A DOZEN THINGS YOU WISH YOU HAD KNOWN ABOUT …

1 11903971 9/19/2013A DOZEN THINGSYOU wish YOU HAD KNOWNABOUT COMMERCIALPROJECT INSURANCEWILLIAM H. LOCKE, , Dougherty, Hearon & MoodyAustin, TexasCHARLES E. COMISKEYB rady Chapman Holland & Associates, , CIC, CPIA, CRM, PWCA, CRIS, CCMH ouston, TexasThis Article alerts the reader to mistakes frequently made by lawyers and theirclients in the manner of specifying insurance for commercial projects. Thesemistakes can lead to catastrophic uninsured losses. Detailed insurancespecifications are relatively standard in construction contracts, but not so in generally set out insurance specifications in a narrative format as opposedto a checklist format. Attached to the Article are insurance specifications in achecklist format as a lease exhibit. These specifications are crafted to avoid theinsurance specification drafting mistakes noted by the authors. Also, attached tothe Article are standard insurance industry forms which have been annotated by theauthors.

2 These and additional insurance industry forms have been annotated by theauthors and posted on the ACREL OF You Did Not Know, and Could Have KNOWN , Can Hurt You .. of insurance Are Not , Problematic and Just Plain Wrong Terminology .. Insureds Are Not Automatically Notified of Cancellation or Modification, and NeverNotified of Non-Renewal of Coverage .. All Indemnified Liabilities Are Insured .. General Specification for "Additional Insured Status" is Meaningless .. Operations Coverage is Important .. Insureds May Not Be Covered by a Blanket Additional Insured May Be Invisible .. Is Not insurance .. All Casualty Proceeds Clauses Are Equal .. Specifications Are Better Than General .. 22 APPENDIX OF FORMSL ease Forms:Casualty Provisions with Narrative insurance Specifications ..24 Casualty Provisions with Checklist-Style insurance Specifications ..25 Liability insurance Forms:ISO CG 20 01 04 13 Primary And Noncontributory Other insurance Condition .. 41 ISO CG 20 10 04 13 Additional Insured Owners, Lessees Or Contractors Scheduled Person OrOrganization.

3 42 ISO CG 20 11 04 13 Additional Insured Managers Or Lessors Of Premises .. 44 ISO CG 20 37 04 13 Additional Insured Owners, Lessees Or Contractors -Completed Operations .. 45 ISO CG 21 39 10 93 Contractual Liability Limitation .. 46 ISO CG 22 94 10 01 Exclusion - Damage to Work Performed by Subcontractors on Your 47 ISO CG 24 26 04 13 Amendment of Insured Contract Definition .. 48 ISO IL 00 17 11 98 Common Policy 49 ISO CP 00 90 07 88 commercial Property Conditions .. 50 ISO CP 12 18 06 07 Loss Payable Provisions ..51 ISO CP 12 19 06 07 Additional Insured - Building Owner .. 53 ISO CP 00 60 06 95 Leasehold Interest Coverage Form .. 54 ACORD 25 (2010/05) Certificate of Liability insurance .. 58 ACORD 28 (2011/11) Evidence of commercial Property 59 Commentary on Forms:See the Endnotes following the Appendix of Forms for a commentary on these 60 ISO and ACORD Educational License:This publication incorporates licensed copyrighted or other proprietary material ofISO and ACORD Corporation.

4 All rights reserved. Used with permission of ISO and ACORD Corporation. The name ACORDand the ACORD logo are registered marks of ACORD Corporation. This document and any opinions it may contain are solelythe product of its author(s) and are neither endorsed, nor warranted, by ISO and WEBSITEF iled on the ACREL website are the following forms, which have been annotated with commentary and citations tocase and treatise discussions:Liability insurance Forms:ISO CG DS 01 10 01 commercial General Liability DeclarationsISO CG 00 01 04 13 commercial General Liability Coverage FormISO CG 02 05 12 04 Texas Changes - Amendment of Cancellation Provisions or Coverage ChangeISO CG 04 37 04 13 Electronic Data LiabilityISO CG 20 01 04 13 Primary and Noncontributory Other insurance ConditionISO CG 20 10 04 13 Additional Insured - Owners, Lessees or Contractors - Scheduled Person Or OrganizationISO CG 20 11 04 13 Additional Insured Managers Or Lessors Of PremisesISO CG 20 24 04 13 Additional Insured Owners or Other Interests From Whom Land Has Been LeasedISO CG 20 26 04 13 Additional Insured - Designated Person or OrganizationISO CG 20 33 04 13 Additional Insured Owners, Lessees or Contractors Automatic Status When Required in ConstructionAgreement With YouISO CG 20 37 04 13 Additional Insured Owners, Lessees Or Contractors Completed OperationsISO CG 20 38 04 13 Additional Insured Owners.

