If you encounter the phrase “your work”, you should check whether it refers to both work in progress and completed tasks, or only to ongoing tasks. The term “your work” generally refers to both, but there may be an exclusion language in the confirmation that excludes completed transactions. Read these recommendations carefully to find out! There is a lot of discussion around this topic, how long a subcontractor is responsible for a project. Many States have intervened to define the required duration of the operations carried out. However, other policyholders should be aware of policy cancellation dates. LMA policies are not cheap and contractors can terminate them after completing an order, especially third parties that offer more seasonal services. If the state does not specify a coverage period, define the requirement in the subcontractor`s agreement. If the third party does not retain coverage for the required period, the general contractor has the option of bringing an action for infringement. Currently, there is no sign that the pendulum will swing in the direction of the insurance industry – at least as far as California law is concerned. The most reasonable prediction would be that other jurisdictions will continue to adopt Pulte`s analytical approach, which is based on the finding that the language of ongoing activities is ambiguous in the additional assured notes. While these distinctions and embellishments are not negligible, it is not the most important issue that affects the construction industry.
As this article will show, the interpretation of the scope of ongoing operations reports has less to do with the term “ongoing operations” than with the language surrounding it. It is important to know that supplemental insured coverage includes the obligation of a subcontractor`s insurer to defend its supplemental insured against the responsibilities related to the subcontractor`s work. The court expressly qualified its position by stating: “We do not decide whether an ongoing operating confirmation such as that used in this case insures the additional insured only for damages that occurred before the end of the ongoing operation of the insured`s subcontractors.” Instead, the court emphasized that it was simply rejecting Lexington`s argument that “liability,” as the term is used in endorsement, cannot exist until owners purchase their properties. The court deliberately refrained from declaring the death of completed operations excluded. Ongoing operation refers to work considered to be in progress. Standard CGL policies apply only to the “day-to-day activities” of a named insured who insures themselves and their additional insured for property damage and injury while actively working on a project. It goes without saying that the obligation of defense goes beyond the obligation of indemnification and extends to any claim or action that may be covered. This means that the crucial question with regard to supplementary insurance coverage is whether the allegations or evidence submitted to the subcontractor`s insurer are sufficient to prove that property damage or bodily injury occurred during the subcontractor`s ongoing operations. If there are claims or supporting evidence, the insurer is likely required to provide or participate in the defence of the promoter or general contractor based on the possibility of additional insured coverage. While the insurance industry has conceived the concept of ongoing operations as a limitation on the scope of additional insured coverage, the legal approach and interpretation has evolved in recent years. As a result, the courts have adopted an analytical approach that has extended the scope of an insurer`s obligation to other insurers. In April 2018, electric car company Tesla, Inc.
(TSLA) announced that it would move to continuous operation of its Model 3 to meet an increased production target of 6,000 cars per week. Founder and CEO Elon Musk said the company`s previous goal of 5,000 cars leaves no room for error throughout Tesla`s manufacturing process and supply chain. Continuing operations are a company`s main source of revenue generated by its main or main activities. For example, the main activity of an automotive company is to manufacture and sell cars. The result of continuing operations consists only of that activity. While there is strong evidence that the new or revised wording explicitly excludes losses that occur after the named insured`s operations have ended, the trend is that other insured benefits may exist. What is an ongoing operation? Very Good Building and Development Company hires energy electricians for electrical work on a construction project. Energy Electricians follows the contractual requirements of Very Good and includes the general contractor as an additional insured in its policy. The subcontractor then completes the contract within two weeks and moves on to a new project for another contractor. Two months later, a fire broke out in Very Good`s new building, causing $75,000 in damage.
Inspectors determined that the fire was started due to faulty wiring by electrical electricians. Very Good takes legal action against Energy`s policy, only to find that it includes the standard “operations in progress” clause, and the insurance company denies the claim. Very Good Building must claim damages against its own policy or pay the costs directly. This trend can be traced back to Valley Ins. Co. v. Wellington Cheswick, LLC, No. 05–1886, 2006 WL 3030282, at *5 (W.D.Wash.2006), which was mentioned in an unpublished Ninth Circle decision in Tri-Star Theme Builders, Inc. v. OneBeacon Ins.
Co., 426 F. App`x 506 (9th Cir. 2011). These decisions shifted the analytical approach from dependence on historical development of approval language to evaluation of simple language. The decisions stressed that if the insurer intended to exclude completed transactions from the scope of supplementary insurance coverage, there had to be an explicit statement to that effect. The inclusion of the term “ongoing operations” in the additional ISO confirmation forms should serve to limit coverage to the contractor`s work that has not yet been completed. In fact, this was recognized at least as early as 2000 in Pardee Construction Co. v. Insurance Co.
of the West 77 Cal.App.4th 1340 (2000). The court concluded in that case that the language of the daily operations of the ISO supplementary insured should limit the scope of the additional insured obligation. Given that the amendment at issue in Pardee did not contain any language for day-to-day operations, the Court concluded that “the failure of insurers to use available language that expressly excludes coverage for completed transactions implies a clear intention not to do so.” Conceptually, this means that the additional insurance obligation covers the risk of material damage and/or bodily injury caused by the presence of the contractor on the site and the activity of promoting the project. But little by little, the courts have worked out nuances on what constitutes an ongoing operation. For example, it was found that a contractor`s ongoing responsibility for post-work monitoring may be part of routine operations. It was also noted that incomplete work can be an ongoing process. In fact, courts have held that even work performed by a contractor improperly or not in accordance with the express or implied terms of the contract can be interpreted as a continuous transaction. The most common confirmation of additional insurance for contractors is GC 20 10, which usually only concerns ongoing operations. CG 20 37 insures the supplementary insured only for completed operations. Nevertheless, one thing is certain from the perspective of all parties involved: clarity about the scope of ongoing operational coverage leads to more effective dispute resolution.
Insurers rightly believe that the courts repeatedly prohibited how to limit additional insurance coverage and then moved the goal posts. If the law interpreting the scope of ongoing transactions were clearer and more consistent, there would be fewer disputes over additional insured obligations, which would lead to greater market efficiency and, theoretically, greater construction at lower cost. But what do these terms “ongoing and completed operations” mean? Getting back to basics, the dictionary defines “in progress” as “work in progress” and “in progress”. Any upstream entity that hires subcontractors should review the requirements of its contract and ensure that it indicates “operations completed”. Not sure if your insurance needs protect you? Talk to the myCOI team. We have the certificate of insurance tracking technology and industry professionals to protect you.
