Liability & Insurance

Template 22

Use Template 22 for:

Construction of Tenant's Improvements

  • For use only with Real Estate Department Agreements

Example: Insurance requirements for the Tenant’s contractors during construction of improvements.

Mandatory Contractual Language

Insurance requirements should be saved and attached to the contract as an exhibit. Please edit the template so that references to the party with whom you are contracting matches the agreement. To ensure the requirements are included as part of your contract, please include the following language within the insurance section of the agreement:

_______ is required to maintain the insurance specified in Exhibit _____, which is attached hereto and incorporated herein by this reference.

Consistent Language

Edit the template to keep the language consistent with your agreement.

For example: if the template refers to: “Consultant”, but the agreement uses “Contractor”, change all references in the template to “Contractor”. If your agency is not the County (SCAPOSD, Water Agency, Fairgrounds, etc.) substitute the correct terminology for all references to “County”. If the agreement is called “contract”, “license”, “lease”, etc., edit the template to match.

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Template Assistant

Tenant shall require its general contractor and all subcontractors to maintain the insurance listed below, unless such insurance has been expressly waived by the attachment of a Waiver of Insurance Requirements. The required documentation of insurance shall be furnished to County prior to commencement of any construction or grading work or other physical work preparatory to work upon the Premises. Tenant shall not commence work or allow its employees or its contractors or subcontractors or anyone to commence work until the required insurance has been obtained, submitted and approved.

County reserves the right to review any and all of the required insurance policies and/or endorsements, but has no obligation to do so. Failure to demand evidence of full compliance with the insurance requirements set forth in this Lease or failure to identify any insurance deficiency shall not relieve Tenant nor its General Contractor and subcontractors from, nor be construed or deemed a waiver of, their obligation to maintain the required insurance.

I. General Contractor - Required Insurance
  1. Builders Risk Insurance (Required only during construction of improvements and may be purchased by either Tenant or General Contractor.)

    Builders Risk Insurance covers buildings and structures if they are damaged during the construction period. The general contractor often purchases this insurance, but sometimes the tenant purchases it. Either approach is acceptable.

    1. Insured property shall include: (1) improvements in course of construction; (2) building materials and supplies intended for installation in the improvements located at the construction site, in transit and at off-site storage locations.

      Tenants Improvements are changes to the County’s property made and paid for by the tenant. When the tenant leaves, the improvements remain and become the property of the County.

      Examples: buildings, structures, carpeting, lighting, interior walls, plumbing, built-in cabinets.

    2. Insurance shall be written on a Special Form policy which may exclude earthquake and flood.

      Special Form means the property is insured for all losses unless the specific cause of loss is excluded. Some common exclusions are: earthquake and other earth movement, flood, wear & tear, lack of maintenance.

    3. The limit of insurance shall be no less than the actual cost of construction work as estimated in Exhibit ____.
    4. Insured property shall be valued on a replacement cost basis without deduction for depreciation.

      Replacement Cost means that the insurer will pay for property based on the current cost for new improvements, without subtracting anything for age, use or wear and tear.

    5. If purchased by the General Contractor, the County of Sonoma, its officers, agents and employees, Tenant, and subcontractors of all tiers shall be endorsed as additional insureds.

      We require this so that all parties with a financial interest in the improvements are insured under the same policy. If the improvements are damaged during the construction process, the policy covers the damage without regard to fault. This eliminates litigation if the negligence of one of the parties has caused the damage.

    6. If purchased by Tenant, the County of Sonoma, its officers, agents and employees, the General Contractor and subcontractors of all tiers shall be endorsed as additional insureds.

      We require this so that all parties with a financial interest in the improvements are insured under the same policy. If the improvements are damaged during the construction process, the policy covers the damage without regard to fault. This eliminates litigation if the negligence of one of the parties has caused the damage.

    7. Required Evidence of Coverage:Certificate of Property Insuranceor Evidence of Commercial Property Insurance
  2. Workers Compensation Insurance & Employers Liability Insurance
    1. Workers Compensation insurance with statutory limits as required by the Labor Code of the State of California.
    2. Employers Liability with minimum limits of $1,000,000 per Accident; $1,000,000 Disease per employee; $1,000,000 Disease per policy.
    3. The policy shall be endorsed to include a written waiver of the insurer’s right to subrogate against Tenant and County.

