Hello there Wendy --
The language that you have asked to be added (or you have added) to Section 3 is actually very standard in the construction industry and it is language that I would insist upon myself if I were handling the contract. Your insurance will not pay for any claims made due to the owner's misconduct or gross negligence (in fact, no insurance company will pay any claim of any insured if another party committed willful misconduct or gross negligence -- it simply does not happen). My husband is also a contractor and I am very familiar with smaller construction / remodeling contracts of this nature. It seems to me that the owner simply does not understand that whether this language is in the contract or not, if the owner is found to be grossly negligent or commits an act of willful misconduct, your insurance company will simply refuse to pay the claim and the insurer is legally within their rights to refuse to pay the claim -- leaving the plaintiff party or parties bringing suit to file a lawsuit against the owner directly. If the owner is going to be stubborn about this language due to failure to understand it, and refuses to let you add that into the paragraph, the practical effect of it is as follows (a) as I said, the insurer will not pay the claim anyway - that is a standard exclusion in your policy and the policies of any subcontractors and there is no way you can purchase additional coverage to cover these items -- it does not exist - so a lawsuit CAN be filed against the owner, (b) such a liability scenario is extremely rare - owners do not generally do anything at the property that would amount to anything more than standard negligence - it must be a situation such as the owner committing arson and setting his own property on fire before it gets to the "willful misconduct" phase and be excluded from coverage under the contractor policy -- so you may consider the benefits/futility of arguing with the homeowner when the homeowner either will deliberately or ignorantly continue to not understand the situation and the likelihood of anything like this happening is very, very rare.
My suggestion here is to simply try to explain to the owner that whether the language is in section 3 or not, there is not a contractors insurance company in business that will cover the gross negligence or willful misconduct of the owner of the property and by adding the language it is standard to simply put the owner on notice that such coverage does not exist in the real world. If that does not work, then you should decide whether you want to move forward without the language, given the fact that it really doesn't matter because the insurer will not offer coverage under those circumstances anyway.
And, you have my sympathies. I have seen this many times with my husband - every person who hires him wants him to throw additional work in for free (he calls it the "while you are here" attitude -- "while you are here, can you do this or that for the same price? It shouldn't cost anymore money because you are here anyway and you are opening that wall anyway" .............. I could go on forever, but I won't).
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Hello again Wendy -
I note that you viewed the answer about 20 minutes ago. Do you have any further questions for me on this issue? If not, can you please press a positive rating underneath this ANSWER box so I will be paid for my time? I truly am paid nothing unless you press the 3rd, 4th or 5th smile face below (we do not receive paychecks - we are paid per question accepted with a positive rating). THANK YOU VERY MUCH
Thank you for the answer and explanation.
I immediately emailed my insurance broker to see if the same applies to our policy - not sure if it makes any difference but the client is a business and the work to be done is commercial construction at the business location. Is it the same commercial & residential?
Thank you, Wendy
Hello Wendy -
There is no difference between commercial and residential work when it comes to this particular clause. In fact, I first learned to request the same language in contracts when I worked on larger commercial projects for the firms I worked for in Boston and NYC. Then when I opened my own practice I notice that it is pretty standard in smaller projects as well. I would not call this a deal killer if the owner refuses to put it in the contract because, as I said, a court will hold the owner responsible for gross negligence or willful misconduct (that is the legal standard) and the insurers know this so the insurers simply refuse to pay the claim if that is what it is based upon -- and, as I said -- it is extremely rare that something happens due to the gross negligence or willful misconduct of any party to the contract, including the owner.
Thank you for coming out and saying you don't think it should be a deal killer. I appreciate you stating that clearly as well as the law on gross negligence.
You have been great. Thank you, Wendy
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