Changes Under the A201

The 1997 edition of A201 makes several changes to provisions for insurance and indemnification. Let's look at the most noticeable changes.

The most significant change in Article 11 is the option provided for the procurement of "Project Management Protective Liability Insurance." Now, the Owner has the option of requiring the Contractor to procure Project Management Protective Liability insurance through the Contractor's "usual sources." The insurance is to provide primary coverage for the vicarious liability of the Owner, Contractor, and Architect arising from "construction operations." The Project Management Protective Liability insurance is a product of CNA Insurance and is in the process of being filed with state insurance regulators. Its insuring clause is identical to the insuring clause of the Owners and Contractors Protective Liability Coverage Form.

The PMPL policy, however, has two significant differences. First, it sets forth specific conditions for defense of an "indemnitee" pursuant to the policy. Second, the definition of "insured" expressly includes an architect, engineer, or any organization acting on the insured's behalf in connection with the "general supervision" of the "named contractor's operations at the location designated in the declaration."

The apparent intent of this change is to permit substitution of PMPL for the indemnity obligations of the Contractor.When a PMPL policy is procured, the Owner, Contractor, and Architect waive all rights and claims against one another to the extent covered by PMPL insurance.

The revisions to the document prohibit the Owner from requiring the Contractor to name the Owner, Architect, or other persons as an additional insured on the Contractor's liability insurance procured for the work. This prohibition applies even if the option to procure Project Management Protective Liability insurance is not exercised.

Four important changes have been made to the Contractor's indemnity obligation:

• First, the Contractor's indemnity does not apply to claims or damages which are covered by a PMPL policy.
• Second, the indemnity does not apply to loss of use.
• Third, the indemnity has been significantly narrowed to include claims or damages "only to the extent caused by the negligent acts or omissions" of the Contractor. The language "in whole or in part" contained in the 1987 version of the document has been removed.
• Fourth, the language in Article 3.18.1 of the 1987 version, excluding the Contractor's indemnity of the liability of the Architect, has been stricken.

Under the 1987 edition of the A201, the indemnity obligation of the Contractor for patent infringement has been expanded to include copyright violations. The indemnity obligation does not apply where the violation is contained in the Contract Documents. This qualification, however, is subject to a further caveat that the Contractor is responsible for such violation if the Contractor has "reason to believe" that the Contract Documents constitute an infringement and fails to promptly notify the Architect of such infringement.

Under the 1987 edition of A201, the Contractor was responsible for costs incurred as a result of minimum deductibles under property insurance procured pursuant to Article 11. The new A201 transfers such costs from the Contractor to the Owner. Thus, the Owner is responsible for all costs incurred as a result of required deductibles under property insurance. The Owner is responsible for such costs whether the property insurance is procured by the Owner or the Contractor.

This article is taken from Constructive Comments, Vol. 1, No. 3. The contributing editors are Michael C. Loulakis and Owen J. Shean, shareholders in the Washington D.C. area law firm of Wickwire Gavin, P.C. They can be reached by phone at (703) 790-8750, or by fax at (703) 448-1801. E-mail can be sent to bmoison@wickwire.com.

This information is provided by Victor O. Schinnerer & Company, Inc. as the program administrator for the CNA Professional Liability Insurance Policy for Design Professionals. The CNA/Schinnerer Program is the Commended Program of The American Institute of Architects and the National Society of Professional Engineers.

In each issue of Constructive Comments we answer questions on important contractor issues. Do you have a question you would like answered? Please submit all questions to: Attention: Constructive Comments, at info@schinnerer.com or fax to 301-951-5444.