As 2026 dawns, project insurance remains one of the most critical risk management tools for developers, builders and design professionals. Yet with multiple acronyms out there such as OCIP, CCIP, OPPI, GL, PL and SDI, defining the right insurance program is not easy. Common mistakes leading to coverage denials include deference to “standard” insurance forms (tip:  nothing is “standard”), misplaced reliance on informal broker assurances (get it in writing), and a reluctance to wade through the swamp of policy “endorsements” that operate as “exclusions” for certain claims.

In 20-plus years of practicing construction law, I’ve encountered plenty of insurance-related mistakes but also quite a few best practices to emulate as lessons learned. To mitigate the danger of lacking or losing coverage, keep in mind the following typical mistakes and best practices when you next review coverages or claims.

Mistake no. 1: failing to obtain adequate proof of insurance. Construction parties too often defer to stock contract terms requiring each party to only produce a Certificate of Insurance (COI) or ACORD certificate. Without more, these certificates can be largely worthless as evidence of coverage when a claim arises because a COI typically does not also list the endorsements excluding coverage (e.g., exclusions for multifamily projects, condominiums, mold, and/or cross-suits by one insured against another).

Best practices: To confirm project-specific coverage, modify the contract terms regarding insurance to require that parties produce copies of the actual policies. Then double-check all endorsements and use a contract insurance rider excluding any insurance endorsements that don’t fit your project or risk tolerance.

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Mistake no. 2: failing to obtain adequate insurance limits. As a transactional attorney and a litigator, I’ve encountered a key subcontractor with a risky scope of work carrying only its standard $1 million coverage. Or for a project with potential soils or site condition problems, the soils engineer carries only a $1 million policy or worse, a contractual limitation of liability to the amount of the engineer’s fee.

Best practices: In prime contracts, specify not just insurance limits for the general contractor or design professional, but also for their subcontractors and subconsultants. Additionally, consult the insurance broker early to gain independent written confirmation of the appropriate types and limits of coverage for the project. Finally, consider whether a project-specific policy or wrap (construction or design) might fit the project better than a traditional insurance setup.

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Mistake no. 3: neglecting to employ specific insurance tracking protocols. Despite best intentions, parties often neglect to track insurance during construction and for the duration of the applicable statute of repose. Consequently, when a claim arises several years later, evidence of policies and coverage is hard to locate and determine.

Best practices: Compile policy and COI copies in a separately labeled electronic file. Calendar out yearly intervals following project completion to reconfirm policy limits and any change in policy providers. If a contracting partner is out of business, determine whether you need to take separate action to insure interests. Finally, utilize an insurance tracking log or similar spreadsheet that lists each project participant and its policy numbers, limits and notable exclusions each year during construction and in each year following project completion. Contact your attorney or broker for an example tracking log.

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Mistake no. 4: not tracking the time frames within which to report a claim. Many policies require claims reporting and cooperation within a specific or default “reasonable” time. Delays in recognizing and reporting claims can risk denials of coverage.

Best practices: Review policies annually for applicable reporting requirements or ask your broker or attorneys to identify the specific timelines therein. Ensure project managers are aware of the deadlines and practice prompt reporting of claims.

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Mistake no. 5: failing to obtain or document Additional Insured status. Standard ISO endorsements are available to provide additional insured or “AI” status to various entities on construction projects that are not the primary named insured. However, endorsements can limit AI coverage only for ongoing operations and may prohibit coverage altogether via a cross-suit exclusion for coverage where one insured sues another insured.

Best practices: Remove any cross-suit exclusion from the policy and specifically analyze the risks of naming multiple parties as additional insureds.

Parties don’t plan to fail; they just too often fail to plan. Mitigating potential coverage oversights on complex construction projects is possible by employing some or all these practices. Ensure periodic reviews of insurance policy language and endorsements, utilize tracking protocols, and double-check policies on specific projects to make certain coverage is not excluded. While the law of unintended consequences mandates that all parties to a project will likely face risks and potential claims, with some foresight and consultation of insurance brokers, attorneys, and each other, the parties will be best prepared for any potential coverage issues.

Andrew Gibson is a Stoel Rives LLP partner and a member of the construction and design group in the firm’s Portland office. Contact him at 503-294-9878 or andrew.gibson@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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In 20-plus years of navigating construction contract negotiations and disputes, I have reviewed for clients a number of terms overlooked at signing that carry significant importance when a dispute arises: materials warranties limited to replacement costs (no tear-out, no install) and a 60-day notice period; limitations of liability clauses that cap damages significantly below insurance coverage the owner paid for; and, in perhaps the most egregious example, an attorney’s fees clause written in reverse that had the winner pay the loser’s legal fees!

