed operations, such as construction defect litigation.
The name of the general contractor or developer should appear either on the actual ISO form listed above or in the policy declarations, along with the subject project(s). Although it is common in the industry, you should not merely accept a checklist form from the subcontractor’s insurance agent that states the proper coverage is in the policy. You should request certified copies of the subcontractors’ policies and ensure that the policies are reviewed by your own insurance company, or an attorney that specializes in construction coverage matters. Alternatively, you can ask the subcontractors’ insurance producers to sign a subcontractor insurance compliance form, certifying that the proper coverages are in place.
If you are a subcontractor, you need to speak with an insurance coverage attorney and demand your insurance company write you the above-referenced forms or the equivalents. If your current insurance company will not, shop around. The failure to procure the correct insurance could leave you with millions of dollars in uncovered liabilities such as the attorney fees and expert costs of the project owner, general contractor, and/or developer in any construction defect litigation. Please understand that this is not inserted here as a pitch for work. We are not coverage attorneys, we just happen to think this is a good idea.
For additional information regarding Colorado construction litigation, please contact David M. McLain at (303) 987-9813 or by e-mail at mclain@hhmrlaw.com.
[1] Engineers, Architects, and Surveyors have different coverage forms.
