Risk Management and Insurance Brochure

OVERVIEW

JE Dunn Construction Company is faced, as are all contractors, with purchasing insurance products to protect itself and its clients from the risks of bodily injury and property damage arising from the work of the contractor and its trade partners. Trade partners are those with whom we have a subcontract or supplier contract, with limited exceptions. Additionally, JE Dunn buys insurance or surety products to protect itself and its clients from contract default. Unfortunately, many of the standard insurance and surety products available to the average contractor are either inadequate and include detrimental exclusions, or are expensive to obtain and costly to the contractor, its clients, or both.

This situation presents an unacceptable exposure for JE Dunn and its clients. In response, JE Dunn has developed a broad and robust program of insurance and surety coverage that

far exceeds that which is available to most contractors. JE Dunn’s programs maintain broader coverage with less exclusions and a longer coverage period – all at a cost that is competitive with other similarly situated contractors’ traditional programs.

JE Dunn’s programs provide excellent protection over a longer than average term due to its strategic partnerships with carriers. While annual insurance and bond renewals are viewed by some as a commodity, JE Dunn views it as an opportunity for a costfavorable partnership. When JE Dunn established the current version of its insurance and trade partners default programs, it took a careful and thoughtful approach to surveying the market and identifying partners. JE Dunn wanted programs and partners that would be advantageous to the company and its owners across all types of projects – in fact, the program

provided to commercial projects is the same, strong program JE Dunn uses on its federal government projects. The last piece of the insurance puzzle that is a traditional requirement for every project, but generally not given much thought, is Builder’s Risk insurance.

Aside from protecting the owner’s investment, the policy’s primary aim is to support the contractor’s obligation to deliver the project. Owners and lenders quickly think about their risk but often forget that it is ultimately the contractor who may have the risk of rebuilding after a loss, including cost of debris removal, increased material costs and labor, and delay. For these reasons, JE Dunn has developed minimum coverage standards to ensure that the interests of all parties are adequately insured. JE Dunn’s minimum standards are included on the following Builder’s Risk page.

Policy Form:

Named Insured:

All Risk, including flood, water damage, earthquake and named windstorm

JE Dunn Construction Company; Owner and Trade Partners shall be included as additional insureds on the policy.

Limit of Insurance: Full value of Contract, including Change Orders

Insurer Rating: A-VIII or better

Permission to Occupy: No limitation

Earth Movement/Subsidence: No exclusion for earth movement or unexpected subsidence

Minimum Sub-limits for

Extensions of Coverage:

Property in Transit $10,000,000

Property at Temporary Locations $10,000,000

Earthquake, Flood or Wind full contract value

Water Damage full contract value

Ordinance or Law/Demolition & increased Cost of Construction $10,000,000

Debris Removal 25% of insured loss up to $15,000,000

Expediting Expenses and Extra Expense 40% of insured loss up to $15,000,000

Sub-limits are minimums and subject to increase based on specific project conditions (i.e., location, size, and construction type)

Deductibles:

Additional Terms & Conditions:

Deductibles are based on project size and location. Additional information will be provided with initial pricing.

No wind-driven rain, snow or exclusion relative to interior damage

No coinsurance provision

Contractors overhead & profit shall be included in loss settlement

No warranties that suspend coverage, such as fencing, lighting, security, sprinkler requirements

No limitation based on liquidated damages

No exclusion for collapse

Contractor shall be authorized to make immediate repairs without insurance adjuster inspection

Emergency Property Protection Expense provision

DUNN CONTROLLED INSURANCE PROGRAM (DCIP) INFORMATION

Contractors, as a rule, do a fair job of procuring insurance during the term of actual construction to provide coverage for personal injury and property damage. But, uncertainty prevails for the period after Substantial Completion of the project up until the legal obligation – a statute of repose, for example – expires.

Trade partners, especially, may discontinue business during that period, resulting in no “Completed Operations” coverage since it is purchased annually. Additionally, trade partners seldom carry the quality and quantity of insurance that project risk dictates. Often, trade partners insurance contains multiple unacceptable exclusions or limitations. Finally, in the case of a claim, the number of entities and carriers involved in typical claims administration – where multiple adjusters

represent multiple insurance carriers with differing agendas – creates friction, inefficiency and delays in recovery while increasing the cost of settling claims.

Our experience with managing a CIP is among the best in the industry.

JE Dunn determined there was a better way through the use of a controlled insurance program (“CIP”) that JE Dunn crafted for its specific use. Projects with a contract value greater than $1 million are enrolled in a program which provides General Liability coverage (“GL Only”), while larger projects are enrolled in a program that provides both General Liability and Workers Compensation coverage (“WC/GL”).

The programs provide coverage for JE Dunn and for all enrolled trade partners during construction and for completed operations for a period equal to the relevant state’s statute of repose.

JE Dunn remains competitive by having low rates, which are driven by excellent safety and quality performance.

