An Administrator's Guide to California Private School Law

Chapter 17 – Construction

 Workers’ Compensation Insurance : Workers’ compensation covers injuries sustained by the architect’s, engineer’s, or construction manager’s workers while performing their job duties. The professional must provide appropriate coverage as required by the state. The school does not need to be named as an additional insured on this policy, but should ensure the professional maintains this coverage to limit its employees from seeking recovery from the school for injuries.

B. I NSURANCE O F C ONTRACTOR A ND S UBCONTRACTORS The school should insure against the risks and potential liabilities inherent in a construction project relating to the contractor and its subcontractors. Generally, the school should require the following insurance policies from contractors and subcontractors throughout the project:

 Commercial General Liability : As discussed above, a CGL policy generally provides for the indemnity and defense of the insured (here contractor or subcontractor) and additional insured (school and its board, directors, officers, trustees, employees, and agents) against a third party’s claims for bodily injury or property damage. The policy should name the school and its board, trustees, directors, officers, employees, and agents as additional insureds under this policy.  Fire Insurance : Fire insurance policies are standard throughout the United States. They indemnify the insured for damage to or loss of property due to fire and other specified perils, regardless of fault. Fire insurance may be issued as a separate policy or as part of another policy, for example as part of the builder’s risk policy (discussed below).

The fire insurance policy should provide coverage in an amount sufficient to reconstruct the project in the event of destruction or damages to the site facilities. Generally, this means requiring the policy to provide coverage for the full replacement value of the work, without reduction for depreciation. A fire insurance policy that provides for replacement at the current market value may not cover all expenses necessary to restore or reconstruct the project. The fire insurance policy should also provide for removal and demolition costs. Fire insurance generally does not cover new construction. The school should therefore require its contractor to also procure a builder’s risk insurance policy, discussed below. A fire insurance policy may not cover damage to an existing building because of renovation or new construction work, so schools should seek prior approval from the insurance company issuing the policy for this coverage. The contractor may take the position that the builder’s risk policy covers risk of fire and that it does not need a separate fire insurance policy. There are at least two problems with this position. First, a fire insurance policy provides coverage for more perils than just the peril of fire. A builder’s risk policy, depending on its limitations and exclusions, may not provide the school with the same protection as a separate fire insurance policy. Second, a builder’s risk policy may terminate coverage before a project is completed and accepted by the school. For instance, some

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