Whether developing a skyscraper, renovating an existing commercial space, or building a dream vacation home, one rule should remain constant: no construction contract is standard. Construction contract terms (almost) always lean in favor of the party that drafted them. Legal interpretations of important terms also vary considerably from state to state. This consistent inconsistency makes it prudent to carefully review terms at contract formation to manage the risk inherent in blindly agreeing to default form contract language. One often overlooked term – the third-party beneficiary (TPB) clause – provides a prime example.

A TPB is a person or entity who, though not a party to a contract or subcontract, stands to benefit from the contract’s performance. Typically, the TPB is expressly named in the contract from which it stands to benefit. For example, if the contractor and a subcontractor agree to a subcontract that specifies the subcontractor will render performance to a project for the express benefit of an owner as a TPB, then that owner is a third-party beneficiary of the subcontract, even though it is not a signatory or party to the subcontract. TPB status may exist both up and down the contractual chain of a project.

TPB status carries substantial benefits. In the example above, the owner may assert claims directly against the subcontractor for breach of the subcontract, breach of warranty, negligence, or other claims arising out of the subcontracted work for the project. This allows the owner flexibility to pursue the potentially liable parties rather than having to first seek recourse from its prime contractual partner, the general contractor. These direct rights can also help avoid an economic loss rule defense by the offending party (the economic loss doctrine generally provides that a party cannot recover in negligence for purely “economic loss” – i.e., without personal injury or property damage). There are risks, however, because if not drafted correctly, a TPB clause could grant unintended rights, such as direct claims against the owner or a project lender.

“Standard” contract language is limiting on the TPB issue. The American Institute of Architects’ default forms provide that unless otherwise stated they do not create a TPB relationship and can act as a potential waiver of a party’s rights. Other construction industry contract forms don’t do much better. This often means the parties are left to the applicable law of the place in which the project is located, which can vary considerably from state to state.

In Oregon and California, to the benefit of owners, the law holds that where an owner, even as a remote purchaser, can demonstrate actual property damage rather than purely economic loss, the economic loss rule does not bar a negligence claim for construction defects. Thus, even if an owner is not a TPB of a subcontract, it may have direct rights of recovery against a subcontractor for actual property damage to the owner’s property, unless of course the owner agreed to a default form contract waiving that right.

In Washington, the situation is different because the law rebranded the economic loss rule as the independent duty doctrine. The independent duty doctrine provides that an injury is remediable on a negligence theory if it traces back to the breach of a duty arising independently from the contract terms. In the context of a defective construction case, Washington courts have explained there is no independent duty to avoid economic loss – i.e., the bargained-for quality, absent an independent duty or other risk of harm. These cases suggest that in Washington, without a TPB clause, the upstream party needs to show an independent duty or harm separate from the construction defect to maintain a direct action against a non-contracting construction party.

And in Utah, the legislature codified the economic loss doctrine to make clear that an action for defective design or construction is limited to breach of contract. Absent a TPB clause in a Utah contract, an owner has little recourse against a construction party with whom it lacks privity of contract, no matter how significant the harm.

Legal interpretations vary and no construction contract is standard. The oldest piece of advice remains the best: if you want something done right, do it yourself. When negotiating your next construction contract, consider adding your own TPB clause. Clarify that the upstream parties benefiting from the work have direct rights of action against downstream parties in order to equitably hold each party accountable. Protect your rights and do not leave your contracts open to default form terms and the law of unintended consequences.

Andrew Gibson is a Stoel Rives LLP partner and a member of the construction and design group in the firm’s Portland office. Contact him at 503-294-9878 or andrew.gibson@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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As we approach the end of 2024, prudence dictates a checkup on one of the most critical risk management tools for developers, builders and designers – insurance. With multiple acronyms out there such as OCIP, CCIP, OPPI, GL, PL and SDI, defining the right insurance program for a project can be daunting. Common mistakes leading to coverage denials include deferring to “standard” insurance forms (hint: nothing is “standard”), misplacing reliance on informal broker assurances (get it in writing), and being reluctant to wade through the swamp of policy “endorsements” that exclude certain claims. To mitigate the danger of lacking or losing coverage, consider the following general rules and best practices when reviewing coverages or claims.

