Volume 36, Issue 12, December 2001


ASA Praises One General Contractor’s Protective Liability Insurance
The standard subcontract used by Pepper Construction Co. of Chicago allows subcontractors to protect their general liability claims experience from losses caused by the negligence of others, according to the August/September 2001 issue of the American Subcontractors Associa-tion’s (ASA) newsletter. 

According to ASA, Pepper Construction uses a “Subcontractor Obligations” form that includes reasonable indemnification language and also gives subcontractors an option to provide Owners and Contractors Protective Liability Insurance (OCP) instead of an “additional insured” endorsement.

“We firmly believe that we need to work with subcontractors to help them meet insurance requirements and to work safely,” said Bob Lessman, Pepper vice president and general counsel. “We work extremely hard with our subcontractors to keep experience modifiers low. Our performance depends on our subcontractors, so we need to treat subcontractors fairly and have a good relationship with them.”

ASA also says Pepper’s subcontract comes close to meeting ASA standards for model construction documents. Policies adopted recently by ASA advocate for terms in model construction documents that “encourage or mandate” the use of OCP, that prohibit “additional insured,” and that limit a subcontractor’s indemnity obligations “to the extent of bodily injury and property damage losses caused by the negligent acts of the subcontractor.”

Fitting those terms, Pepper’s form allows the subcontractor to use an OCP policy when additional insured coverage is unavailable, and it limits the subcontractor’s obligation to provide indemnity losses “to the extent caused by negligent acts or omissions of the subcontractor.”

South Carolina Supreme Court Rules Architect is Liable to Sub for Lack of Bond
A South Carolina Supreme Court ruling decided an unpaid subcontractor can sue the project architect for the negligent release of progress payments and retainage to a general contractor that has failed to secure a payment bond.

In the case Cullum Mechanical Construction. v. South Carolina Baptist Hospital, the Supreme Court reversed a decision by the South Carolina Court of Appeals, ruling that Cullum could sue the architect on the theory that “the architect owed a duty to Cullum to use reasonable care in the administration of general contractor provisions that were designed to ensure payment to the subcontractor.” 

The case arose when Cullum Mechanical finished its work on a new medical center for South Carolina Baptist Hospital, still due $127,000 by general contractor Miller-Sharpe Inc. Cullum requested the general contractor provide the name of the payment surety, but got no response. Several other subs complained directly to the architect about the nonpayment issues. The architect then asked the general contractor for a copy of the payment bond, but was instead given a copy of a “General Agreement of Indemnity.” According to the American Subcontractors Association, at that point the architect had information that subs were not being paid, and that no payment bond had been provided as required by the general contractor, yet the architect continued to certify payments, and reduced the amount of retainage from 10 percent to 5 percent. 

The trial court and the Court of Appeals both said the architect had no obligation to protect the subs, however the Supreme Court, which did agree that architects generally do not have to assure a sub’s payment, said “special conditions in these contract documents may have given rise to a special relationship with subcontractors, and therefore a duty of care.”

CGCA Begins Discount Program
The Color-ado Glazing Contractors Association (CGCA) has announced an agreement with Western Glass Supply (WGS) to offer member companies a 4-percent discount on purchases.

According to the CGCA, customers will be quoted a price per their customer numbers, and will receive any existing special-volume discounts, sales prices, quotes, etc. The prompt-payment discount is also included.

Survey Shows Slight Increase in Project Managers’ Salaries During Past Year
An increase in demand for project managers in the construction industry has driven up the price for their services, reported the 2001 edition of the ninth annual Association for Project Managers (APM) Project Management Survey (see chart for salaries). The 2001 study included 35 member firms.

In addition to reporting the salary increase, the survey also noted several other details of the average project manager. For example, the survey found that the level of experience for them has risen, with the typical project manager having 13.5 years of professional experience, up from 13 years in 2000. The median age is 41.5 years, and the range is 30 to 55. The number of projects a project manager can handle varies based on project size, location, experience and staff capability. According to the survey, project managers handled a median of 4.5 projects at a time.

The survey also found that with strong demand for project managers, high turnover is common. Of the firms responding to the survey, 90.5 percent reported some loss “in the ranks” in the past year. The median turnover was two per firm, with an average of almost four. 

Project Manager’s Salaries
Year         Mean ($)         Median ($)
2001         67,667             65,000
2000         62,471             65,000
1999         54,889             50,000
1998         54,784             53,000
1997         53,128             50,000
1996         54,018             50,000


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