5 Lessees Or Contractors Automatic Status for Other Parties When Requiredin Written Construction AgreementISO CG 21 39 10 93 Contractual Liability LimitationISO CG 21 42 12 04 Exclusion Explosion, Collapse and Underground Property Damage Hazard (Specified Operations)ISO CG 21 43 12 04 Exclusion Explosion, Collapse and Underground Property Damage Hazard (Specified OperationsExcepted)ISO CG 21 44 07 98 Limitation of Coverage To Designated Premises Or ProjectISO CG 22 34 04 13 Exclusion Construction Management Errors and OmissionsISO CG 22 43 04 13 Exclusion Engineers, Architects or Surveyors Professional LiabilityISO CG 22 70 04 13 Real Estate Property ManagedISO CG 22 79 04 13 Exclusion Contractors Professional LiabilityISO CG 22 94 10 01 Exclusion Damage to Work Performed by Subcontractors on Your BehalfISO CG 22 95 10 01 Exclusion Damage to Work Performed by Subcontractors on Your Behalf Designated Sites orOperationsISO CG 24 04 05 09 Waiver of Transfer of Rights of Recovery Against Others to UsISO CG 24 26 04 13 Amendment of Insured Contract DefinitionISO CG 25 04 05 09 Designated Location(s) General Aggregate LimitProperty insurance Forms.

6 ISO CP DS 00 10 00 commercial Property Coverage Part Declarations PageISO IL 00 17 11 98 Common Policy ConditionsISO CP 00 10 10 12 Building and Personal Property Coverage FormISO CP 00 30 10 12 Business Income (And Extra Expense) Coverage FormISO CP 00 90 07 88 commercial Property ConditionsISO CP 04 05 10 12 Ordinance or Law CoverageISO CP 04 15 10 12 Debris Removal Additional InsuranceISO CP 10 30 10 12 Causes of Loss Special FormISO CP 12 18 06 07 Loss Payable ProvisionsISO CP 12 19 06 07 Additional Insured - Building OwnerISO CP 00 60 06 95 Leasehold Interest Coverage FormCertificates:ACORD 25 (2010/05) Certificate of Liability InsuranceACORD 28 (2011/11) Evidence of commercial Property InsuranceACORD 75 (2010/04) insurance Binder1A DOZEN THINGS You wish You Had KnownAbout commercial project Insurance1. What You Did Not Know, and Could Have KNOWN , Can Hurt YouIt is the authors opinion and experience that lawyers drafting transactional documents areresistant to undertaking the effort required to understand the insurance provisions they include intheir documents and to following up with their clients to assure that the drafted insuranceprovisions are fulfilled by the parties and their insurance occasion this resistancehas risen to heated rhetoric to the effect I only draft the provisions.

7 I am not an insuranceperson. It is up to the client to understand and implement the provisions. Perhaps this choice arises out of concern that professing some knowledge as to one s craftexposes the practitioner to a greater likelihood of being held accountable in cases where thingsgo wrong than being silent. The insurance industry s forms promote taking this position. Thestandard certificates of insurance are simple appearing one page forms arenot readily accessible to the practitioner. Once obtained, they appear areidentified by a seemingly complicated numbering circumstances lead the authors to present to you a DOZEN THINGS You wish You HadKnown ABOUT commercial project insurance . It is the authors hope that exposure to these traps for the unwary will result in change in your approach to drafting insurance provisionsand will lead to your more active involvement in implementing the insurance programcontemplated Certificates of insurance Are Not Certificatesa.

8 An All Too Typical SpecificationSpecifying appropriate insurance coverages is the first step. The next step is to confirm theinsurance has been obtained and is in full force and contracts require that acertificate of insurance be furnished as evidence of the existence of the specified insurance . Thefollowing is an all too typical specification:Tenant shall provide Landlord a certificate of insurance certifying the coverages required of an ACREL Fellow. I confess that I fell into the camp that it is better to be ignorant than take the responsibility of education, Bill Locke. However, he has changed this aspect of his practice due to his unwillingness to continue drafting and providing clients withdocuments containing provisions neither understood by the client nor the ACORD certificates attached in the Appendix of liability insurance forms published by the insurance Services Office ( ISO ) are recognized nationally as the industrystandard.

9 However, they are not freely available to the public or the practitioner. These forms are prepared by an industry trade organization foruse by its members. Copies may be purchased by contacting ISO. Neither ISO s property insurance forms nor the forms promulgated by anyother industry trade organization have gained recognition as the industry standard. Also, insurers including some of the leading insurers crafttheir own liability and property insurance and these forms are not readily available to the public or practitioner in advance of their Form Numbering Endnote 3 to the Commentary on insurance Forms in the Appendix to this Article for an explanation ofthe ISO form numbering We have met the enemy and he is us. Pogo by Walt Kelly (1913 - 1973).6 Lender an Interested Bill Locke and Marilyn C. Maloney,Top Ten insurance Issues for Lenders, THEACRELPAPERSTab 11(Las Vegas, Spring 2012).2Is this sufficient? Unfortunately,no. Prior to 2006, the ACORD form of certificate of insuranceappeared to be evidence of insurance and appeared to give rights against the insurer (includingindependent rights to notice upon cancellation).

10 When ACORD changed its certificate forms in2006 to clearly state that they conferred no rights on the certificate holder, insureds and theirattorneys attempted to negotiate with insurers and agents to restore some enforceability toinsurance certificates. Unfortunately, these efforts did not succeed. In response to these effortsthe insurance industry approached state insurance commissioners and legislatures to gain supportfor their position that a certificate of insurance could not vary the underlying policy or grantrights that did not exist under the applicable policy. At last count, 42 states have either insuranceregulations or statutes on this result? A certificate of insurance does not provide coverage if coverage is not provided inthe underlying It is Not Reasonable to Rely Upon an ACORD Certificate of InsuranceThe ACORD 25 Certificate of insurance is labeled a certificate, is addressed to a certificateholder and states This is to certify that the policies of insurance listed below have been issuedto the insured named above for the policy period indicated.