Masonry Magazine August 1968 Page. 16
WHAT
NOT COVERED.
by Walter T. Derk-MCAA Insurance Consultant
A series of articles composed of a concise summary of principal hazards excluded or omitted from the newly revised liability insurance policies. Designed to bring the fine print into better focus.
MASONRY is pleased to be able to bring you this second series of articles on insurance by Walter T. Derk, MCAA's Insurance Consultant. Mr. Derk's book, "Insurance For Contractors," is now in its fourth printing with over 30,000 copies in circulation.
PART IV
POLICY EXTENSIONS
Each of the policy extensions we shall discuss here is just that, of course, an extension or broadening of the basic contract so that it covers more hazards. Nonetheless, in our examination of no coverage situations we shall dwell on them from the standpoint of exclusions and limitations they may contain:
A—Blanket Contractual Liability
Many insurance buyers who rely heavily upon this highly recommended endorsement will be surprised to find ten or twelve specific contractual liability exclusions on the reverse side, including:
(1) Professional Liability for plans, specifications, design, etc. if the insured or the indemnitee is an architect, engineer or surveyor.
(2) Supervisory, inspection or engineering services if the insured or the indemnitee is an architect, engineer or surveyor.
(3) Liquor Liability.
(4) Liability to a third party beneficiary under a contract with a public authority.
(5) Damage to property in the insured's care, custody or control.
(6) Damage to the insured's premises following transfer of ownership to someone else.
(7) Injury or damage caused by failure of the produet or work to perform as intended (in the absence of an active malfunction) as a result of design, specification or similar error.
(8) Damage to the insured's product itself.
(9) Damage to the insured's work or materials or equipment.
(10) Expense of recall or replacement of insured's work or product.
(11) Explosion, collapse and/or underground damage as respects specific classifications of work.
Readers will note that these exclusions closely parallel exclusions appearing in the standard Comprehensive General Liability coverage part, the point being that one cannot pick up excluded hazards merely by signing a contract to be responsible for them. It requires more than a contractual agreement to achieve "x, c, u," Completed Operations, Products, Fire Legal Liability or similar coverage. The Contractual Liability endorsement will not cover automatically, regardless of what the agreement itself might say.
Example No. 1
A general contractor signed a contract which included a hold-harmless agreement indemnifying the Owner, Architect and Engineer. The agreement was sufficiently broad to include claims arising from specification errors on the part of the architect. No coverage; professional liability of the indemnitee (the party being held-harmless) is excluded under the Contractual Liability endorsement. Practical solution: Amendment of the contractual agreement to conform with A.I.A. article 4.18.3 amending contract document A-201 to the effect that:
The obligations of the Contractor under this Article 4.18 [or whatever it is] shall not extend to any claim, damage, loss, or expense arising out of professional services performed by the Architect, his agents, or employees, including (1) the preparation of maps, plans, opinions, reports, surveys, designs or specifications, and (2) supervisory, inspection, or engineering services.
Example No. 2
A mechanical contractor signed a contract which included a hold-harmless agreement indemnifying the Owner, Architect and Engineer. The agreement included claims arising from the architect's supervision of the project. No coverage; professional liability of the indemnitee is excluded under the contractual liability en-