Subcontractors No Longer at Fault in Kansas
by David Medes

ALEXANDRIA, Va. – Starting Jan. 2, 2009, the Kansas construction industry will benefit from the elimination of a legal loophole used by some firms to skirt responsibility for paying for injuries and property damage caused by their own negligence on job sites.

On May 9, 2008, Gov. Kathleen Sebelius (D) signed S.B. 379, which closes “the additional insured loophole,” an arrangement used to force subcontractors and their insurers to take responsibility for job-site accidents and damage caused by other firms’ negligence. ASA-Greater Kansas City (ASA-GKC), a chartered chapter of the American Subcontractors Association (ASA), educated legislators about the loophole, culminating in passage of the legislation by a 124-1 vote in the Kansas House on April 30 and passage by a 35-1 vote in the Kansas Senate on May 1.

ASA-GKC spearheaded the effort to enact S.B. 379, which makes Kansas the sixth state to close the additional insured loophole in ASA’s national campaign to eliminate the inappropriate shifting of risks to subcontractors. “Each victory in this national battle should make it a little easier for the next ASA chapter to succeed in its state,” said ASA-GKC Government Relations Chairman Bill Miller, Building Erection Services, Olathe, Kan., who led the chapter’s effort. As a result of the closure of the loophole, Kansas will receive a score of 100 percent in the category of anti-indemnity laws in the next edition of The ASA Report: The Policy Environment in the States, ASA’s annual evaluation of state public policies impacting subcontractors.

The law will increase accountability on job sites by ensuring that companies cannot transfer the responsibility for their own negligence to other firms with the stroke of a pen. It prohibits provisions in construction contracts that require a party “to provide liability coverage to another party, as an additional insured, for such other party’s own negligence or intentional acts or omissions.” Kansas law already prohibits contract provisions that transfer responsibility for injury and damage due to negligence, but some firms work around the prohibition by contractually requiring an insurance policy that has the same risk-shifting effect.

In a typical “additional insured” arrangement, a prime contractor transfers potential liability by requiring a subcontractor to name it as an “additional insured” on the subcontractor’s general liability insurance policy. If the prime contractor causes a job-site injury or damage and a claim is filed, the subcontractor’s policy responds on behalf of the prime contractor. The claim becomes the responsibility of the subcontractor and its insurer; therefore, the prime contractor avoids the consequences of the claim. The new Kansas law limits the types of claims that subcontractors and their insurers must respond to on behalf of prime contractors.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.
 

American Subcontractors Association, Inc.
1004 Duke Street
Alexandria, VA 22314-3588
Contact: David Mendes
(703) 684-3450, Ext. 1335
dmendes@asa-hq.com