An Administrator's Guide to California Private School Law

Chapter 17 – Construction

school should make sure that the name of the project is listed correctly, and it is signed by an authorized representative, or that there is proof that the endorsement has been made a part of the CGL, Automobile Liability, or other policy. The school should also ensure the additional insured endorsement does not just state the school’s name, but should specifically list the school, and its board, directors, officers, trustees, employees, and agents.  Waiver of Subrogation . The Contract documents should reflect that the contractor’s insurance company must agree to a waiver of subrogation against the school and the additional insureds. This prevents the insurance company from pursuing a claim against the school in an attempt to recover amounts it paid to the contractor or a third party in resolution of a claim.  Contractor’s Insurance is Primary . The Contract documents should also reflect that the contractor’s insurance will be primary and used before any insurance which is held by the school.

Section 7 P ERFORMANCE A ND P AYMENT B ONDS Performance and payment bonds are typically issued by a licensed surety. Although insurance companies frequently issue surety bonds, they are not a type of insurance. In an insurance transaction, there are only two parties, the insured party or parties, and the insurance company. The insurer calculates the risk of losses and a premium is determined, based upon the likelihood of the risks and the probable losses resulting from those risks. The insurer anticipates losses and, when they occur, the insured party is not expected to reimburse the insurance company for the losses. In a surety bond transaction, referred to as a suretyship, there are three parties: (1) the principal (contractor) who furnishes the bond; (2) the obligee (school) for whom the bond is provided; and (3) the surety who undertakes to complete the project or pay money in the event the principal fails in its contractual obligations to the obligee. The surety is like a guarantor of a debt. In suretyship, the surety does not calculate the risk of loss into the premium. When a surety makes payment, it expects the principal to repay the surety’s losses. In fact, prior to issuing surety bonds, virtually all sureties will require the principal and its major owners to execute an indemnity agreement. A. P ERFORMANCE B ONDS A performance bond provides financial assurance that the contractor or its surety will complete the contract according to its terms, including within the agreed-upon time and price. Upon default, the bond provisions typically require that the surety take over and complete the project, or that the surety solicit bids from other contractors. If the school does not require a

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