The Commercial Affiliation Marketing unit of CNA has announced a strategic partnership with the American Subcontractors Association, Inc. (ASA) to address contractual transfer of risk issues.

Construction contracts frequently shift risks of loss down to subcontractors regardless of who best controls those risks through the use of indemnity clauses, additional insured (AI) requirements, and waivers of subrogation for workers’ compensation and general liability insurance. It is estimated that in the past 10 years, one-third of the dollars CNA paid for construction general liability losses resulted from indemnification provisions in contracts and additional insured endorsements.

"As a leading provider of insurance protection for the construction industry, CNA continually anticipates new trends affecting our insured and develops products and services to help them understand their exposures," said Brian Fischer, national program director, Commercial Affiliation Marketing.

"We believe that our relationship with ASA can be a catalyst for positive change by addressing equitable risk management solutions for parties engaged in a construction contract," he said.

In March 2001, ASA’s board of directors adopted a group of policies that identify several common risk-shifting techniques, such as AI requirements, as generally creating unreasonable financial risks for subcontractors.

"The financial impact of risk transfer is hard to quantify, but it would be hard to exaggerate it," said ASA President Gerry Martin.

"The partnership between ASA and CNA will help the construction industry understand the real impact of risk transfer without regard to which party controls the risk. Working together, I am confident that we will gain a greater level of insight about how to counter this trend," said Martin.

As part of the partnership between the two groups, a representative from CNA will serve on ASA’s Task Force on Risk Management.

This task force is responsible for developing and implementing ASA’s education and advocacy efforts to eliminate inappropriate risk transfer and introduce more appropriate risk management techniques to construction subcontractors and others in the construction industry.

Solutions developed and tested with ASA members will be used to develop customized "risk transfer best practices" to assist CNA clients in managing this exposure.

ASA members have been closely examining different ways of addressing inappropriate risk transfer since late 2000 when they kicked off a national campaign to raise awareness of and combat this problem.

ASA’s campaign includes educating the construction industry and public policymakers about market trends and implementing legal reforms that address inappropriate risk transfer.

ASA periodically posts updates about the campaign and new resources for constructors on its Web site.

For more information, visit www.asaonline.com.

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