Hazardous material liability during lease hold construction
We have an existing lease on a vacant space attached to our current facility. We are in process of building out this space but have run into a potential liability gap and need to navigate an solution. General contractor is starting with AIA 2017 rev. general conditions. Under those terms, “owner” is to indemnify General for harm occurring to General’s employees or subs. caused by exposure to hazardous substances. In these contracts, owner can generally be substituted with tenant but in this liability situation it is a bit difficult. Our lease with owner warranted that there are no hazardous materials but that warrant is based on actual knowledge of a environmental study done on building when owner purchased it about 2 years ago. Our legal is hesitant to agree with indemnification since we don’t own the building and should not take the liability. We have offered to delete indemnification clause and let court figure out who is liable, if there is an issue, but GC is holding firm. Do you know if there is an insurance provider who would cover our liability in this event so we can buy coverage and more on ?
Thanks for reaching out! This seems a bit complicated. I do know that there might be various types of surety bonds that might be of help. You can read up on surety bonds and the different types with our guides on surety bonds (https://fitsmallbusiness.com/what-is-a-surety-bond/) and the 4 types of surety bonds (https://fitsmallbusiness.com/types-of-surety-bonds/).
We also have an article on liability insurance that might be helpful (https://fitsmallbusiness.com/commercial-general-liability-insurance-cgl/).
Ultimately, I’m not sure if an insurance company will insure you for this specific instance since it seems like there is some significant likelihood that you’ll be liable. And if there is an insurance company that will my gut tells me the premiums will be quite high. However, it’s always best to speak with a legal professional (which it sounds like you did) and take their advice.
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