Legislation

BILL NUMBER: SB 195 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Calderon
FEBRUARY 7, 2007

An act to add Section 3267.5 to the Civil Code, relating to works of improvement.

LEGISLATIVE COUNSEL'S DIGEST

SB 195, as introduced, Calderon. Construction projects: wrap-up insurance: disclosures.

Existing law accords certain rights and protections to subcontractors and other persons who perform work on construction projects, including the right, under specified circumstances, to file and enforce liens.
This bill would, in addition, require the owner, developer, or general contractor of a construction project who proposes or obtains a wrap-up insurance policy, as defined, to provide to each subcontractor who is covered, or whose coverage is contemplated, under the wrap-up insurance policy, before the subcontractor commences work on the project, specified disclosures and documents regarding that policy. The bill would allow a subcontractor, after receipt of those disclosures and documents, or if they have not been made to the subcontractor prior to the time for commencement of work on the construction project, to rescind and declare any subcontract agreement null and void, or to negotiate for an adjustment to the contract.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. Section 3267.5 is added to the Civil Code, to read:
3267.5. (a) The owner, developer, or general contractor of a construction project who proposes, offers, requires, obtains, or otherwise implements a wrap-up insurance policy for the project shall provide, at a minimum, to each subcontractor who is covered, or whose coverage is contemplated, under the wrap-up insurance policy, before the subcontractor commences work on the construction project, all of the following disclosures and documents:

  1. A complete copy of the wrap-up insurance policy or, if the policy has yet to be issued, a copy of the binder confirming coverage terms.
  2. Whether the wrap-up insurance policy provides coverage for premises-operations or products-completed operations and, if so, the following information with respect to that coverage:
    1. The limits and aggregates of the coverage.
    2. Whether there is a time limit on the coverage.
    3. Whether defense expenses are included in the limits and aggregates of the coverage.
    4. Whether any applicable excess policies exist and, if so, their limits.
  3. The identity and total number of projects, and the total P by the wrap-up insurance policy.
  4. Whether it is anticipated subcontractors will be involved in the project who are not covered under the wrap-up insurance policy.
  5. The definition of "occurrence" or "claim" and whethe it applies to each individual unit or home, or collectively to all units or homes within a single lawsuit.
  6. The amount of any deductible or self-insured retention requirement and all of the following information with respect to that deductible or self-insured retention:
    1. Its application with respect to each occurrence and on an aggregate basis.
    2. How allocation is to be made among the participating or named insureds.
    3. Whether it applies on a home-by-home, unit, or project basis.
    4. How it is to be applied or allocated among the insureds for both defense and indemnity purposes, including contemplated timing, collection, and administration of self-insured retention payments.
    5. How self-insured retention obligations of parties not responding to a claim or litigation are to be addressed.
  7. Any exclusion or any other endorsement that changes, limits, or alters coverage, and whether it is anticipated that any specific construction activities or subcontractors will be uninsured under the wrap-up insurance policy.
  8. Whether the wrap-up insurance policy contains a waiver of subrogation between owner, contractor, and subcontractors.
  9. Whether any project design professionals are to be participants in the wrap-up insurance policy and, if not, whether there are any contractual limitations to design professional liability.
  10. The amount to be charged to the subcontractor, as a percentage of its contract, or otherwise, for participation in the wrap-up insurance policy.
  11. Whether the wrap-up insurance policy provides for any dispute resolution procedure between the insured parties arising from the implementation and administration of the policy.
    1. After receipt of the disclosures and documents required by subdivision
    2. Or if any of those disclosures or documents have not been provided to the subcontractor prior to the time for commencement of work on the construction project, the subcontractor may rescind and declare any subcontract agreement null and void, without penalty or recourse by the owner or contractor, or may negotiate for an adjustment to the contract amount and any additional terms to the subcontract that the parties deem necessary.
    3. For the purposes of this section a "wrap-up insurance policy" means a liability insurance policy, or series of policies, written to cover risks associated with a work of improvement, as defined in Section 3106, and covering two or more of the subcontractors that work on that work of improvement.


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