National Academies Press: OpenBook
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Suggested Citation:"Legal Research Digest 66." National Academies of Sciences, Engineering, and Medicine. 2015. Due Diligence for Insurance Coverage in Transportation Construction Contracts. Washington, DC: The National Academies Press. doi: 10.17226/22107.
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Legal Research Digest 66 national Cooperative highway researCh program July 2015 TRANSPORTATION RESEARCH BOARD OF THE NATIONAL ACADEMIES due diligence for insurance coverage in transportation construction contracts This report was prepared under NCHRP Project 20-6, “Legal Problems Arising Out of Highway Programs,” for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Terri Parker, Parker Corporate Enterprises, Ltd., and Laurel Stevenson, Haden, Cowherd, and Bullock LLC. James B. McDaniel, TRB Counsel for Legal Research Projects, was the principal investigator and content editor. the problem and its solution State highway departments and transportation agen- cies have a continuing need to keep abreast of operat- ing practices and legal elements of specific problems in highway law. This report continues NCHRP’s practice of keeping departments up-to-date on laws that will affect their operations. applications Federal and state laws and regulations require that con- tractors provide evidence of insurance for road and bridge construction contracts over specified amounts. The insurance is required to cover general liability, workers compensation, and automobile and other risks. The insurance also has required minimum limits of cov- erage. Each policy typically has exclusions for pollution liability or force majeure. Most government road construction contracts specify that the contractor file certificates of insurance showing the contracting agency as an additional named insured as evidence of coverage. This requirement is not enough to protect the contracting agency because certificates of insurance do not demonstrate whether the provided insurance complies with the contract requirements. A consistent problem exists in that contracting agencies typ- ically lack the requisite knowledge and experience neces- sary to review and determine if the coverage provided in the insurance meets the contractual requirements. Further, a certificate of insurance may contain a provi- sion stating that it is not a contract, and the policy of insurance needs to be reviewed to determine coverage and any exclusion. Because the policy may not be pro- vided until several weeks after the certificate is provided, there is no way to ensure that the policy provides the nec- essary protection. Transportation attorneys need to know the extent of due diligence required on their part to obtain the appropriate coverage and value of insurance as speci- fied in the contract documents. This due diligence will require a review and understanding of underlying insur- ance policy language and insurance industry practices. This digest summarizes the important issues and insurance language encountered during the contracting process and provides language and solutions used to resolve such issues. It should be useful to transportation attorneys, officials, engineers, contracting officers, and financial officials. responsible senior program officer: gwen chisholm smith LRD 66rev2.indd 1 7/1/15 9:11 AM

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TRB's National Cooperative Highway Research Program (NCHRP) Legal Research Digest 66: Due Diligence for Insurance Coverage in Transportation Construction Contracts explores the process of "due diligence," in which a transportation agency acquires objective and accurate information about its insurance companies and contractors in order to evaluate the risks of entering into an agreement and a contractual relationship. The report addresses the common issues faced by the agencies such as: proof of coverage; difficulty of interpretation of specification and insurance language; coverage disputes; lapse in coverage; and qualifying contractors for the bidding process.

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