remodeling an existing structure or constructing
an addition to an existing structure,
the property insurance must also cover
the existing structure against direct physical
loss or damage on a replacement cost basis.
The Exhibit provides that the Owner is
responsible for all loss not covered because
of a deductible or retention.
The Insurance Exhibit also requires
the Contractor to purchase and maintain
a number of different lines of insurance,
including commercial general liability, automobile
liability, workers’ compensation
and employer’s liability. Other lines, such
as professional liability, pollution liability
and maritime liability are required to be
maintained by the Contractor if the work
involves those potential hazards. Unlike
with the prior Article 11 in the A201-
2017, for most of these different lines, the
Insurance Exhibit includes blanks for the
parties to fill in with the specific required
policy limits per occurrence and in the
aggregate for each type of required coverage.
Importantly, the Insurance Exhibit
also identifies certain exclusions or restrictions
that may not be included as part
of the commercial general liability policy,
including, among others: 1) claims
by one insured against another insured;
2) claims for property damage to the
Contractor’s work arising out of the
products-completed operations hazard
where the damaged Work or the Work out
of which the damage arises was performed
by a Subcontractor; 3) claims for indemnity
under Section 3.18 of the A201 arising
out of injury to employees of the insured;
4) claims related to residential, multifamily
or other habitational projects, if the Work
is to be performed on such a project; 5)
claims where the work involves such hazards,
such as roofing, exterior insulation
finish systems, earth subsidence, or explosion,
collapse and underground hazards.
The Insurance Exhibit also provides
that the Contractor may achieve the required
coverage limits for commercial general
liability and automobile liability through
a combination of primary and excess or
umbrella liability coverage. However, the
excess or umbrella liability insurance may
not provide narrower coverage than the
primary policy, and the excess policy is not
permitted to require the exhaustion of the
underlying limits only through actual payment
by the underlying insurers.
Section 14.4.3: termination
for convenience
The A201-2017 made a significant change
to the Owner’s payment obligations in the
case of the Owner’s decision to terminate
the Contractor for convenience. In the
A201-2007, the Owner had the right to terminate
the Contractor for convenience, but
in such cases the Contractor was entitled
to receive payment for Work executed and
costs incurred by reason of the termination,
along with reasonable overhead and
profit on the Work not executed. A related
provision in the A401-2007 subcontractor
agreement entitled subcontractors to
the same relief in the case of a termination
for convenience.
In the A201-2017, Section 14.4.3
removes the Contractor’s right to recover
for lost anticipated overhead and profit on
Work not executed and instead substitutes
a termination fee to be negotiated by the
parties and identified in a fill-in-the-blank
section in the Owner-Contractor agreement.
If the parties do not negotiate such a
termination fee at the time of contract execution,
the default would be that the Owner
would not have to pay the Contractor anything
for lost anticipated overhead and profit.
Surprisingly, AIA did not flow down
the language in the prime agreement to the
AIA A401-2017 standard subcontract, so
if the flow down language is not aligned,
the Contractor could potentially be left
obligated to pay its subcontractor overhead
and profit on Work not performed,
without the right to receive the same from
the Owner. t
LEGAL
tsyhun / 123RF Stock Photo
126 | ISSUE 5 2018
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