Is the amount of damages limited to insured coverage?

• A. Yes, limited to insured coverage.
• B. Only for property damage.
• C. No, the contractor is liable for all damages.
• D. Only for indirect damages.

Answer: (C)

Damages under the AIA A201 are not capped by the amount an insurance policy will pay. Insurance transfers risk and pays covered losses up to policy limits, but it doesn’t set the contractor’s liability for breach. If the contractor’s breach causes damages, the owner can pursue the actual damages resulting from that breach, and the contractor bears responsibility for those damages up to the terms of the contract and applicable law. Insurance may help cover part of the losses, but it does not automatically limit liability to the insured amount. So the statement that damages are limited to insured coverage isn’t correct; the contractor is responsible for the full amount of damages caused by breach, as allowed by the contract and law.