CG 31 15-Construction Project Management Protective Liability Coverage

CG 31 15–CONSTRUCTION PROJECT MANAGEMENT PROTECTIVE LIABILITY COVERAGE

(November 2019)

INTRODUCTION

CG 31 15–Construction Project Management Protective Liability Coverage is not a stand-alone coverage form. It must be attached to CG 00 09–Owners and Contractors Protective Liability Coverage Form–Coverage for Operations of Designated Contractor. It both broadens and restricts coverage by replacing certain portions of CG 00 09. Unfortunately, there are parts of the endorsement that are difficult to interpret.

CG 31 15–CONSTRUCTION PROJECT MANAGEMENT PROTECTIVE LIABILITY COVERAGE ANALYSIS

This analysis is of the 04 13 edition. The single change from the 10 01 edition is in bold print.

SCHEDULE

The endorsement schedule has spaces to enter the following information:

Note: Only operations for this project are covered so the description must be precise.

Note: Only operations conducted at this location are covered so the location must be accurate.

What should be entered in the four items is somewhat confusing because of how they are shown. The following items are listed.

Each of these items is followed with a “:” which would indicate that a name or description should be placed next to it.

Completing the schedule in this way would be informational and possibly helpful. Unfortunately, if completed in that way, it is in conflict with the actual endorsement. According to item D. the named insured is to be in some way designated as one of the four items listed. Who is insured under the policy is based on which of the four has been selected. Our question is that if the intent was for only one type of business to be selected, why wasn’t a box placed beside the item to be checked instead of a “:” after it?

Another question arises with the term “contractor.” The definition of contractor on this endorsement means the contractor who is designated on either the schedule or the declarations page. If the named insured is a contractor and named on this schedule while the designated contractor is entered under the contractor item on the declaration, is there a conflict?

Based on the schedule’s wording, the two primary terms providing coverage, “insured” and “contractor,” are under question. Consider these carefully as you review the following.

A. INSURING AGREEMENT

1. The following replaces Section I–Coverages, 1. Insuring Agreement, Paragraph 1.b. (1).

b. Coverage applies to only bodily injury or property damage that is caused by an occurrence which comes out of one or both of the following:

Note: Instead of operations performed for the named insured at the location on the declarations, the operations must be performed by or for the contractor and be part of the construction project on the declarations.

Note: Instead of being only the named insured’s acts or omissions, this applies to the insured’s acts or omissions. In either case, the supervision must be of others.

B. EXCLUSIONS CHANGED

2. The following replaces Section I–Coverages, 2. Exclusions, c., d., g., and k.

c. Work Completed or Put to Intended Use

Coverage does not apply to bodily injury or property damage that occurs after the earliest of the following dates:

Note: The reference to the named insured's work in this exclusion is eliminated and replaced by the designated construction project. The result is the same being no coverage for completed operations.

d. Acts or Omissions by You and Your Employees

There is no coverage for bodily injury or property damage that arises out of acts or omissions of the named insured or its employees. This exclusion does not apply to any general supervision that does not involve the supervising of its own employees.

Note: This exclusion broadens coverage by eliminating reference to the contractor in the exception.

g. Damage to Property

Coverage does not apply to property damage to the following:

·         Property that is owned rented or occupied by the named insured.

·         Property that is being loaned to the named insured

·         Personal property in the insured's care, custody, or control

·         Work that the contractor either performs or it has others perform on its behalf

Note: The second and third items are the same as on the CG 00 09. The first item differs in that CG 00 09 has added wording that the cost of expenses for repair, replacement, enhancement, restoration or maintenance of such property and the prevention of injury to a person or damage to another’s property is included. By this wording not being provided it could mean that such expenses might not be excluded.

The last item differs from CG 00 09 in that not only is work the contractor performs not covered but also work that the contractor has done on its behalf is not covered.

k. Damage to Impaired Property or Property Not Physically Injured

There is no coverage for property damage to impaired property or property not physically damaged that arises out of defects, deficiencies, inadequacies, or dangerous conditions in work the contractor performs or that others perform on its behalf. It also does not apply to delays or failures by the named insured or by others that act on its behalf to perform a contract or agreement according to its terms.

An exception to this exclusion states that it does not apply to loss of use of other property that arises out of sudden and accidental physical damage to work the contractor performs or that others perform on its behalf.

Note: The only difference between this coverage and CG 00 09 is that CG 00 09 states the contractor must be performing the work for the named insured. The reference to the named insured is removed and the option that someone is performing the work on behalf of the contractor.

C. EXCLUSION ADDED (04 13 change)

2. The following is added to Section I–Coverages, 2. Exclusions.

Professional Services

Coverage does not apply to bodily injury or property damage that arises out of providing or failing to provide any professional services. This exclusion applies to services performed by or for the named insured or by the named insured on behalf of the contractor.

This exclusion continues to apply, even if claims against any insured allege that that insured was negligent or wrongfully engaged in hiring, employing, supervising, training, or monitoring others. This is in cases where the occurrence that caused the bodily injury or property damage involved providing or failing to provide any professional services described above. (04 13 addition)

Note: This change is similar to the professional services exception in the CGL professional exclusions.

D. WHO IS AN INSURED–PARAGRAPH 1

1. This completely replaces Section II–Who Is an Insured, but only Paragraph 1.

This section does not refer to an individual, partnership, joint venture, limited liability company, or other organization in order to define who is an insured. Instead it refers to the schedule on this endorsement. If the named insured is one of the following:

the named insured is an insured. However, the named insured’s the status of insured applies only with respect to each of the following:

E. WHO IS AN INSURED CHANGES–PARAGRAPH 2

2. This changes Section II–Who Is an Insured, paragraph 2. by an addition at the end of the section.

This is broadened to include the named insured's employees that are not part of paragraph 1. that was changed above. However, this does not apply to all coverage provided by this endorsement. It applies only for the general supervision coverage at the specific construction project.

Note: CG 00 09 does not include employees as insureds. As a result, this is a significant and important broadening feature.

F. CONDITION ADDED

The following is added to Condition 12. Transfer of Rights of Recovery Against Others to Us.

The insurance company waives any rights of recovery it has against the named insured because of payments made for bodily injury or property damage that this insurance covers.

Note: This is a very odd coverage because the insurance company is agreeing not to sue its own named insured!

G. DEFINITIONS ADDED

The following definitions are added to Section V–Definitions.

1. Designated construction project

This is the construction project listed and described at the designated location on the endorsement schedule.

2. Professional services

These include the preparing or approving, or not preparing or approving, maps, surveys, field orders, change orders, drawings, and specifications. It does not include services provided within construction means, methods, techniques, sequences, and procedures that the contractor uses in conjunction with the construction operations it performs.

H. DEFINITION REPLACED

Definition of Contractor

The definition of contractor is replaced.

Contractor is the contractor that is designated on the declarations or on the endorsement schedule.

Note: This could be very confusing if one contractor is listed on the declaration and a different one on the endorsement schedule.

 

Example: Jessica’s, Inc. is the named insured and the owner of the project. She hires Maggie’s Construction as the General Contractor. The designated project is Jessica’s Building that is located at 123 Main St. Good Town, Good State. Jessica’s, Inc. is shown on the endorsement schedule as the owner. Maggie’s Construction is listed as the designated contractor on both the CG DS 02 and on the endorsement schedule. Jessica’s manager is on site one day and when asked to make a decision, she does. The decision results in the injury to an employee and to a pedestrian who was near the worksite. When the employee and the pedestrian sue Jessica, this policy responds because Jessica’s manager’s general supervision precipitated the injuries.