Protecting the Job (Insurance) Flashcards
What does insurance do?
Transfers risk from internal to external party
Insurance Contracts interpretation
Same as normal contracts
When insurance ambiguous
- favor interpretations consistent with reasonable expectations
- all else fails contra proferentem
Contra proferentem in insurance
- Coverage provision interpreted broadly
- Exclusion clauses interpreted narrowly
Builders risk insurance
Covers resulting loss to a project during the project
Builders risk insurance helps with risk of having lots of parties how?
Covers negligence connected with construction
Who is covered by builders risk?
Covers all contractors, subcontractors, and tradespersons working on a project as well as consultants
Who is not covered by builders risk?
- People whose contributions are collateral (only necessary people)
- Depends on what suppliers supplying
Time period for builders risk
period from commencement of construction activities to completion of the project (either specified date or when owner occupies/uses)
4 trigger theories of builders risk (policy outlines which to use)
1) Exposure theory
2) Manifestation theory
3) Injury in fact theory
4) Continuous trigger theory
Exposure theory
loss occurs at the time the property is first exposed to the peril (ex: lightning hits tree)
Manifestation theory
damage does not occur until it becomes apparent or manifests itself
Injury in fact theory
policy responds only if there was damage which actually occurred during the policy period, whether it was found out during or after period
Continuous trigger theory
when there are continuous causes of damage, damage is deemed to occur from initial encounter to the time when the damage became manifest
Faulty workmanship exclusion
Cost of making good faulty workmanship is generally excluded from construction insurance policies
When will faulty workmanship exclusion apply?
if risk that caused loss was in any way foreseeable and thus preventable
What does faulty workmanship exclude?
Only the cost of redoing faulty work
Canadian Railway Co v Royal Sun Alliance
Facts: new machine
Ratio: : Faulty/ improper design requires insurer to go beyond a failure due to foreseeable risk. Insurer needs to be able to establish that it fell below a realistic standard (complied with the state of the art)
Acciona v Allianz
-Facts: concrete deflecting
Ratio: Insurer not going to pay costs that would have been incurred had they been done correctly
Test from Acciona v Allianz
to see if damage covered
Defects exclusion-Sequential analysis:
1) is it covered
2) total cost of all damages
3) exclusion clause to carve out the parts that would have made good the faulty design
(deduct costs that would have been incurred if repaired before damage)
Commercial liability insurance
coverage to damage to insured’s work once it is completed. Covers damages caused by accident
Accident meaning in insurance
any unlooked-for mishap or occurrence
Two types of default insurance
1) Contractor insurance
2) Subcontractor default insurance
Contractor insurance
protects owners against losses resulting from general contractor defaulting
Subcontractor default insurance
protects contractor from default from subcontractor
Default insurance is an alternative to
Surety bond
Default insurance covers
- Cost of performing obligations of defaulting party
- Correcting defective works
- Legal/investigation costs
- Overhead and acceleration costs
