Volume 47, Issue 1 - January 2012


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," Patterson says.

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 projects."

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.
-Sahely Mukerji

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), West (45.6);

  • Sector index breakdown: multi-family residential (55.8), commercial/industrial (53.9), institutional (48.9), mixed practice
    (41.6); and

  • 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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