      If a contractor’s employee is injured on the job, the worker’s compensation insurer will cover the claim. However, if the County is in any way responsible for causing the injury, the insurer will try to recover all or part of its payment from us. This is called subrogation. The insurer cannot recover from us if it has waived its right to subrogate. Sample Workers Compensation Waiver

    4. Required Evidence of Coverage:
      1. Subrogation waiver endorsement; and
      2. Certificate of Insurance.
  3. General Liability Insurance
    1. Commercial General Liability Insurance on a standard occurrence form, no less broad than Insurance Services Office (ISO) form CG 00 01.

      ISO (Insurance Services Office) publishes a standard CGL. Some insurers use that specific form; others use their own form with a different numbering system. Any CGL is acceptable as long as the coverage is as broad as the ISO form.

      An occurrence policy responds if the injury or damage takes place during the policy period. It doesn’t matter when the claim is filed.

      A claims-made policy responds if the claim (demand for money) is made during the policy period.

    2. Minimum Limits: The required limits may be provided by a combination of General Liability Insurance and Commercial Umbrella Liability Insurance. If the General Contractor maintains higher limits than the specified minimum limits, County requires and shall be entitled to coverage for the higher limits maintained by Contractor.

      A Commercial Umbrella or Excess Liability policy provides additional limits which are usually shown on the Certificate of Insurance. The additional limits are added to the General Liability Limits. The combined total of the General Liability Limits and the Umbrella Limits must equal or exceed our minimum requirements.

      The limits noted below are general guidelines. If you think the project presents unusual hazards and higher limits should be required, please Contact Risk Management (Outlook: 139 kB) to discuss alternative limits.

      1. Total Construction Cost of Improvements under $1,000,000: $1,000,000 per Occurrence; $2,000,000 General Aggregate; $2,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.

        Occurrence limit: the most the insurer will pay for any one accident.

        General Aggregate: the most the company will pay for all claims resulting from damage or injuries that occur before the work is completed, regardless of the number of accidents, injuries, claims or claimants.

        Products/Completed Operations Aggregate: the most the insurer will pay for all claims resulting from damage or injuries that occur after the work is completed, regardless of the number of accidents, injuries, claims or claimants.

        When the General Aggregate applies separately to each project, the project does not share the limit with other projects the contractor does during the policy year. A separate Products/Completed Operations Aggregate is not required for each project because that coverage is not available.

      2. Total Construction Cost of Improvements from $1,000,000 - $4,999,999: $2,000,000 per Occurrence; $4,000,000 General Aggregate; $4,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.
      3. Total Construction Cost of Improvements $5,000,000 and Over:  $5,000,000 per Occurrence; $5,000,000 General Aggregate; $5,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.
    3. Any deductible or self-insured retention shall be shown on the Certificate of Insurance. If the deductible or self-insured retention exceeds $25,000 it must be approved in advance by County. The General Contractor is responsible for any deductible or self-insured retention and shall fund it upon County’s written request, regardless of whether the General Contractor has a claim against the insurance or is named as a party in any action involving the County.

      Contact Risk Management (Outlook: 139 kB) if the retention or deductible exceeds $25,000. We want to verify that the party with whom we are contracting has sufficient assets to fund a large retention or deductible. A waiver is not needed.

    4. Insurance shall be maintained for the entire period of the construction plus the additional periods as specified below:

      Because injury or damage resulting from the contractor’s work can occur after the project is complete, the insurance must continue after the work is done. Occurrence policies must be in force when the injury or damage happens, not when the faulty work is done.

      You cannot receive evidence that coverage will be continued after the work is complete because policies are issued for only one year. When reviewing the insurance prior to the start of work, you can verify only that the insurance is currently in force.

      1. Total Construction Cost of Improvements under $1,000,000: one (1) year after completion of construction.
      2. Total Construction Cost of Improvements between $1,000,000 - $4,999,999: two (2) years after completion of construction.
      3. Total Construction Cost of Improvements $5,000,000 and Over: three (3) years after completion of construction.
    5. [Insert exact legal name of Landlord] shall be additional insureds for liability arising out of the General Contractors’ and subcontractors’ ongoing operations (ISO endorsement CG 20 26, Additional Insured – Designated Person or Organization, or equivalent).

