Masonry Magazine February 1961 Page. 30
Hold-Harmless
(Continued from page 26) matize and make them even more frequent.
It is customary now for the property owner to require a Hold-Harmless Agreement from the contractor, who in turn requires the same of each prime or sub-contractor involved. Each pays a premium to his insurance carrier for much the same thing. Of course, to a large extent losses determine the premium you pay, and it is not at all unusual to pay for the same claim twice. For example, in St. Paul-Mercury Indemnity Company v. Kapp, the contractor was working under a contract including a typically broad Hold-Harmless Clause. In the course of work, an employee of the contractor was accidentally killed because of the owner's negligence. The deceased's dependents collected the Workmen's Compensation benefits from his employer, but also filed suit against the owner, whose Liability Insurance carrier defended the suit and settled with the estate. But then, they secured a judgment against the contractor for the full amount because of the agreement to hold the owner harmless. The same contractor, therefore, had to pay a substantial third party judgment to his own employee as well as pay Workmen's Compensation benefits as a result of this agreement to protect the owner without regard to negligence.
It is, therefore, extremely important for any contractor to carefully review job specifications in advance to determine just how much of someone else's liability is being assumed. I should think this is one area where the insurance agent can be of considerable assistance. Having been alerted to some of the dangers in readily agreeing to take on responsibilities which by law belong to someone else, a good many contractors are now having some success in negotiating modifications of these clauses Insurance companies generally group them into one of three classes:
(1) Limited forms, which may hold the owner or indemnitee harmless against claims due to the contractor's operations or negligence,
(2) Intermediate forms, which add indemnification where both parties may be negligent and legally liable for a loss, and
(3) Broad forms, which also indemnify the owner or indemnitee even where he is solely responsible for a loss and the contractor is in no way negligent.
It is important to know that Contractual Liability Coverage is usually automatic only to a very limited degree, even in the present broad Comprehensive Liability Policy forms. It is often necessary, therefore, to endorse specific contracts on to the policy in consideration of an additional premium before coverage applies, Certain standard forms, for instance, include only Railroad Sidetrack Agreements, leases and Municipal Ordinance Agreements among those written contracts covered automatically. An uninsured agreement is, of course, only as good as the financial strength of the indemnitor, and Certificates of Insurance too often omit any reference to inclusion or exclusion of Contractual Coverage.
Some insurance carriers provide Blanket Contractual Liability Insurance protection which automatically insures all written agreements, while others may exclude only the very broad forms. Some call for submission of contracts within a stipulated time after execution to keep a check upon both the liability assumed and the premium developed to cover it.
However, it is possibly most essential to bear in mind that, even where coverage does exist, either on a blanket basis or by specific endorsement, it is still another's liability which is assumed. If there should be a loss, it must be charged against the contractor's claim experience record.
Now, if we can assume that a property owner contracting for a job has in force a Liability Insurance Policy covering negligent acts of his own employees, in addition to the usual Workmen's Compensation Coverage, there is no real need for a broad Hold-Harmless Agreement. The owner is usually fully protected without Hold-Harmless where:
(1) He has adequate insurance to cover his own employees for Workmen's Compensation and General Liability.
(2) His general contractors and all sub-contractors are adequately insured.
(3) He has Owners' Protective Liability Coverage, either as part of his Comprehensive General Policy or in a separate contract in his name and furnished by the contractor. This protects the owner against liability arising from operations of independent contractors, including that arising from the owner's own supervision.
The catch is that the owner must also be willing to recognize and accept responsibility for his own properly insured legal liability. Many instead specify that the contractor must assume that responsibility, thereby passing the buck and charging any claims against the contractor's loss record rather than the owner's. So, long after the job is completed, the contractor can be penalized by a higher premium based upon that loss record. The effect is compounded when the contractor logically requires the same agreement from any sub-contractors involved; indeed, the specifia-tions often insist that be done. Each such agreement involves a premium charge per $100 contract cost, still for an exposure adequately insured before the eyele began.
Specifically, when applied to a property owner, Protective Liability affords contingent coverage for injury or damage caused by a general contractor or any of his sub-contractors. Even assuming that the contractor involved has adequate insurance coverage to take care of the loss, defense
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MASONRY FEBRUARY, 1961