Surety Bond Quarterly - Winter 2017 - 31

THE NEW EXHIBIT EXPANDS UPON THE PRIOR
INSURANCE REQUIREMENT AND PROVIDES
A WIDER MENU OF COVERAGE OPTIONS FOR
THE PARTIES TO CHOOSE FROM. THIS IS A
SIGNIFICANT CHANGE THAT REFLECTS THE
IMPORTANCE OF EARLY CONSIDERATION OF THE
ROLE TO BE PLAYED BY INSURANCE AND BONDING
AS A RISK TRANSFER MECHANISM BETWEEN
THE PARTIES.
The new Exhibit expands upon
the prior insurance requirement and
provides a wider menu of coverage
options for the parties to choose from.
This is a significant change that reflects
the importance of early consideration
of the role to be played by insurance
and bonding as a risk transfer mechanism between the parties.
Notably, although the bonding
requirements are also shifted to the
new Exhibit, the most significant
changes are to the insurance provisions. The bonding requirements in
the A201 family of documents remain
largely unchanged, and it should be
noted that these revisions do not modify the language of the popular AIA
A312 Performance Bond and Payment
Bond, which was last revised in 2010.
However, it is notable that both the
revised Article 11 of the A201 General
Conditions and the new Insurance and
Bonding Exhibit contain new language
expressly requiring that surety bonds
be obtained only from a surety company that is lawfully authorized to issue
bonds in the jurisdiction where the
project is located. This new requirement, which was added at the suggestion of the NASBP, will help ensure that
required bonds are backed by companies that are adequately capitalized
and that the parties will be protected as
they intended. In addition, the revised
language now expressly calls for the
use of the A312 bond form.
According to AIA, the move to a separate Exhibit was motivated, at least in
part, by a desire to facilitate the transmittal of the form to the parties' insurance/bonding professionals for review.
Rather than having to wade through a

thick set of contract documents, the
concept was to create a concise, standalone document for easier identification
of the required coverages. While the
use of a separate Exhibit may indeed
make it easier to spot the required
insurance coverages, bond producers
and surety underwriters will, of course,
still need to review other key contract
terms, such as scope, price, waivers of
consequential damages, indemnification provisions, no-damages-for-delay
clauses, and liquidated damages provisions, among others.
Another reason cited by the AIA for
the shift to use of the insurance Exhibit
was to give the agreements flexibility
to incorporate and adopt changes and
developments in the insurance products used in the construction industry and to allow for future changes
without requiring additional edits/
modifications within the contract
documents. This concept reflects the
trend of changing availability of insurance products and evolving policy language. On the other hand, the fact that
the insurance provisions are now set
forth on a separate Exhibit would seem
to increase the risk that the parties may
inadvertently omit it altogether.
The Exhibit seeks to provide a
user-friendly check-the-box menu of
insurance coverages for the parties
to choose from, depending on type of
and complexity of project. The Exhibit
includes a list of traditionally required
coverages as well as an expansive list
of optional coverages. The intent here
appears to have been to draw attention to additional types of coverages
that the parties may not otherwise
have considered.

The Exhibit requires the owner to
obtain property insurance written on
a builder's risk "all-risks" completed
value or equivalent policy form sufficient to cover the total value of the project. In addition, the owner's property
insurance must be maintained through
completion and correction of the work
through the contractor's one-year warranty period, and not merely through
the date of final payment as required
by the prior language. In addition, in
the case of a renovation or remodeling project, the form also requires the
owner to purchase property insurance
covering existing structures. Although
the Exhibit (like the prior version of the
A201) contemplates that the owner will
be responsible for obtaining the property insurance, it provides an option for
shifting this burden to the contractor.
The check list of optional coverages that the parties may agree will
be purchased by the owner includes
loss of use, business interruption, delay
in completion insurance and cybersecurity insurance, among others.
Notably, the new Exhibit prohibits
exclusions to the owner's property
insurance for loss from fire, exposition,
theft, vandalism, malicious mischief,
collapse, earthquake, flood, or windstorm, in order to ensure coverage for
events that may arise during the course
of a project. It also requires coverage
for ensuing loss or resulting damage
from error, omission, or deficiency
in construction means and methods
or materials.
For the contractor, the Exhibit
requires the purchase of general liability (including completed operations
coverage), workers compensation,
auto liability, and employer's liability
insurance, which must be maintained
through the time period for the contractor's correction of the work. Like the
owner's property coverage, the Exhibit
contains a lengthy list of prohibited
policy exclusions for the contractor's
general liability coverage, which are
set forth in § A.3.2.2.2.
As with the owner's property coverage, the Exhibit contains a host
of additional coverages that parties
may agree that the contractor will
obtain, including professional liability,

