policy coverage to satisfy third-party claims. An SIR is a form of coinsurance commonly used in the construction industry to offset premium costs. A policy deductible further offsets the stated limit of insurance. These offsets transfer indemnity directly to an insured and reduce insurance coverage limits. In such cases, the insured must pay for claims, legal fees and damages before insurance takes effect under the policy. Contractors should be aware of these coinsurance limits because they can apply per claim. For example, in the case of a large deductible and/or SIR limit, combined with an event involving multiple parties and claims, these financial insurance risk-transferring terms could eliminate insurance coverage and pass all financial risk directly to the design team. One should also be aware of the insurance policy provisions. Standard insurance policy terms are typically changed by endorsements that may eliminate coverage one might expect is usually available through insurance. For example, some insurers endorse general liability policies to eliminate coverage for property damage caused by earth subsidence or movement. When a contractor plans to perform underground or foundation work, it is particularly important to specify that coverage for earth subsidence and move- ment is included in the policy terms. Attention should also be made to Explosion, Collapse or Underground (XCU) coverage. This coverage is usually modified by insurance carriers. Many carriers eliminate this coverage through endorsements, resulting in the exclusion of insurance coverage for explosion, collapse or underground risks (known as XCU risks). If those risks are implicated in a project, it is good practice to specify with insurers, through contractual terms and with the design team, that XCU en- dorsements eliminating coverage will not be allowed. Promoting Project Success There is a spectrum of approaches to protecting abutters’ structures and miti- gating the potential for damage and delay. The project team for the new construction is in the best position to establish criteria and expectations for the work. Indifference and ignorance create the potential for high risk. Conversely, knowledge and com- munication enhance awareness, and allow for proactive protections for existing adjacent structures. Even small steps can help improve knowledge, awareness and the ability to navigate risks. For example, simple photos or measurements to document precon- struction conditions create an inexpensive baseline to understand whether changes have occurred during the construction process. This puts the project team in a much stronger position if the abutter claims that its structure was damaged due to construction activity. Staying on the low-risk side of the risk spectrum puts all parties in a better position to understand and mitigate risks, identify problems and collaborate to make corrections as the work proceeds. This collaborative and informed approach can effectively mitigate damage, associated costs and delays, and potential litigation. Conclusion Construction professionals and risk man- agers need to be aware of the threats associated with construction projects, particularly with excavation projects adjacent to existing structures in urban environments. In Chicago, for example, liability for owners, contractors and engineers exists based upon state and local city laws, ordinances and regulations. These risks are passed on by new construction owners to contractors and construction professionals through procurement docu- ments. Lack of understanding by the project/construction team and lack of communication with abutters can result in third-party damages, increases in project costs and costly repairs that also cause delays. In certain cases, these costs can become extravagant if they cannot be passed on to insurers. Best practices for a successful project include understanding and planning for the technical, legal and insurance risks, engaging and educating abutters prior to and during construction, and monitoring construction to allow for appropriate course correction as issues arise. Scott J. DiFiore, P.E., a principal at Simpson Gumpertz & Heger, has 25 years of experience in structural and geotechnical engineering. DiFiore evaluates complex problems related to below-grade construction and soil-structure interaction, including underpinning systems, excavation- support systems, deep and shallow foundations, buried utilities and other underground structures. Gregory R. Meeder, a partner of Holland & Knight, is a nationally recognized construction attorney who handles civil trial matters in state and federal courts on a local and national basis, proceedings before governmental and administrative agencies, and arbitration and mediation proceedings. Meeder is also the firm’s Midwest regional construction practice group leader. James P. Chivilo, a partner at Holland & Knight, concentrates his practice on construction law, mechanic lien law, premise liability, general tort defense, insurance law and general commercial litigation matters. Chivilo represents many client types, including owners, developers, contractors, suppliers, and governmental entities involving claim administration, project management, complex litigation and dispute resolution. Matthew H. Johnson, P.E., a principal at Simpson Gumpertz & Heger, is the structural engineering division head for its Chicago office, leading a diverse team that designs, investigates and rehabilitates buildings and infrastructure, structurally complex building enclosures and non-traditional structures. These include complex concrete formwork, structural steel construction and temporary structures. DEEP FOUNDATIONS • MAR/APR 2020 • 91
