Week 12- Insurance Flashcards
What is insurance?
a form of protection against certain risks
What is a contract bond?
a legal obligation to stand if the contractor failed their contractual obligations to the owner
What does commercial general liability insurance insure?
- 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
What doesn’t a commercial general liability insurance insure?
- blasting, pile driving and demolition
- professional liability
- faulty workmanship
- property under the control of the insured
What is a wrap-up liability insurance?
-an insurance placed on construction project by a single entity an insuring all parties
What are 4 advantages of wrap-up liability?
- certainty of coverage
- elimination of duplicate coverage saves money
- elimination of interinsurer disputes
- availability of higher limits than normally available for small contractors
How much does Commercial General Liability insurance normally cost for a general contractor in the lower mainland
$1-2 per $1000
What are the 4 disadvantages of wrap-up liability?
- 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
What does a Builders’ Risk or Course of Construction or Broad Form Insurance insure?
-physical loss or damage to work such as fire, collapse, windstorm, vehicle impact, theft, etc
What doesn’t Broad Form insurance insure?
- waterborne property
- contractors equipment
- property in transit or off site
-How much is insured for a Broad Form insurance?
not less than the sum of 1.1 times the contract value plus the full value
What are the three types of surety bonds?
- bid bonds
- performance bond
- labor and material payment bond
Explain a bid bond
- 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
What is a performance bond?
-guarantee for the performance of the principal, issued after they sign the contract
How much is the liability limited to in a performance bond?
50% of the contract price
What are the 50/50 bonds?
The performance bond and labor and material payment bond because they are usually both limited to 50% of the contract price
What does indemnify mean?
-to protect from harm, if harm is done, compensate for it
What does “hold harmless” mean?
-to agree not to hold the other party responsible for any loss, damage or legal liability
Who can claim the Labor and Material Payment Bond?
Claimants with direct contract with the principle. Eg. subcontractors can, sub-subcontractors can’t
