Masonry Magazine January 1967 Page. 62
Insurance For Contractors
(Continued from page 51)
An employee or his estate can sue his employer at law if the injury arose out of and in the course of employment. Yet, by signing a Hold-Harmless Agreement, you may well find yourself, as this contractor did, in the position of (1) paying full Workmen's Compensation benefits, (2) paying a common law judgment to the same employee and (3) losing your right of subrogation; that is, your right to be reimbursed by the responsible party for Compensation benefits paid (although the amount of Workmen's Compensation benefits paid may be credited back as part of the Liability settlement).
A loss for which you could have been 100% reimbursed, therefore, can cost you or your insurance company at least double, and probably more, because there is no statutory limit to jury awards as there is to Compensation benefits. All for an injury caused entirely by someone else.
If we can assume that a property owner contracting for a building has in force a Liability Insurance Policy covering negligent acts of his own employees, in addition to the usual Workmen's Compensation Coverage, there is no real need for a broad Hold-Harmless Agreement. The Owner is usually fully protected without Hold-Harmless where:
(A) He has adequate insurance to cover his own employees for Workmen's Compensation and General Liability.
(B) His general contractor and all subcontractors are adequately insured.
(C) He has Owners' Protective Liability Coverage, either as part of his Comprehensive General Liability Policy or in a separate contract issued in his name and furnished by the contractor. This protects the owner against liability arising from operations of independent contractors, including that arising from the owner's own supervision.
The catch is that the owner must also be willing to recognize and accept responsibility for his own properly insured legal liability. Many instead pass all responsibility on to the contractor, thereby charging any claims to his loss experience rather than the owner's. So, long after the job is completed, the contractor can be penalized by a higher premium based upon that loss record. The effect is compounded when the contractor logically requires the same agreement from any subcontractors involved; indeed, the specifications often insist that be done. Each such agreement involves a premium charge per $100 of contract cost, still for an exposure most likely adequately insured before the cycle began.
There seems little doubt, however, that Hold-Harmless Agreements are here to stay, because of habit if nothing else. Purely from the standpoint of the indemnitee, such contracts are looked upon favorably because they can be written with fewer restrictions than an insurance policy. They can also elude certain statutes, as the Illinois Scaffold Act.
LIMITS OF LIABILITY
The Comprehensive General Liability Policy provides for one Bodily Injury limit per person, another per occurrence and a third limit as an aggregate for all Completed Operations-Products bodily injury claims arising during the policy period, per year if the policy is written for three years.
Thus, 100/300/300,000 contemplates a Bodily Injury limit of $100,000 per person injured, $300,000 per occurrence regardless of number of persons involved, and a total limit of $300,000 for all Completed Operations Products bodily injury claims during a single policy year.
Property Damage Liability lists one limit per occurrence, another as an aggregate limit individually applicable to each of the five separate hazards contemplated by the Comprehensive Policy form, except Elevator Liability, which has no aggregate limit.
Thus, 50/100,000 means a Property Damage limit of:
$ 50,000 Each Occurrence
100,000 Aggregate Operations
100,000 Aggregate Independent Contractors Protective
100,000 Aggregate Completed Operations
100.000 Aggregate Contractual
Unlike Bodily Injury, however, the Property Damage aggregate limits for Operations, Protective and Contractual apply separately to each project with respect to operations being performed away from premises owned by or rented to the named insured. The Completed Operations-Products aggregate limit continues to apply to all claims within a single policy year.
Insurance For The Contractor will cover Policy Exclusions and Limitations in next month's Masonry.
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Linwood Stone Products Co., Inc. R. R. 2, Davenport, lowa Phone 324-2186
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MASONRY January, 1967