Legal and Regulatory

AIA Revises Insurance and Bonds Requirements: Construction Contractors Must Be Aware of 2017 Changes to AIA Contract Documents

The latest set of revisions to A201–2017 and the new Insurance and bonds exhibit make it easier for contractors to identify what is available and to select insurance for their project. Learn more about the changes here.
By Michael B. Bomba
April 19, 2017
Topics
Legal and Regulatory

The construction insurance industry is constantly changing and the number of available insurance products continues to grow. The result is an increasingly complex insurance market for construction project participants to navigate. In response to these developments, the American Institute of Architects (AIA) undertook an extensive examination of its insurance and bonds requirements for the 2017 update to key AIA contract documents. Working with industry experts on construction insurance, the AIA has put together a comprehensive set of revisions to the insurance and bonding provisions included in its 2017 owner-contractor agreements.



New Insurance and Bonds Exhibit

The biggest change for 2017 is a new insurance exhibit to be used with the AIA Documents A101™–2017 Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum; A102™–2017 Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price; and A103™–2017 Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price. The new insurance and bonds exhibit, used in conjunction with the revised Article 11 (Insurance and Bonds) of A201–2017, the General Conditions of the Contract for Construction, results in a flexible set of insurance coverages that can be tailored to the specific needs of each project.

Required Vs. Optional Coverages

To create a more expansive and flexible set of insurance requirements, the new insurance and bonds exhibit distinguishes between required coverages and optional coverages. Required coverages are those that would commonly be procured on all construction projects. Required coverages for the owner include typical property and general liability coverage. For the contractor, required coverages include commercial general liability coverage, auto liability coverage, workers’ compensation and employers’ liability coverage, and other coverages based on the type of project. Any coverages outside these more traditional coverages are categorized as optional.

Optional coverages should be discussed with an insurance advisor and selected based on specific project needs. For owners, optional insurance coverages include loss of use, business interruption, and delay in completion insurance; ordinance or law insurance; and expediting cost insurance. For contractors, optional insurance coverages include railroad protective liability insurance; asbestos abatement liability insurance; insurance for physical damage to property while in storage or transit; and property insurance to cover property owned by the contractor and used on the project.

Article 11 of A201

While the specific insurance requirements between the owner and contractor are now set forth in the Insurance and Bonds Exhibit, A201–2017 still includes some key insurance related terms that are applicable to virtually all projects. The Insurance and bonds exhibit must be read in conjunction with the insurance requirements included in Article 11 of A201–2017.

Among the revisions to Article 11 of A201 is the removal of the requirement that the contractor provide certificates of insurance with an obligation on the part of the insurer to notify the owner of a pending lapse in insurance. That provision was ultimately removed from the certificates of insurance issued by most insurers and, therefore, was eliminated from A201. Accordingly, A201–2017 now requires that the owner and contractor (as opposed to the insurers) each provide the other with notice of an impending or actual cancellation or expiration of insurance coverage. Additionally, there are provisions that protect the interests of the contractor and subcontractors if the owner fails to purchase any of the insurance as required by the agreement or contract documents.

As a final note, Article 11 contains broad waivers of subrogation for damages covered by fire or other causes of loss to the extent those losses are covered, or required to be covered, by property insurance required by the agreement or other property insurance applicable to the project, including property insurance the owner might have under policies that are separate from those insuring the project. It is particularly important to discuss these waivers with insurers to make sure it is not prohibited by your policy.

Insurance can be an intimidating topic. The latest set of revisions to A201–2017 and the new insurance and bonds exhibit have been developed to make it easier for contractors to identify what is available and select insurance for their project. By working with insurance advisors and selecting the appropriate optional coverages, owners and contractors can rest assured that project risks will be adequately covered.

by Michael B. Bomba
Michael B. Bomba, Esq. is Director and Counsel on the AIA Contract Documents team at the American Institute of Architects, Washington, D.C. Michael works actively in the creation and revision of AIA Contract Documents.

Related stories

Legal and Regulatory
Final Build America, Buy America Act Guidance Released
By P. Lee Smith and Greggory C. Maddaleni
This new guidance tightens U.S. content requirements for federally funded infrastructure projects, expands the definition of infrastructure and provides calculation methodologies for manufactured products.
Legal and Regulatory
A Look at Trending Legislative Changes Impacting Workers' Comp
By Rosanna Shamash
Could three recently enacted changes in New York State affect workers' compensation cases across the country for the construction industry?
Legal and Regulatory
How to Get the Most Bang for Your Buck Out of the Infrastructure Bill
By Rich Meene
The Infrastructure Investment and Jobs Act authorizes $550 billion in new funding for infrastructure projects. Here's how to position your company for success when pursuing these opportunities.

Follow us




Subscribe to Our Newsletter

Stay in the know with the latest industry news, technology and our weekly features. Get early access to any CE events and webinars.