ARE Daily | PcM #22 — Insurance: Owner's & Contractor's Coverage

Quick Recall (from #21 — Insurance: Architect's Coverage)

What are the four types of insurance AIA Document B101 requires architects to maintain?

Professional liability (errors and omissions), general liability, automobile liability, and workers' compensation. If an owner requires higher coverage limits than the architect normally carries, the owner pays the additional premium cost.

Today's Content

Today wraps up the insurance section with coverage requirements for the other two parties on every project — the owner and the contractor. The exam frequently tests which party is responsible for which type of insurance, and the specific language around what the owner's property policy must cover.

Owner's Insurance

AIA Document A201 (General Conditions) requires the owner to carry two primary types of insurance.

Liability insurance: standard protection against claims arising from the project.

Property insurance: required at the full insurable value of the work — the complete replacement cost, not a partial amount. This policy must be the "all-risk" type, not the "specified peril" type. The distinction matters: all-risk insurance covers all hazards except those specifically excluded by the policy. Specified peril insurance only covers hazards explicitly listed — a much narrower protection. If the all-risk policy has deductibles, the owner pays any costs not covered by those deductibles.

All-risk property insurance also covers work stored off-site and portions of the work in transit — not just what's physically at the construction site at any given moment.

The owner is also required by A201 to carry boiler and machinery insurance.

Contractor's Insurance

The General Conditions require contractors to carry coverage protecting against a specific list of claim types:

• Workers' compensation
• Bodily injury, occupational sickness, or death of employees
• Bodily injury or death to people other than employees
• Personal injury (slander, libel, false arrest, similar actions)
• Property damage (other than to the work itself), including loss of use
• Motor vehicle liability
• Completed operations coverage — bodily injury or property damage arising after the job is complete and the contractor has left the site
• Contractual liability insurance

The completed operations coverage is worth noting specifically: the contractor's liability doesn't end when they walk off the job. If something goes wrong after completion that can be traced to the contractor's work, they're still on the hook — and their insurance must cover it.

The big picture: all three parties — architect, owner, contractor — carry insurance, and the coverages are designed to work together. Gaps in one party's coverage can create exposure for the others, which is why the General Conditions coordinate these requirements carefully and why architects should verify contractor insurance certificates before work begins.

Today's Questions

1. What does AIA Document A201 require the owner's property insurance to cover, and what type of policy is required?
2. What is the difference between all-risk and specified peril insurance? Which does A201 require?
3. A contractor completes a project and leaves the site. Six months later, a defect in their work causes property damage. Are they covered? What type of coverage applies?
4. Why does the owner's property insurance need to cover work stored off-site and in transit?

Next up: Comprehensive Review I — Business Organization & Ethics

Answers from #21 — Insurance: Architect's Coverage

1. Four types required by B101? → Professional liability, general liability, automobile liability, workers' compensation.
2. Two things professional liability does NOT cover? → Intentional wrongful acts and claims for cost estimates being exceeded (also: claims arising from express warranties). Professional liability covers negligence — not deliberate misconduct or contractual guarantees.
3. Employee in accident in personal vehicle on company business — what covers the firm? → Automobile insurance — specifically coverage for employees using personal vehicles on company business. The firm's auto policy can include this protection.
4. Professional liability vs. general liability — difference? → Professional liability covers claims arising from the architect's professional services — errors, omissions, negligence in design and CA. General liability covers property damage, bodily injury, and personal injury caused by the architect or those working under them — broader, non-professional-specific claims.

Additional Quick Recalls

From #06 — AIA Code of Ethics What are the AIA's four levels of sanctions from least to most severe?

(1) Non-public admonishment (private), (2) censure (violation published in AIA periodical), (3) suspension of membership, (4) termination of membership. The AIA cannot revoke a license — that is a state board function.

From #18 — Liability & Negligence What is the statute of repose, and how does it differ from the statute of limitations?

Both set time limits on claims. The statute of limitations typically starts at substantial completion. The statute of repose starts at discovery of the problem but includes an absolute outer cutoff from substantial completion — so even if discovered late, the claim must still be filed before the outer limit. Used in some states, not all.

From #20 — Copyright What is a derivative work in the context of architectural copyright, and why does it matter?

A derivative work is a building that is substantially similar to a copyrighted original — including modifications to the original building. The Architectural Works Copyright Protection Act prohibits derivative works without authorization from the copyright holder. This means a building owner can't substantially modify a building based on the architect's copyrighted design without the architect's permission.