Checkup no. 1: Obtain adequate proof of insurance. Traditionally, parties rely on stock contract terms requiring each party to produce only a certificate of insurance or an ACORD certificate. Unfortunately, these certificates can be largely worthless as evidence of coverage when a claim arises because they typically do not specify the endorsements excluding coverage (e.g., exclusions for multifamily projects, condominiums, mold, and/or cross-suits by one insured against another).

Best practices: To confirm project-specific coverage, obtain copies of the actual policies by contractually requiring production, double-check all endorsements, and specifically disallow in one’s contract any insurance endorsements that don’t fit one’s needs.

Checkup no. 2: Enforce insurance requirements downstream. As a transactional attorney and a litigator, I’ve seen a key subcontractor performing a material or risky portion of work carrying only its standard $1 million coverage. Or, on a project with potential soil or site condition problems, the geotechnical engineer carries only a $1 million policy – or worse, a contractual limitation of liability to the amount of its fee.

Best practices: Specify requirements in prime contracts for the prime contractor and architect to ensure certain insurance levels for their subs. Also, consult an insurance broker early to gain independent written confirmation of the appropriate types and limits of coverage for the project.

Checkup no. 3: Use insurance tracking protocols. Despite efforts at the contracting stage to secure the right insurance, parties often neglect to track insurance during construction and for the duration of the applicable statute of repose. Consequently, when a claim arises several years after project completion, evidence of policies and coverage is hard to locate and determine.

Best practices: Compile policy and COI copies in a separately labeled electronic file. Calendar out regular intervals following project completion to reconfirm policy limits and any change in policy providers. If a contracting partner is out of business, determine whether you need to take separate action to insure your interests. Finally, utilize an insurance tracking log or similar spreadsheet that lists each project participant and their policy numbers, limits, and notable exclusions each year during construction and in each year following project completion.

Checkup no. 4: Know the time frame within which to report a claim. Many policies require claims reporting and cooperation within a specific or reasonable time. Delays in recognizing and reporting claims can risk denials of coverage.

Best practices: Review policies annually for applicable notice requirements and claim deadlines or ask your broker or attorneys to identify the specific timelines therein. Ensure project managers are aware of the deadlines and practice prompt reporting of claims.

Checkup no. 5: Consider whether to name additional insureds. Standard ISO endorsements are available to provide additional insured or “AI” status to various classes of entities on construction projects. However, endorsements can limit AI coverage only for ongoing operations and may prohibit coverage altogether via a cross-suit exclusion for coverage where one insured sues another insured.

Best practices: Remove any cross-suit exclusion from the policy and specifically analyze the risks of naming multiple parties as additional insureds.

Complex construction projects carry complex insurance coverage issues that require detailed analysis to mitigate potential oversights in coverage. Ensure periodic reviews of insurance policy language and endorsements, utilize tracking protocols, and double-check policies on specific projects to ensure coverage is not excluded. While the law of unintended consequences mandates that all parties to a project will likely face risks and potential claims, with some foresight and consultation with insurance brokers and attorneys, the parties should be best prepared for any potential coverage issues when they arise.

Andrew Gibson is a Stoel Rives LLP partner and a member of the construction and design group in the firm’s Portland office. Contact him at 503-294-9878 or andrew.gibson@stoel.com

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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On April 23, the Federal Trade Commission banning noncompete clauses nationwide. A noncompete clause or agreement is typically a binding contract that prevents a worker from competing with the employer after their employment ends. will become effective on Sept. 4, 2024 (pending legal challenges, as discussed below).

The new rule provides:

• “that it is an unfair method of competition – and therefore a violation of section 5 (of the Federal Trade Commission Act) – for persons to, among other things, enter into non-compete clauses (noncompetes) with workers on or after the final rule’s effective date.” The rule covers employees and independent contractors.
• For existing noncompetes entered into before the effective date, the final rule adopts a different approach for senior executives (defined as those earning more than $151,164 annually and who are in policy making positions) – “for senior executives, existing non-competes can remain in force, while existing non-competes with other workers are not enforceable after the effective date.”

FTC Chair Lina M. Khan justified the rule in stating, “Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned. The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC noted that trade secret laws and nondisclosure agreements (NDAs) still provide employers well-supported mechanisms by which to protect confidential and proprietary company-specific information, and the rule specifically exempts such types of agreements.

