The construction contract documents published by the American Institute of Architects (AIA) are among the most commonly used forms on both commercial and residential projects in the United States.
Although parties are free to modify these forms to suit their needs, it’s important to understand what the standard documents contain in order to negotiate appropriate changes. Even more important, in April 2017, the AIA updated its forms — making a number of significant revisions. Let’s take a closer look at the changes.
Among the most notable changes involves insurance. Rather than burying insurance requirements in Form A201 — “General Conditions of the Contract of Construction” — the new set of forms contains a separate Exhibit A — “Insurance and Bonds.”
The exhibit provides a comprehensive menu of insurance options, allowing parties to specify insurance requirements and coverage limits by checking boxes and filling in blanks. The advantage of this approach is that it facilitates review of insurance options and encourages more thoughtful consideration of risk management.
The exhibit also spells out in detail the types of insurance that must be provided by the owner and contractor, respectively. (The two parties may opt to shift these responsibilities from one to the other.)
In addition, the updated forms contain some significant changes from the insurance provisions in previous AIA documents. For example, Exhibit A:
- Provides that the contractor’s required insurance must be maintained through the “correction of work” period rather than the date of final payment, as previously required,
- Requires the contractor to procure additional insurance (including professional liability, pollution liability, maritime liability, and manned or unmanned aircraft liability) if the work involves those activities, and
- Clarifies the contractor’s obligation to provide additional insured coverage to the owner, architect and architect’s consultants.
The last requirement is particularly significant. Previous versions of the AIA documents simply required the contractor to name the owner, architect and architect’s consultants as additional insureds on their liability policies. But Exhibit A specifies: “To the extent commercially available, the additional insured coverage shall be no less than that provided by” three commonly used endorsements published by the Insurance Services Office. As a result, contractors whose liability policies don’t provide this level of coverage may be liable for the difference.
Impact and risks
If you’re involved in projects that use the AIA forms, be sure to review the 2017 revisions carefully. Evaluate the impact of the new forms on your insurance requirements and other obligations under the contract and request modifications if needed to mitigate your risks.