Alabama Construction News

JUL-SEP 2018

Alabama Construction News is the states only bimonthly magazine dedicated to the commercial construction industry.

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47 JUL–SEP 2018 AL CONSTRUCTION NEWS program for the JV. There are at least (3) three different way to insure JVs and partnerships as follows; Option 1: Each party insures their own risk under its existing insurance program. The JV is listed as an additional insured under each member's policies. This option is usually viable only when there is limited investment by the members; basically, the contribution is limited to "man power" and time. Use of this option requires several specific endorsements to both the commercial general liability (CGL) and workers compensation (WC) policies as follows; Commercial General Liability: CGL policies specifically exclude joint ventures, even if newly formed, not specifically listed as a named insured. Each member forming the JV must first specifically endorse the CGL naming the joint venture as an insured. Furthermore, to accomplish the second JV coverage goal (waiving subrogation), each member should attach the "Additional Insured- Designated Person or Organization (CG 20 26) to their CGL naming the other members of the JV as additional insureds. Workers Compensation: Because a properly created joint venture is essentially a separate legal entity, employees of any members working for or on behalf of the JV may be considered "borrowed servants" of the venture even though not its direct employees. If the JV has no employees of its own and is not required by the local jurisdiction to provide WC, each member would protect the joint venture by attaching the Alternate Employer Endorsement (WC 00 03 01 A) to its policy naming the joint venture as the alternate employer. This option would not be available if the joint venture is required by the jurisdiction in question to provide its own coverage as a direct "employer" rather than a "special" employer. Also, each member would attach a "Waiver of our Right to Recover from Others" endorsement (WC 00 03 13) in favor of the other members. Combining these endorsements ensures that the employee is compensated and none of the members are held liable for any injury they may have caused to another member's employee. Option 2: One party insures the JV or partnership in total including all parties' related risks. The specifics of this option are varied based on the agreement amongst the members. If the member responsible for providing coverage chooses to add the joint venture to its own policy, the same steps detailed in option 1 should be followed. However, if the member chooses to place separate coverage, the steps in option 3 will apply. Any combination of these may be used if this option is chosen. While this method is simpler and potentially less costly, the risks associated are; (a) limit inadequacy and (b) the impact of any losses on the named insured's program. Option 3: The JV or partnership procures its own insurance. **The JV usually sub-contracts with each partner for resources As a separate legal entity, this may be the most appropriate option of the three. Beyond being the cleanest choice for protecting the joint venture, there are other advantages for each of the members; • Loss experience is assigned to the JV rather than the members • Losses caused by the JV do not affect the limits of coverage available to the members; • Claims are handled by one carrier rather than multiple different carriers • The members of the JV can be named as additional insureds on the JV's policy rather than the reverse, and; • Only one call is necessary to request a certificate or to report a claim Another advantage of separate coverage is the breadth of protection that can be procured. The construction insurance marketplace commonly offers higher limits on a "per project" basis at extremely competitive costs. There are a few insurance considerations in this process; Commercial General Liability: The JV should name each member as an additional insured to protect them from vicarious liability for the actions of the JV. The same CG 20 26 discussed in option 1 should be used. Reciprocally, each member should name the other members as additional insureds to protect each for the actions of the other (accomplishing the second goal of JV insurance). The same CG 20 26 can be used, being very careful to specifically limit the additional insured status to apply only to liability arising out of the activities of the joint venture. The JV should probably not be added as an additional insured to the individual member's policies as this has the potential to severely hamper the application of the "other insurance" condition in the CGL. Workers Compensation: Direct employees of the joint venture can be insured on a separate workers compensation policy in the name JOINT VENTURES HAVE BECOME A POPULAR STRATEGY, ESPECIALLY ON LARGER, MORE COMPLEX PROJECTS. THE ACCESSIBLE COMBINATION OF EXPERIENCE, EXPERTISE, FINANCIAL CAPACITY AND AVAILABILITY OF COMPETENT PERSONNEL HAVE LED TO A SIGNIFICANT INCREASE IN THIS BUSINESS MODEL OVER THE PAST SEVERAL YEARS.

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