Notably, the FTC did not include in the final rule an obligation from draft versions that purported to require employers to formally amend and rescind existing noncompete agreements. Instead, ostensibly to streamline compliance, the final rule obligates employers to provide notice to any workers (other than senior executives, as noted above) subject to an existing noncompete agreement that the agreement will no longer be enforced against them.

In the construction industry, noncompete clauses and agreements have long served as a valuable tool to protect investment in both employees and opportunities. For companies that invest heavily in training a skilled workforce, noncompete clauses play an important role in building long-term employee relationships that justify heavy resource allocation to training. Similarly, in such a competitive industry as construction, noncompete clauses and agreements with independent contractors and subcontractors can protect a company’s investment in building customer relationships to attract repeat business. Finally, construction companies often deal with or develop confidential and proprietary information including safety programs, customer preferences, bidding and estimating strategies, profitability data, and trade secrets. Noncompetes help prevent the disclosure and dissemination of such valuable information that often takes companies years or decades to build and maintain.

The loss of such an important tool is significant. However, other restrictive covenants such as those preventing solicitation of customers or employees, protecting confidential information, and securing trade secrets, are still permitted and can help construction companies continue to protect some of their most valuable assets (though they must be carefully drafted to avoid becoming subject to the rule).

The full impact of the FTC’s new rule remains to be seen. The rule is already the subject of multiple lawsuits; it is possible a court will take action to block it from taking effect and may ultimately strike it as unlawful.

If the rule takes effect, the impacts may be significant. While the FTC’s justification for the rule suggests it was ostensibly issued primarily to address restraint of workers in the new economy of the cloud and information technology, the rule does not delineate among industries (though it is limited to those under the FTC’s jurisdiction). The proverbial law of unintended consequences will force companies up and down the line of the construction industry – material suppliers, subcontractors, general contractors, developers, and design professionals – to all grapple with the new rule’s impacts and pursue alternative means to protect valuable building blocks on which they’ve built their businesses. The industry would do well to take prompt notice of the new rule and look ahead with its risk managers, insurers, attorneys, and stakeholders to assess all potential impacts and plan accordingly.

Andrew Gibson is a Stoel Rives LLP partner and a member of the construction and design group in the firm’s Portland office. Contact him at 503-294-9878 or andrew.gibson@stoel.com

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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As a construction and design attorney who both negotiates contracts and litigates disputes, I’ve evaluated many a project gone wrong because of the rights, obligations, and remedies allowed by contract terms. Too often as developers, designers, and contractors are understandably pushing forward to start a project, the parties devote insufficient time identifying and allocating risk in their contracts. Projects that end up with the most unintended consequences are those where parties defer to and use an “industry standard” contract form as opposed to one specifically tailored to the project’s needs and risks. While contract forms developed by industry organizations can provide a good starting point for most projects, prudent parties will carefully navigate and negotiate the standard terms to avoid the following tricks and traps that are inherent with use of an unaltered industry contract form. The bottom line? Nothing is “standard.”

