Contract Change #1- Insurance in the A201 (law note)

At last, we have arrived at the Top Change in the AIA A201— and it deals with the subject that everyone loves to hate (until they need it!), Insurance.  (Go here for yesterday’s post on Digitial Data changes).

Got Insurance

Insurance– everyone needs it; everyone would just as soon not have to deal with it.  I get it, I do.  Attorneys, Insurance Agents– no one likes spending time with those folk!  Good news though.  The changes to the A201 mean that you may end up spending less time with both!

The most important change to the Insurance requirements of the AIA contract is that most of it has moved to a new Exhibit.  Why is this important?  Instead of having to send the entire contract to your agent or broker, you can now send them only the section that they really need to review for compliance.  This also means that if insurance policies change (as they surely will), the entire contract document does not need to be re-written– the Exhibit can be updated accordingly, leaving the rest of the A201 alone.  Nice, right?  This change was made to streamline insurance review and provide for that flexibility of the changing insurance market.

Does this mean that there are *no* insurance requirements in the A201 anymore?  Unfortunately, no.  There are still some insurance provisions in Article 11, such as the requirement that both parties maintain insurance.  (11.1.1 and 11.2.1).

Most notably, it is now the Owner & Contractor, and not the insurer’s, requirement to provide each other with notice of cancellation/expiration within 3 days.  (Section 11.1.4 and 11.2.3).  The party receiving notice can stop work until the insurance lapse is cured.  The reason for the notification change is that prior editions of the A201 required that the insurer notify the Owner of a pending lapse in insurance.  That provision was ultimately removed from the certificates of insurance issued by most insurers, so it was eliminated as a requirement to codify what was happening on the ground between the parties.

There are also some changes to property insurance losses.  The Owner must notify the Contractor of proposed settlements and allocations, and the Contractor has 14 days to object or he will be bound by the allocation.  (See 11.5.2).

The main take-away here is that most insurance will now be in a streamlined, stand-alone exhibit which will make it easier for you to ensure your agent/broker is on board with the requirements before work begins.

In case you are wondering why, as the architect or engineer, you need worry about insurance of the contractor, just remember that it is in your own financial interest to make sure they are properly insured for the project.

That’s it.  You’ve made it through the Top 10 changes.  I do have a few other changes of note, which will be in my next post.  Stay tuned!  As always, if you have any comments or questions, drop me a line or comment below.

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