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The insurance provisions in contracts we receive have been an escalating problem. It seems the contractor is getting bolder and bolder with requests for outrageous limits and coverage. Once, contractor listed more than 10 people whom he wanted named as additional insured! Now, we take every contract, mark through the entire insurance section and insert the language, "The subcontractor shall maintain the types and limits of insurance per the attached insurance certificate." Then we attach a copy of our insurance showing our limits.
The best practice in negotiating contracts is to define terms in your proposal and then Stand Up for what you know is right for your business.
We had successfully negotiated scope and price for our trade work on a new juvenile detention center. However, when the subcontract arrived, I was no longer excited about the project because of some pretty egregious terms typical of a propriety document prepared by outside counsel.
I drafted a courteous letter to the signatory of the subcontract, stating, "While we appreciate the opportunity to negotiate the contract price and scope of work, we will not negotiate the terms and conditions of the subcontract form. Our proposal was conditioned upon the use of an AIA 401 [1997] subcontract form." I prepared the AIA form inserting some additional language that appeared in the supplemental conditions of our proposal. In particular, I was able to strike the additional insured provision and provide an Owner & Contractor Protective Liability Policy. After negotiating on the duration of activities that were inserted, the subcontract was signed ad returned by the general contractor.
I feel I was successful in negotiating this subcontract because of two valuable lessons I have learned from ASA and my fellow subcontractors. First, specify in your proposal the industry subcontract on which your proposal is predicated. If a general contractor returns a different subcontract, then you can back out of your proposal as it would be considered a counteroffer, or you have a basis from which to negotiate changes. Second, specify in your proposal the indemnification and insurance you will provide, excluding any additional coverage such as an 'additional insured' provision. Again, this provides a basis for negotiation and any additional insurance requirements can then be added to the subcontract amount.