      We must get a copy of the endorsement or section of the policy that makes us an additional insured. A statement on the Certificate of Insurance is not sufficient because an insurance company is bound by its policy and endorsements, not by the Certificate.

      ISO endorsement CG 20 26 covers the County for liability arising out of the contractor’s ongoing operations.

      Not acceptable – Endorsement CG 20 10: “additional insured…but only with respect to liability…in the performance of your ongoing operations FOR the additional insured(s).” With this language then we are not an additional insured because the contractor is not doing the work for us.

    6. Tenant shall be an additional insured for liability arising out of ongoing and completed operations by or on behalf of the General Contractor with respect to the construction of the improvements.

      Ongoing operations refers to injuries and damage that happen while the work is in progress.

      Completed operations refers to injuries and damage that happen after the work is complete. The tenant needs to be an additional insured for both exposures. Most insurers issue two separate endorsements; a few issue their own form which includes both in the same endorsement.

      If the endorsement refers to “your work” and does not exclude completed operations, it is acceptable because “your work” includes both ongoing and completed operations. If you’re not sure, attach the questionable endorsement to a HelpRequest (Outlook: 139 kB) and submit it for review.

      We must get a copy of the endorsement or section of the policy that makes the tenant an additional insured. A statement on the Certificate of Insurance is not sufficient because an insurance company is bound by its policy and endorsements, not by the Certificate.

    7. The General Contractor shall maintain completed operations insurance with Tenant endorsed as an additional insured for completed operations for at least three (3) years after completion of the construction.

      You cannot get evidence of this in advance because most insurers issue policies for only one year.

    8. The insurance provided to the additional insureds shall be primary to, and non-contributory with, any insurance or self-insurance program maintained by them.

      Because the County and tenant are additional insureds on the contractor’s policy, we want that policy to cover claims before any contribution from the County’s insurance or from the tenant’s insurance.

      We must get a copy of the endorsement or section of the policy that has the Primary & Non-Contributory language. A statement on the Certificate of Insurance is not sufficient because an insurance company is bound by its policy and endorsements, not by the Certificate.

    9. The policy definition of “insured contract” shall include assumptions of liability arising out of both ongoing operations and the products-completed operations hazard (broad form contractual liability Insurance including the “f” definition of insured contract in ISO form CG 00 01, or equivalent).

      This is included in standard General Liability policies and you do not need evidence of coverage.

    10. The policy shall not contain a Contractors’ Warranty or other similar language which eliminates or restricts Insurance because of a subcontractor’s failure to carry specific insurance or to supply evidence of such insurance.
    11. The policy shall be endorsed to include a written waiver of the insurer’s right to subrogate against all persons or entities that are, or are required to be, additional insureds.

      If the contractor’s insurer pays a claim to a third party and either the County or the tenant is partially responsible for the injury or damage, the insurer will seek reimbursement from them. This is called subrogation. The insurer cannot recover from us or the tenant if it has waived its right to subrogate.

    12. The policy shall cover inter-insured suits between the contractor and the additional insureds and include a “separation of insureds” or “severability” clause which treats each insured separately.

      This guarantees that the County and tenant will be covered if they are sued by the contractor and that the contractor will be covered if it is sued by the County or the tenant. This language is standard in the General Liability policy; you do not need to get a specific endorsement to satisfy this requirement.

    13. Required Evidence of Insurance:
      1. Additional insured endorsements or policy language granting additional insured status;
      2. Endorsement or policy language indicating that the insurance is primary and non-contributory
      3. Subrogation waiver endorsement; and
      4. Certificate of Insurance.
  4. Automobile Liability Insurance
    1. Minimum Limits:
      1. Total Construction Cost of Improvements under $1,000,000: $1,000,000 combined single limit per accident.
      2. Total Construction Cost of Improvements $1,000,000 or more: $2,000,000 combined single limit per accident.
    2. Insurance shall apply to all owned, hired and non-owned vehicles.

      Hired Autos: vehicles the contractor rents or borrows.

      Non-owned Autos: vehicles owned by the contractor’s employees and subcontractors.

      If “Any Auto” is checked on the Certificate of Insurance, it includes owned, hired and non-owned autos.

