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2
WHO WE ARE
Kevin A. Delorey, Partner– Quarles & Brady, LLP
Charlie Kilander, CPCU, ARM– Risk Management Account Specialist– Integrated Risk Solutions, Inc.
4
AGENDA
Contract Form Overview
Contract Document Issues
Indemnification Clauses
Best Practices for Reviewing and Negotiating Contracts
Questions!
5
SOMETHING TO THINK ABOUT
How many of you enter into contracts in the course of your business?
How many of you review each and every line, and each and every item included in every contract?
How many of you know your assumed exposure?
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CONTRACT DOCUMENT ISSUES
Sign a Complete Document
Never sign an incomplete contract
Fill in all blanks
Attach all exhibits and schedules
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CONTRACT DOCUMENT ISSUES
Do not sign personally Always sign in a representative capacity
Failure to do so can result in personal liability
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CONTRACT DOCUMENT ISSUES
Standard of CareIs “average” good enough?
What are owner’s expectations
Will matter if claims arise
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CONTRACT DOCUMENT ISSUES
Payment Procedures
Establish ground rules at the outset Follow the process Involve a third party (title company; construction monitor,
etc.) Lien waivers are a must (local law) Retainage (local law)
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CONTRACT DOCUMENT ISSUES
Insurance Coverage – applicable? Amounts Insureds / Additional Insureds Bonds
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CONTRACT DOCUMENT ISSUES
Change ManagementWhen is a schedule/cost change justifiedHow is it documentedTime periods for claimsContinued performance during dispute
14
CONTRACT DOCUMENT ISSUES
Substantial CompletionHow definedWho determinesWhat if delivery is late (LD’s?)Punch list process
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CONTRACT DOCUMENT ISSUES
Assignment Owner needs this right for
– Future purchaser– Project lender
18
HOLD HARMLESS VS. INDEMNIFY VS. DEFEND Hold Harmless
– To protect another against the risk of loss as well as actual loss– Tends to be interpreted as “pay as expenses are incurred”
Indemnify– Reimburse for any damage
• Narrower than HH – no protection against the RISK of loss, just actual loss
– Tends to be interpreted as “payment at final disposition”
Defend– Indemnitor has to supply defense attorney and actively be
involved in the defense of the matter
The above two amount to passive involvement (recoupment) matters, defend means active participation
19
HOLD HARMLESS VS. INDEMNIFY VS. DEFEND
Does “Indemnify and Hold Harmless” include Defense?– NO!
If one party wants the other to defend them against claims and the costs associated with it – this needs to be expressly stated
Otherwise the provision only requires a recoupment or reimbursement of the costs and damages after the initial party has expended their own time and money
20
INDEMNIFICATION AGREEMENTS
Broad Form Agreement– All of the risk of loss described in the contract is transferred
to the lower tier regardless of who is at fault for the loss
Intermediate Form Agreement– All of the risk of loss described in the contract is transferred
to the lower tier except when the loss is entirely the fault of the higher tier
Limited Form Agreement– The lower tier is obligated to reimburse the higher tier for
its share of the liability of loss described in the contract.
21
INDEMNIFICATION AGREEMENTS
Example #1
To the fullest extent permitted by law, the Sub-contractor shall defend, indemnify, and hold harmless the Contractor, its officers, directors, employees, and agents from and against all actual or alleged claims (including but not limited to property damage, bodily injury, sickness, or disease), damages, losses, and expenses (including but not limited to attorney, court, mediation, or arbitration fees) arising out of, relating to, or connected in any way to the performance of work described in this contract, whether or not caused in part by the Contractor.
22
INDEMNIFICATION AGREEMENTS
Example #2
To the fullest extent permitted by law, the Sub-contractor shall defend, indemnify, and hold harmless the Contractor, its officers, directors, employees, and agents from and against all actual or alleged claims (including but not limited to property damage, bodily injury, sickness, or disease), damages, losses, and expenses (including but not limited to attorney, court, mediation, or arbitration fees) arising out of, relating to, or connected in any way to the performance of work described in this contract, whether or not caused in part by the Contractor, but only to the extent caused by the acts, omissions, or liability of the Sub-contractor or others providing services under this contract.
23
IMPACT TO INSURANCE
Know what you are signing
Make sure your insurance policies cover what you are agreeing to
Certificate Issuance
Blanket Waivers vs. Individual Waivers– Blanket – where agreed to in an insurance contract– Individual – needs to be endorsed to the policy
Primary vs. Excess– Does contract specify the party to be primary– Does the contract specify insurance forms needed (CG 2010)
Additional Insured Status– Your policy will stand in the shoes of the additional insured
24
BEST PRACTICES
Internal Review Process– Who is reviewing the contracts?– Who is authorized to sign contracts within your company?– Are insurance requirements/coverages being reviewed?
External Review Process– Attorney– Insurance Agent– Insurance Carrier