The Inter-Relationship Of Risk Management - Provisions In Construction Contracts: Part 2

In a previous article we highlighted the need for contract drafters to give consideration to the inter-relationship of common risk management provisions in construction contracts and specifically reviewed the relationship between a maximum liability clause and the requirement to obtain a performance bond in a stipulated amount. The within article explores the potential concerns that arise when parties tie a maximum liability clause to the insurance provisions in the contract.

The inter-connection between maximum liability clauses and insurance provisions is most often found in contracts involving design professionals and engineering firms, although they are also seen in standard terms and conditions relating to the sale of goods. Most commonly, one encounters a contract that states any liability is limited to the extent that such liability is covered by the insurance in effect or, alternatively, that liability will be limited to the amount of insurance required by the