Week 12- Insurance

Question 1

What is insurance?

Answer 1

a form of protection against certain risks

Question 2

What is a contract bond?

Answer 2

a legal obligation to stand if the contractor failed their contractual obligations to the owner

Question 3

What does commercial general liability insurance insure?

Answer 3

• bodily injury to people
• damage to property belonging to others
• personal injury and non-bodily injury
• a legal defense on the behalf of the insured

Question 4

What doesn’t a commercial general liability insurance insure?

Answer 4

• blasting, pile driving and demolition
• professional liability
• faulty workmanship
• property under the control of the insured

Question 5

What is a wrap-up liability insurance?

Answer 5

-an insurance placed on construction project by a single entity an insuring all parties

Question 6

What are 4 advantages of wrap-up liability?

Answer 6

• certainty of coverage
• elimination of duplicate coverage saves money
• elimination of interinsurer disputes
• availability of higher limits than normally available for small contractors

Question 7

How much does Commercial General Liability insurance normally cost for a general contractor in the lower mainland

Answer 7

$1-2 per $1000

Question 8

What are the 4 disadvantages of wrap-up liability?

Answer 8

• may not be legally enforceable by unnamed insured
• purchaser pays increased costs for renewals if anyone causes claims
• parties who are not in control of policy must determine gaps or overlaps with their policies
• does not provide 6 year completed operations coverage, normally only 2 years

Question 9

What does a Builders’ Risk or Course of Construction or Broad Form Insurance insure?

Answer 9

-physical loss or damage to work such as fire, collapse, windstorm, vehicle impact, theft, etc

Question 10

What doesn’t Broad Form insurance insure?

Answer 10

• waterborne property
• contractors equipment
• property in transit or off site

Question 11

-How much is insured for a Broad Form insurance?

Answer 11

not less than the sum of 1.1 times the contract value plus the full value

Question 12

What are the three types of surety bonds?

Answer 12

• bid bonds
• performance bond
• labor and material payment bond

Question 13

Explain a bid bond

Answer 13

• guarantee the sincerity of the bidder
• issued before submission of bid
• if principal bidder doesn’t enter a formal contract or provide specified security to guarantee performance of contract:
• they must pay the lesser of the difference between their bid and the new bid or 10% of their bid price

Question 14

What is a performance bond?

Answer 14

-guarantee for the performance of the principal, issued after they sign the contract

Question 15

How much is the liability limited to in a performance bond?

Answer 15

50% of the contract price

Question 16

What are the 50/50 bonds?

Answer 16

The performance bond and labor and material payment bond because they are usually both limited to 50% of the contract price

Question 17

What does indemnify mean?

Answer 17

-to protect from harm, if harm is done, compensate for it

Question 18

What does “hold harmless” mean?

Answer 18

-to agree not to hold the other party responsible for any loss, damage or legal liability

Question 19

Who can claim the Labor and Material Payment Bond?

Answer 19

Claimants with direct contract with the principle. Eg. subcontractors can, sub-subcontractors can’t