General Contractors Work to Move More
Liability to Glazing Contractors
The implementation of design-assist in the project delivery process has
brought the glazing contractor on the design team early in the game; however,
it also has him paying for professional liability insurance for contractors.
"We've seen that requirement recently in some subcontracts where
it appears general contractors (GC) doing work as 'construction managers
at risk' are trying to push off some potential liabilities onto their
subcontractors," says William C. Keen, executive vice president and
CEO of TEPCO Contract Glazing Inc. in Dallas. "This requirement is
fairly new and, since there is perceived exposure, may not go away. "
Professional liability coverage for contractors is available now to subcontractors,
but there is an additional cost.
Enclos Corp., headquartered in Eagan, Minn., has carried professional
liability insurance for many years now, says Mic Patterson, director of
strategic development at Enclos. Patterson says, "Currently, design-assist
is a big umbrella and there are many variations ... but the central idea
is to get the primary vendors, material suppliers and specialty contractors
on board the design team as early in the development process as possible."
The design-assist work mitigates risk and makes for a more successful
project, Patterson says. "But it does create the potential for professional
liability for those that participate in the process," he says.
However, the insurance industry is playing catch-up in responding to these
changes. "The lack of effective and efficient insurance products
can hinder and even strangle evolving project delivery processes,"
Attila Arian, president of seele Inc. in New York, agrees. "Based
on our experience, the biggest risk exposure in design- built contracts
is budget overruns and delays, which are not covered by the general liability
insurance," he says. "Insurance programs need to cater to the
needs of the contractors and offer specific coverage for design-build
Building information modeling software is another area that needs attention,
Arian says. "The interactive collaboration of multiple trades and
the design team creates efficiencies and benefits the project in many
ways," he says. "However, it exposes the individual contractors
to risks that are currently not covered by the general liability insurance.
Assuming the insurance industry started offering contractor-specific products,
who would pay for it? "We asked [the GC] to pay for it, but they
don't want to pay," Keen says. "So, we've stricken it from the
subcontract. They normally come back and object ... generally we compromise,
and we provide them with a copy of the errors and omissions insurance
certificate from the professional engineer who's performing the calculations
on our work."
Before paying for the insurance there are a couple of things to consider,
Keen says. "First, the glazing sub has general liability insurance
that will cover bodily injury or property damage due to an improper design
of that glazing contractor ... However, there is exposure if an owner
were to discover later that the project material provided does not meet
the function intended, whereby economic loss might be incurred due to
'loss of use' of property during rework." That is not covered by
general liability insurance, he says. "If a glazing contractor develops
plans and specifications for his materials then he will have exposure,
and the general contractor will try to make sure that the glazing contractor
assumes that risk." Secondly, "the prudent glazing contractor
will be employing for his design calculations a professional engineer
who carries errors and omissions insurance," Keen says.
ABI Climbs into Positive Territory
Continuing the positive momentum of a nearly three point bump in October,
the American Institute of Architects' (AIA) Architecture Billings Index
(ABI) reached its first positive mark since August. As an economic indicator
of construction activity, the ABI reflects the approximate nine to twelve
month lag time between architecture billings and construction spending.
AIA reported the November ABI score was 52.0, following a score of 49.4
in October. This score reflects an overall increase in demand for design
services (any score above 50 indicates an increase in billings). The new
projects inquiry index was 65.0, up from a reading of 57.3 the previous
month. Key November ABI highlights include:
- Regional averages: South (54.4), Midwest (50.9), Northeast (49.1),
- Sector index breakdown: multi-family residential (55.8), commercial/industrial
(53.9), institutional (48.9), mixed practice
- Project inquiries index: 65.0.
The regional and sector categories are calculated as a 3-month moving
average, whereas the index and inquiries are monthly numbers.
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