BEC Attendees Learn About Risk Management and Contract Documents

Las Vegas is a town for risk-takers, where just like in construction, you can win it all-or lose it all. So perhaps Vegas was the appropriate venue for contract glaziers to attend the Glass Association of North America's BEC Conference earlier this week, where one of the hot discussion topics was risk management. In addition to risk management several of the conference's speakers talked about other contract-related issues for contract glaziers, including contract insurance.

Colette Nelson of the American Subcontractors Association (ASA) spoke to attendees about new versions of the American Institute of Architects (AIA) AIA A201 -- General Conditions and A401 - Model Subcontract documents. Both will be available later this year. She said that contractors and subcontractors have looked to AIA as having the most accurate documents for many years. ASA has concerns, though, over the new versions.

"Immediately, for your own protection, if you're using any documents that reference AIA documents you need to be very sure that it specifically references the 1997 AIA documents," Nelson said. "The new set [may not have] have the provisions that protect you now."

A group called the Construction Industry Contracts Coalition (CICC) was formed to represent the interests of the construction industry in developing and publishing consensus contract documents based on areas such as best practices and proper risk allocation.

"The participants truly believe that this will stabilize industry transactions," said Nelson. "It gives an alternative to contractors, designers, etc. who are no longer comfortable with the AIA documents." She explained that the CICC believes the new documents [on which it is working] will decrease individual transaction costs. "When you reach a stalemate you have something in the industry to point to on which everyone agrees."

Nelson says the CICC's documents will include conditions that go beyond AIA A 201, including insurance, protection against back-loading and limitations on warranties, etc.

In addition, ASA will be modifying its subcontract addendums to reflect the new contract documents.

"The new ASA bid proposal will urge you to condition your bids on the new construction industry's subcontract form," she said. "We are also issuing a broad, comprehensive education process to enter this new era of construction documents through webinars, teleconferences and regional conferences."

She closed by encouraging subcontractors to condition their bids. "If you don't, you have nothing to go back on."

Richard Usher, from Hill & Usher LLC, an insurance and surety agency, also spoke during the conference. His focus was on contractor insurance, indemnity and risk transfer. He explained that when people are jointly responsible for something in tort, they are jointly or proportionately libel; most have the notion that liability should be in proportion to the contribution of their liability.

"In absence of tort liability, we put together contracts and decide how we are going to allocate risk," he said. "I like to think that in construction, contract control and liability should be connected. ASA is on a mission to apply more comparative negligence standards across the states-we call it the Pottery Barn explanation; if you broke it you own it."

Usher talked about different indemnity provisions, beginning with broad form indemnity. "This essentially stands for the proposition that if I am an owner and I want to hire a sub, if something goes wrong, even if it's not my fault, I am not going to be responsible for it," he said. "That's a pretty tough situation for trade contractors to find themselves in-to take on the responsibilities of a much larger consequence of their work."

Intermediate is another form of indemnity. Usher said that it is intended for the purpose that so long as the entity asked to be indemnified, there does not need to be fault on the part of the subcontractor.

General indemnity, Usher explained, is a limited indemnity. "You can supplement the tort with a contract indemnity where you are only responsible to the extent of the party's fault or cost."
Usher also reviewed ASA's subcontract chart of anti-indemnity statutes by state. "You need to know when you work in one state or another that the laws may change," he said.
"You also need to know more about insurance [today] than you used to," Usher said. "We need to let legislators know that we will be 100-percent responsible for our own fault, but we will not be 100-percent responsible for those [issues] that are not our fault," he added. "We can be fully responsible for that which we do wrong. The builders want proportionate liability; I want to connect control and responsibility."