Subcontractor default insurance (SDI) remains a popular alternative to surety bonds, with its primary selling point-premium savings for the coverage purchaser. Most project owners assume they are protected from subcontractor default when the construction manager (CM) or general contractor (GC) purchases an SDI policy. However, a mounting number of court decisions prove otherwise. Unless the project owner purchases the SDI policy and is the named insured, coverage may be unavailable to the project owner to offset its losses in the event of a subcontractor default. Even being named by an endorsement to a CM or GC's SDI policy does not guarantee coverage for the project owner, due to very strict insurance coverage limitations that are often contained within those policies.
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