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

31


http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Winter 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Looking Backward to Reach Forward
Relationships for the Long Run
Subcontractor Default Insurance: Relevant Considerations for the Surety Claims Professional
Bottom Line Protection with Job Cost Accumulation & Allocation
Inside the AIA’s New Insurance and Bonding Contract Exhibit
The Calm After the Storm: Managing Disaster Response Contracts
Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Index to Advertisers
Surety Bond Quarterly - Winter 2017 - Intro
Surety Bond Quarterly - Winter 2017 - cover1
Surety Bond Quarterly - Winter 2017 - cover2
Surety Bond Quarterly - Winter 2017 - 3
Surety Bond Quarterly - Winter 2017 - 4
Surety Bond Quarterly - Winter 2017 - 5
Surety Bond Quarterly - Winter 2017 - 6
Surety Bond Quarterly - Winter 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Winter 2017 - 8
Surety Bond Quarterly - Winter 2017 - From the CEO: Looking Backward to Reach Forward
Surety Bond Quarterly - Winter 2017 - 10
Surety Bond Quarterly - Winter 2017 - Relationships for the Long Run
Surety Bond Quarterly - Winter 2017 - 12
Surety Bond Quarterly - Winter 2017 - 13
Surety Bond Quarterly - Winter 2017 - Subcontractor Default Insurance: Relevant Considerations for the Surety Claims Professional
Surety Bond Quarterly - Winter 2017 - 15
Surety Bond Quarterly - Winter 2017 - 16
Surety Bond Quarterly - Winter 2017 - 17
Surety Bond Quarterly - Winter 2017 - 18
Surety Bond Quarterly - Winter 2017 - 19
Surety Bond Quarterly - Winter 2017 - 20
Surety Bond Quarterly - Winter 2017 - 21
Surety Bond Quarterly - Winter 2017 - 22
Surety Bond Quarterly - Winter 2017 - 23
Surety Bond Quarterly - Winter 2017 - 24
Surety Bond Quarterly - Winter 2017 - 25
Surety Bond Quarterly - Winter 2017 - Bottom Line Protection with Job Cost Accumulation & Allocation
Surety Bond Quarterly - Winter 2017 - 27
Surety Bond Quarterly - Winter 2017 - 28
Surety Bond Quarterly - Winter 2017 - 29
Surety Bond Quarterly - Winter 2017 - Inside the AIA’s New Insurance and Bonding Contract Exhibit
Surety Bond Quarterly - Winter 2017 - 31
Surety Bond Quarterly - Winter 2017 - 32
Surety Bond Quarterly - Winter 2017 - The Calm After the Storm: Managing Disaster Response Contracts
Surety Bond Quarterly - Winter 2017 - 34
Surety Bond Quarterly - Winter 2017 - Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Surety Bond Quarterly - Winter 2017 - 36
Surety Bond Quarterly - Winter 2017 - 37
Surety Bond Quarterly - Winter 2017 - Index to Advertisers
Surety Bond Quarterly - Winter 2017 - cover3
Surety Bond Quarterly - Winter 2017 - cover4
https://www.nxtbook.com/naylor/SBPQ/SBPQ0118
https://www.nxtbook.com/naylor/SBPQ/SBPQ0417
https://www.nxtbook.com/naylor/SBPQ/SBPQ0317
https://www.nxtbook.com/naylor/SBPQ/SBPQ0217
https://www.nxtbook.com/naylor/SBPQ/SBPQ0117
https://www.nxtbook.com/naylor/SBPQ/SBPQ0416
https://www.nxtbook.com/naylor/SBPQ/SBPQ0316
https://www.nxtbook.com/naylor/SBPQ/SBPQ0216
https://www.nxtbook.com/naylor/SBPQ/SBPQ0116
https://www.nxtbook.com/naylor/SBPQ/SBPQ0415
https://www.nxtbook.com/naylor/SBPQ/SBPQ0315
https://www.nxtbook.com/naylor/SBPQ/SBPQ0215
https://www.nxtbook.com/naylor/SBPQ/SBPQ0115
https://www.nxtbook.com/naylor/SBPQ/SBPQ0414
https://www.nxtbook.com/naylor/SBPQ/SBPQ0314
https://www.nxtbook.com/naylor/SBPQ/SBPQ0214
https://www.nxtbookmedia.com