Under JE Dunn’s CIP, if a covered claim arises, there is a single point of contact for adjusting and paying the claim, no matter which covered entity is involved. Additionally, on bigger projects, the program provides “per project” insurance limits that exceed most traditional programs, eliminates several common exclusions, and includes completed operations coverage for longer than typical programs. Finally, there are no deductible costs to the owner, as that risk is calculated in the rate JE Dunn charges for the coverage.

Since 2005, Dunn has enrolled hundreds of projects with an estimated value exceeding $33.2 billion into the company’s CIP. JE Dunn’s experience

with managing a CIP is among the best in the industry. And, Dunn remains competitive by having low rates driven by excellent safety and quality performance. In fact, Dunn believes that its CIP encourages improved safety and quality results for JE Dunn’s projects.

JE Dunn also sponsors a workers compensation program. This program provides coverage through the JE Dunn CIP on larger projects for the labor force of both itself and its enrolled trade partners. This program provides for a unified approach to worker safety and injury treatment and has shown positive results in loss trends since its inception.

GENERAL INFORMATION

What is the Dunn Controlled Insurance Program (DCIP)

The DCIP is a coordinated master insurance, safety, and claim management program for both JE Dunn and enrolled trade partners working on a project.

Benefits of the DCIP

• Broad insurance coverage for all construction activities

• Higher limits of liability that exceed most traditional programs

• Eliminates several common exclusions found in most traditional programs

• Completed operations coverage based on the state statute of repose, after substantial completion of the project

• In the case of a claim, there is typically a single adjuster, reducing friction between parties, increasing efficiency, and reducing the cost of settling claims

• No deductibles to the owner, as that risk is calculated in the rate JE Dunn charges for the coverage

• JE Dunn believes our DCIP provides

broader coverage with not only less exclusions but also a longer coverage period – all at a rate which is competitive with other similarly situated contractors’ basic traditional programs

Who enrolls in the DCIP

• All eligible trade partners of any tier

Who is not eligible to enroll in the DCIP

• Vendors, suppliers, material dealers, and firms whose sole function is to transport materials, supplies, tools, equipment, or other items or persons to or from the project site

• Trade partners performing hazardous material remediation and their consultants, structural demolition Trade partners, elevator Trade partners, design professionals

What is not covered under the DCIP

• Property insured by BR; Automobiles, contractors’ personal property, tools, and equipment, professional liability

DUNN CONTROLLED INSURANCE PROGRAM (DCIP) INFORMATION

SUMMARY OF COVERAGE

Coverage:

General Liability limits (*) $ 5,000,000 per Occurrence

(shared by both JE Dunn & Trade partners) $ 10,000,000 Products/Completed

Operations Aggregate $ 10,000,000 General Aggregate

(shared by both JE Dunn & Trade partners) $ 50,000,000 Products/Completed Operations Aggregate $ 50,000,000

* The DCIP General Liability policy provides projects with a contract value greater than $15 million “per project” insurance limits.

** The DCIP provides both General Liability and Workers’ Compensation for projects with a contract value greater than $30 million.

TRADE PARTNER DEFAULT INSURANCE (SDI) INFORMATION

JE DUNN’S TRADE PARTNER DEFAULT PROGRAM

JE Dunn’s Trade Partner Default Program is backed in part by AXA XL Default Insurance to protect its projects against the impact of subcontract defaults. While Default Insurance provides the majority of coverage for the program, other coverage methods may also be provided through a combination of performance and payment bonds, required letters of credit, and other risk management techniques. Regardless of the method of security, this program protects our projects from the cost exposure of default through our unified program.

What is Trade Partner Default Insurance

Default Insurance is a comprehensive insurance policy through AXA XL that pays for costs associated with trade partner default.

• JE Dunn aggressively manages and monitors trade partners through a collaborative ERP system

What if a default occurs

What are the benefits of Default Insurance

• Provides broad coverage with a reliable single source of claims processing

• Eliminates adversarial three-party claims relationships related to a Subcontract Surety Bond

• Provides a cost-effective alternative to Subcontract Surety Bonds

• Provides completed operations coverage up to 10 years

• Lenders prefer the added security that SDI offers

How does JE Dunn use Default Insurance to prevent trade partner default exposure

• JE Dunn has an industry-leading pre-qualification approach, dedicated carrier risk engineers, JE Dunn risk analysts and sophisticated underwriting

• Single point to resolve claim in an immediate manner, resulting in minimal impact to project schedule or costs

• Default Insurance allows JE Dunn to:

– Take immediate action to remedy the default

– Replace non-conforming work

– Fund replacement trade partners

– Accelerate the schedule if there is a delay

– Fund any legal fees

• AXA XL and JE Dunn maintain dedicated Default Insurance claims teams focused on providing responsive service and effective loss control management

Coverage

$ 50,000,000 each loss

$100,000,000 aggregate limit