    3. Required Evidence of Insurance: Certificate of Insurance
  5. Contractors Pollution Liability Insurance
    1. Minimum Limits:
      1. Total Construction Cost of Improvements Under $5,000,000: $1,000,000 per Pollution Incident; $1,000,000 Aggregate;
      2. Total Construction Cost of Improvements $5,000,000 and Over: $2,000,000 per pollution Incident; $2,000,000 Aggregate.
    2. Any deductible or self-insured retention shall be shown on the Certificate of Insurance. If the deductible or self-insured retention exceeds $25,000 it must be approved in advance by County. The General Contractor is responsible for any deductible or self-insured retention and shall fund it upon County’s written request, regardless of whether the General Contractor has a claim against the insurance or is named as a party in any action involving the County.

      Contact Risk Management (Outlook: 139 kB) if the retention or deductible exceeds $25,000. We want to verify that the party with whom we are contracting has sufficient assets to fund a large retention or deductible. There is no specific field on the Certificate of Insurance for a Pollution Liability deductible or retention. A waiver is not needed.

    3. If the insurance is on a Claims-Made basis, the retroactive date shall be no later than the commencement of Work.

      In a claims-made policy the claim (demand for money) has to be made during the policy period. However, the injury or damage must occur on or after the retroactive date. The retroactive date is usually the inception date of the first claims-made policy purchased by the contractor. You do not have to get evidence of the retroactive date.

    4. Insurance shall be maintained for the entire period of the construction plus the additional periods as specified below:
      1. Total Construction Cost of Improvements under $1,000,000: one (1) year after completion of construction.
      2. Total Construction Cost of Improvements between $1,000,000 - $4,999,999: two (2) years after completion of construction.
      3. Total Construction Cost of Improvements $5,000,000 and Over: three (3) years after completion of construction.
    5. If the insurance is on a Claims-Made basis, the continuation Insurance may be provided by: (a) renewal of the existing policy; (b) an extended reporting period endorsement; or (c) replacement insurance with a retroactive date no later than the commencement of the Work.
    6. [Insert exact legal name of Landlord] and Tenant shall be additional insureds for liability arising out of operations by or on behalf of the contractor.

      We must get a copy of the endorsement or section of the policy that grants additional insured status. A statement on the Certificate of Insurance is not sufficient because an insurance company is bound by its policy and endorsements, not by the Certificate.

    7. The insurance provided to the additional insureds shall be primary to, and non-contributory with, any insurance or self-insurance program maintained by them.

      Because the County and tenant are additional insureds on the contractor’s policy, we want that policy to cover claims before their insurance or self-insurance contribute to the claim. To put it another way: the contractor’s policy pays first.

      We must get a copy of the endorsement or section of the policy that has the Primary & Non-Contributory language. A statement on the Certificate of Insurance is not sufficient because an insurance company is bound by its policy and endorsements, not by the Certificate.

    8. Required Evidence of Insurance:
      1. Additional insured endorsement or policy language granting additional insured status;
      2. Endorsement or policy language indicating that the insurance is primary and non-contributory; and
      3. Certificate of Insurance.
  6. Professional Liability/Errors & Omissions Insurance (Required if the General Contractor or its employees engage in design or professional activities (architecture, engineering or surveying) which are not subcontracted out).
    1. Minimum Limit: $1,000,000 per claim.
    2. The General Contractor shall disclose any deductible or self-insured retention in excess of $25,000.

      Contact Risk Management (Outlook: 139 kB) if the retention or deductible exceeds $25,000. We want to verify that the party with whom we are contracting has sufficient assets to fund a large retention or deductible.

      There is no specific field on the Certificate of Insurance for a Professional Liability deductible or retention. A waiver is not needed.

    3. If the insurance is on a Claims-Made basis, the retroactive date shall be no later than the commencement of the work.

      In a claims-made professional liability policy, the claim (demand for money) has to be made during the policy period. However, the error must be committed on or after the retroactive date. The retroactive date is usually the inception date of the first claims-made policy purchased by the contractor. You do not have to get evidence of the retroactive date.

    4. Insurance applicable to the work related to the design and construction of the improvements on the Premises shall be continued for two (2) years after completion of the work. Such continuation Insurance may be provided by one of the following: (1) renewal of the existing policy; (2) an extended reporting period endorsement; or (3) replacement insurance with a retroactive date no later than the commencement of the work.

