02 Sep Yet Another Crazy Contract Requirement
Our clients are constantly faced with contract requirements that are difficult or impossible to comply with. An agent has a client who has a prospective job that requires them to maintain insurance up to the state’s 10-year statute of repose. I have seen this type of requirement before, which puts the agency in an impossible situation. How would you comply with this request?
The Statute of Repose is a legal concept that plays an important role in construction law across the United States. It limits the time frame for legal action against construction professionals or parties for construction defects arising from a construction project. While statutes of limitations focus on the time to take legal action after an injury or damage occurs, the statute of repose addresses the period following substantial completion of a construction project, regardless of when the damage is discovered.
Each state has its own Statute of Repose law, which varies significantly. Some states have a fixed time limit, while others may have exceptions based on the discovery of the defect or the type of property involved. All parties involved in a construction project must be aware of these laws.
The ISO CGL coverage form requires that the policy be in force at the time of an occurrence involving bodily injury or property damage for the products-completed operations coverage to apply. The agent asks, “What if the business closes in 6 years? Is there an ISO form that would grant coverage through the applicable statute of repose without needing to maintain an active insurance policy at the time of an occurrence? Is there an extended products completed-operations form?”
While I have found that almost anything is possible in our business, I have never seen such a form, at least in the standard market. The insured would need to maintain coverage and continue to pay premiums for the next 10 years. It might be possible to arrange extended P/CO coverage in the E&S market. Still, it would have to be a specific policy that can be purchased now and remain in effect to cover occurrences within the next 10 years. It would probably need to be limited to this specific insured for liability arising from this one project. The premium would have to be paid at the policy’s inception to cover the possibility that the insured might not be in business for that whole period. If the insured ceases operations before the end of the 10 years, a “discontinued products-completed operations” form might be available.
The best advice would be to speak with your insured and have them ask if the 10-year requirement can be modified. If not, the contract conditions require that insurance be maintained per the contract requirements. If you can obtain a premium estimate, provide that information and allow your contractor to decide.