The AIA General Conditions address the risk of casualty loss to property during construction. One of the parties agrees to maintain “all-risk” casualty insurance until completion and acceptance of the project. And, the parties agree to a reciprocal waiver of claims for damage “covered by property insurance,” which applies to subcontractors, employees, agents, etc., of each party. This leads to a question: When a casualty loss is less than the deductible amount of the policy, is the loss covered by property insurance?
The owner of a project in Indiana elected to carry property insurance with a very large deductible. A $1 million casualty loss, allegedly caused by subcontractors, was well within the deductible, so the insurance company made no payment. The subcontractors argued the loss had been “covered” because it resulted from a risk stipulated in the policy. The project owner and its prime contractor argued the waiver did not apply because the insurer made no payment for the loss.
The second case in this issue involved an alleged misrepresentation of custom fabricated windows. The project owner argued promotional material had represented crafting of individual items and testing for compliance with certain standard specifications. The supplier responded the language was merely “advertising puffery.”
The third case addressed delay damage claims disguised as change order requests. A New York court ruled the contractor could not use this device to avoid the consequences of an enforceable no-damages-for-delay clause.
