Taking a cue from architects and engineers, construction contractors have started inserting limitation of liability clauses in their construction contracts to manage risk and limit financial exposure. This article will address the specific risks that can be limited through an LOL, tips for negotiating the LOL terms with reluctant owners to cover those specific risks, how to limit unintended consequences of an LOL (such as relieving an insurer of its obligations to cover certain losses), and approaches to setting the amount of the liability cap in the LOL.

Addressing Particular Risks
An LOL can address a wide range of risks, including:

• Damages for delay
• Liability for non-conforming or defective work
• Liability for third-party bodily injury or property damage
• Liability excluded by a general liability policy (e.g., pollution and cyber liability)
• Liability related to intellectual property

Reprinted courtesy of Ellen Chapelle, Richard Reizen, Hannah Batsche, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.