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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48 AL CONSTRUCTION NEWS JUL–SEP 2018 of the joint venture. There are (2) two recommended changes to the policy which are; (a) attachment of the Joint venture as Insured Endorsement (WC 00 03 05). This endorsement limits coverage to the employees of the joint venture while specifically excluding coverage for employees of the member companies. (b) In addition, the joint venture's workers compensation policy should include an "alternate employer endorsement" naming the partners in order to make sure that any injury to a joint venture employee is insured under the joint venture's workers compensation policy alone and not the individual partners' policies. It should be noted that while this method is usually the most expensive from an insurance cost perspective, it does provide dedicated limits of coverage, increased protection for members, and reduced carrier disputes involving questions of coverage applicability or claims. Here are a couple of final "other" insurance considerations; ** The principle of "severability" or "separation of insureds" should exist in all insurance policies. ** Joint venture participants should make sure their insurance agent secures an "endorsement", providing that any clause prohibiting coverage for joint ventures and partnerships not specifically named to the policy will not be applied to bar coverage for the company's liability that: (a) Arises form a joint venture or partnership that was in the process of being formalized by a written agreement; or (b) Is imposed because a court deemed the company's conduct to create a joint venture or partnership by operation of law. ** When the joint venture secures its own workers compensation policy, an "EMR" (experience mod rating) factor is created. New entities usually get an EMR of 1.00 but that's not always the case with joint ventures. Most states will allow for the creation of a "blended" EMR based on the rate of both partners. The joint venture should secure it's own auto liability policy and confirm coverage for hired, non-owned and borrowed vehicles is included. ** An additional issue for self-performing joint ventures is the need for rented equipment. Typically the joint venture will rent vehicles or equipment from the individual partners. To properly transfer this risk, a formal rental agreement should exist between each partner and the joint venture. ** An endorsement that expressly recognizes that all insurance policies maintained by the parties to the joint venture or partnerships are excess to the policies procured and maintained by the joint venture or partnership itself. ** Lastly, one of the exposures that often is forgotten with a joint venture is the liability for injuries that occur after the work is complete. Most states have a statute of repose that defines how long a contractor retains liability for a project. Three ways to insure this risk are (a) purchase completed operations coverage for the full statute period for the applicable state, (b) purchase "discontinued operations" at the completion of the project or (c) maintain an active general liability policy for the duration of the statute. In conclusion, the formation of Joint Ventures and Partnerships are growing at a significant pace. These newly created arrangements represent a variety or risk and reward propositions. Great care must be given to their formation and operation. Based on the complexity involved in this process, we believe there are (2) two foundational rules to operate by… ** PPPP = Proper Planning Prevents Poor Performance ** It it's not documented… didn't happen. RETREAT. REGROUP. RELAX. Reload. SELWOOD FARM 706 Selwood Road Alpi ne, AL 35014 800.522.0403

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