On September 28, 2016, Ross & Yerger Insurance, Inc. hosted a seminar to discuss the implications of this law featuring Michael Thompson and Judson Sanders, attorneys at the law firm Taylor, Wellons, Politz & Duhe.
The construction industry depends on teamwork. An owner teams with an architect to design a project and a general contractor to execute the project. The general contractor uses subcontractors to carry out the work. At the core of these relationships are contracts specifying what is expected and required from each party.
In 2012, Louisiana created a new wrinkle in this process when it passed R.S. 9:2780.1.
Michael and Judson’s analysis of this new law is that it could add much needed clarity to Louisiana’s prohibition against one party transferring its negligence to another. Also, there’s some precedent on how the law will be interpreted based on the construction industry changes being tacked onto the current Louisiana Oilfield Anti-Indemnity Act, which has been in place for decades.
In general, one party can’t push its liability onto another party unless several conditions are met:
- The assumed liability is supported by insurance and only up to the required limits of insurance;
- Any request to be an additional insured requires the party providing additional insured coverage to be partially at fault;
- The party paying for protection pays the cost of this required insurance.
The established oilfield law requires the party seeking protection provide definitive and conclusive proof it paid the entire cost of this insurance coverage, and the oil & gas insurance market has responded with specific endorsements to provide this proof. We’re still in the early stages of this rule being applied to construction, and are waiting to see if Louisiana courts will interpret the proof of payment requirements for construction contracts the same as they do for oil & gas contracts.
Michael and Judson discussed R.S. 9:2780.1 as an evolving issue that each contractor may choose to address a little differently than the next based on their risk tolerance and specific goals. And, contractors will need both attorneys and insurance agents who are aware of the implications this new law could have on the enforceability of their contracts and who are staying on top of new developments.