At the Boston meeting, Gregg Bundschuh of Greyling Insurance and Christopher DeBruin of Suffolk Construction Co. gave a presentation on new trends in insurance. Some of the issues they highlighted are important when considering alternative project delivery methods. In this post, I'll summarize Gregg and Chris' tips for structuring insurance for alternative delivery projects.
Integrated Project Delivery
A key insurance problem posed by IPD is that the contractual risk-sharing model for IPD participants is typically a no-fault model---risks (and costs) are shared among the participants without regard to fault or negligence. Insurance, however, is typically keyed to notions of fault and negligence, and therefore traditional insurance policies are often a bad fit for an IPD project. A further complication is posed by third-party claims---all project participants are liable for a third-party claim, no matter who caused the problem. Again, this is an approach at odds with traditional insurance. While the right insurance solution will vary from project to project, common ingredients will be a CIP (OCIP or CCIP) package of CGL, auto, BR, and pollution with broad subrogation waivers, and a custom-tailored PL policy.
Design Build
Gregg and Christopher highlighted the importance, and usefulness, of Contractors Professional Liability (CPL) insurance in a DB setting. CPL provides two distinct but important coverages. Part A provides coverage to the contractor for third-party claims arising out of alleged design errors by the contractor. It effectively operates, for the contractor, as PL insurance does for the designer. Part B provides coverage to the contractor for its own costs incurred as a result of errors and omissions made by the designer. The designer's PL policy must be exhausted before Part B coverage will kick in, but Part B coverage also affords "difference in coverage" protection, and if the designer's PL policy excludes costs that the CPL would afford coverage for, the CPL will kick in and pay those costs regardless of exhaustion of the PL policy. This helps cover common PL exclusions like mold, pollution, and residential projects.
P3
Unfortunately, I simply cannot do justice to the extensive discussion devoted to P3 insurance considerations. Suffice it to say, for projects of the magnitude typical for a P3, the insurance issues are legion, and no one would ever expect to perform a P3 project without first crafting a project-specific stack of insurance custom-tailored to the particular risks that project posed. For those interested in far greater detail, I recommend a detailed review of Gregg and Chris' written materials.
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