• “Standard” form contracts tend to favor the industries that drafted them. If another party proposes an “industry standard” form contract for use on a project, start your analysis by questioning the origins of the form. If the form is from an architect’s association, ask whether developers or owners have ever been in the drafting room. If the form is from a contractor’s association, subcontractors should ask whether the form was drafted in favor of the general contractor versus the sub trades. Just because an “industry standard” form has been around and refined for 40 years by a particular industry segment does not make its standard terms suitable for your project.
• Mutual waivers of consequential damages are not truly mutual. Many industry form contracts contain a mutual waiver of consequential damages. Such clauses appear fair by claiming to be mutual. Yet, the fact is that an unaltered CD waiver poses significantly greater risk to an owner’s rights than that of the other party. This is so because the owner is not only at risk for consequential damages due to late project delivery (often addressed by liquidated damages clauses), but also because the owner faces risk for several years after completion if latent defects or errors require repairs (e.g., rent concessions to tenants or renting alternate space for office workers). Parties should always consider deleting or modifying the standard CD waiver terms to account for, at a minimum, insurance-covered claims and claims that arise after completion.
• Limitation of liability clauses are more limiting than intended. More commonly found in design professional contracts, LOL clauses should be avoided because they often conflict with other contract terms, especially insurance. A party’s liability should never contractually be limited to less than at least its insurance limits, and even then, best practices dictate ensuring that in case of a defect or error, all parties have some vested interest or “skin in the game” in resolution.
• Default insurance terms are insufficient. Speaking of insurance, “standard” industry contract forms typically provide less than standard insurance coverage for a project. Most problematic are terms that vaguely require a party to provide the types and limits of insurance otherwise described in the contract documents (which then is not done) or as typically carried in the industry (what’s typical?). Best practices dictate creating an exhibit that carefully – and with specific analysis of project risks – spells out the parties’ insurance obligations, including products-completed operations coverage and tail coverage for professional liability policies to cover post-completion risks. Contractually specifying insurance limits and scrutinizing policy endorsements (aka exclusions) are absolutely essential to hedge against risk in commercial development.
• Force majeure and delays are not addressed. One of the many things we’ve learned since early 2020 is to carefully consider the potential impacts of causes beyond all parties’ control. Yet, many form contracts either haven’t been updated since that year or simply fail to specify a remedy, leaving the parties to fight it out should a dispute arise. Best practices dictate contractually specifying the critical path delay events that warrant a time extension versus those that might be attributable to a party with other remedies available. While nobody plans to fail, failing to plan for project impacts can result in similar consequences.
• Indemnity language is considered legal jargon. Few topics in the development world generate more yawns than an indemnity clause. Despite being one of the most important contract terms when a dispute arises, parties defer to industry standard indemnity clauses at their own risk. A handful of key terms in an indemnity clause are too often dismissed as legal jargon, such as what damages give rise to indemnity and/or who is making the claims. The parties should carefully consider any “industry standard” indemnity clause and revise it appropriately to fit the needs of the project.

Complex construction projects carry risks that require contract analysis and negotiation from the outset. Regardless of your position in the contract hierarchy, plan before your next project to set aside ample time to analyze and address the risks inherent with use of an unaltered industry contract form. Know that while standard contract terms may provide a starting point for contract negotiation, nothing is truly “standard.”

Andrew Gibson is a Stoel Rives LLP partner and a member of the construction and design group in the firm’s Portland office. Contact him at 503-294-9878 or andrew.gibson@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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With construction contract negotiations under way for new projects in 2014 and beyond, all involved parties should take notice of Oregon’s revised construction retention statutes.

Revisions effective Jan. 1, 2014 to Oregon Revised Statutes 279C.555, 701.420 and 701.430 provide that on both public and private projects, an owner or contractor or subcontractor may withhold as retainage an amount equal to not more than 5 percent of the contract price of the work completed. Previous law allowed up to 10 percent of the contract price to be withheld as retention to ensure completion of contract performance and the project, unless a performance bond had been posted.

The stated purpose of Senate Bill 405 in halving the retention rate was: 1, to facilitate prompter payment for subcontractors, and 2, to cut down on subcontractor mechanic’s liens filed prior to project substantial completion due to an earlier scope of work. The bill meant to address increasingly contentious situations at the end of construction projects where the owner or lender is often retaining a significant portion of the contractor’s profit until the contractor can deliver occupancy and a lien-free project. While the enacted law’s purposes may have been aimed at prompting resolution, the more common law of unintended consequences may force meaningful and potentially costly changes to project behaviors on both sides of the contract.

At the outset of a project, private owners may increasingly require performance bonds from contractors, and contractors may require from their subs, to ensure project completion. Which party bears the increased costs of this bonding will become a serious point for negotiation among an owner and competitive bidders at the time of contracting.

During a project, owners will be more reluctant to release portions of retention at certain points of completion (e.g., 50 percent of retention when the contractor is 50 percent complete with the project), a practice that although uncommon had gained traction on certain jobs in recent years. Similarly, prudent owners may not grant requests to release retention at the earlier point of substantial completion, instead wanting to ensure the contractor completes all items on the punch list to the satisfaction and written acceptance of the owner. Finally, a greater importance than ever will likely be placed on the contractor providing conditional and unconditional lien and claim waivers and releases prior to payment of retention, to secure a lien-free completed project.

The effects, positive and negative, of Oregon’s new 5 percent retention rule remain to be seen. Parties negotiating construction contracts should stay mindful of how the new retention provisions may force changes to other contract sections, such as those subjects mentioned above, and how such changes may affect all parties throughout construction of the project. For if the law of unintended consequences teaches us anything when it comes to purportedly corrective legislative action, it is to expect the unexpected.

Andrew Gibson is an attorney in the construction and design practice group of Stoel Rives LLP. Contact him at 503-294-9878 or agibson@stoel.com.

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