      You cannot receive evidence that coverage will be continued after the work is complete because policies are issued for only one year. When reviewing the insurance prior to the start of work, you can verify only that the professional liability is currently in force.

    5. Required Evidence of Insurance:
      1. Certificate of Insurance
  7. Standards for Insurance Companies

    Insurers, other than the California State Compensation Insurance Fund, shall have an A.M. Best’s rating of at least A:VII.

    A.M. Best is one of the services that reviews insurers’ financial information. We want the insurer to be able to pay its claims. The letter (A+, A, A-, B+, etc.) is Best’s rating of financial strength. The number (XII,VII, etc.) refers to the insurer’s financial size. You can check the rating at: http://www.ambest.com/ - the service is free, but you need to register and log in.

  8. Documentation
    1. The Certificate of Insurance shall include the following reference: [insert reference].

      Putting the reference on the Certificate of Insurance does not increase our protection. This requirement is included for your convenience.

    2. Tenant shall require Contractor to maintain current Evidence of Insurance on file with County for the required period of insurance. Any requirement to maintain insurance after Final Completion of the Work, including providing Certificates evidencing required Insurance(s), shall survive the Contract.
    3. Required Evidence of Insurance shall be submitted to [insert name of Landlord], Attn: Manager, Real Estate Division, 2300 County Center Drive, A200, Santa Rosa, CA 95403
    4. Required Evidence of Insurance shall be submitted for any renewal or replacement of a policy that already exists, at least ten (10) days before expiration or other termination of the existing policy.
    5. Tenant shall require the General Contractor to provide immediate written notice if: (1) any of the required insurance policies is terminated; (2) the limits of any of the required policies are reduced; or (3) the deductible or self-insured retention is increased.
    6. Upon written request, certified copies of required insurance policies must be provided within thirty (30) days.

      Because it takes much time and substantial expertise to review an entire insurance policy, we don’t routinely request it. However, if we cannot determine the adequacy of coverage from the certificate and endorsements, this is an option.

  9. Policy Obligations

    Tenant’s indemnity and other obligations shall not be limited by the foregoing insurance requirements.

  10. Material Breach

    If Tenant or any of its contractors or subcontractors fails to maintain Insurance which is required by this Lease, it shall be deemed a material breach of this Lease. County, at its sole option, may terminate the Lease and obtain damages from Tenant resulting from such breach. Furthermore, County may purchase the required Insurance, and the cost of same shall be payable by Tenant to County within thirty (30) days of County’s notice of its action to Tenant.

II. Subcontractors – Required Insurance

With respect to their portion of the work, subcontractors of all tiers and consultants shall maintain the same insurance required to be maintained by contractor, with minimum limits as follows:

  1. General Liability Limits for Framing, Mechanical, and Electrical Subcontractors:
    1. Total Construction Cost of Improvements under $1,000,000: $1,000,000 per Occurrence; $2,000,000 General Aggregate; $2,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.
    2. Total Construction Cost of Improvements $1,000,000 and over: $2,000,000 per Occurrence; $4,000,000 General Aggregate; $4,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.
  2. General Liability Limits for all Subcontractors other than Framing, Mechanical, and Electrical Subcontractors: $1,000,000 per Occurrence; $2,000,000 General Aggregate; $2,000,000 Products/Completed Operations Aggregate. The General Aggregate shall apply separately to each Project.
  3. Automobile Liability Limits: $1,000,000 combined single limit per accident.
  4. Professional Liability/Errors & Omissions Insurance Limits: $1,000,000 per claim. (Required for any architect, engineer, surveyor or other licensed professional engaged by Contractor to perform portions of the Work)
  5. Contractors Pollution Liability Insurance Limits: $1,000,000 per pollution incident. (Required for subcontractors whose work has the potential for environmental pollution.)

Contact Information

Jamie Bloom, Insurance Manager

Reesha Ruel, Liability Manager

Risk Management Division

Human Resources Department

Business Hours
Monday – Friday
8:00 AM – 5:00 PM
Contact us by Phone
Address
575 Administration Drive
Room 116 B
Santa Rosa, CA 95403
38.465237, -122.725363

Contracts Exempt from Insurance

Certain contracts pose low risk, therefore, they are exempt from insurance requirements.

Learn more