NFC Contracts 101: The Risk of Being Under Insured
At the Framer Summit in October, both Kent Pagel of Pagel, Davis, and Hill, P.C. and Lock Curtis of IronRisk Strategies, LLC offered helpful information about a framer’s insurance coverage as it relates to GC contract requirements.
Many times, says Kent, “framers are agreeing to insurance requirements in the contracts that they sign,” when in fact they do not “have the insurance that’s stipulated in that contract, and in that situation they’re in immediate breach whether or not they know it.” Kent therefore urges a careful comparison of a contract’s insurance provisions with the framer’s insurance coverage, as well as the coverage of all subcontractors.
In his presentation, Lock mentioned two emerging types of insurance coverage that framers are increasingly being required to carry – coverage requirements that framers should examine their contracts for before signing.
The first is pollution coverage for potential mold issues on framing products. “More and more often [framers are] being asked to carry pollution coverage and they don’t have it and don’t realize it and haven’t built in the cost of it when they bid the project,” says Lock. Instead of attempting to purchase the insurance after signing a contract, Lock encourages a proactive approach. “It’s a lot less burdensome if you do it upfront as opposed to if you do it after they’ve signed the contract,” says Lock. He says a good approach is for framers to buy it when they are “renewing all their other coverages.” Doing so, says Lock, is “a lot less cumbersome, a lot less expensive, and one less headache when it comes time to getting paid.”
Another type of insurance framers are increasingly required to carry is professional liability insurance to cover any changes they make to the design plans during construction. Lock says that while it is often assumed that engineers and architects are to be the ones carrying professional liability insurance, “because framers are now making changes to plans and not always getting them stamped and approved by engineers and architects…framers in particular are being required to carry professional liability for any design changes they make.”
Again Lock encourages a proactive approach to ensuring you have the appropriate insurance upfront rather than waiting until a contract is signed, as it can save framers time and hassle. “All of these compliance issues become mechanisms for general contractors to hold money,” Lock says. “If you don’t have the right limits or you don’t have the right coverage they say, ‘Well, we can’t pay you until you get it.’” This “just delays what’s already a delayed process of getting paid,” says Lock.
Framers can help expedite this process by doing all they can to stay ahead of the game. Working with an insurance and risk management professional to remain up to date on emerging trends in insurance coverage requirements can help.
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