Do you provide Design Build services? If so, please review the following information to ensure that you are fully covered.
Just because you have a general liability policy does not mean you are fully covered.
Professional liability insurance is often used by architects, engineers, and web designers.
Contractors professional liability insurance protects you from claims coming from mistakes that happen during a professional service.
This coverage has become important for contractors who take on the responsibility of both designing and building.
What Does Contractors Professional Liability Insurance Cover?
When you work on a project that you design and build, you may believe you are covered under a commercial general liability (CGL) policy.
However, this is not the case. Insurers often add a clause to deny professional liability.
A CGL policy covers you the contractor, against bodily injury or property damage due to your service.
But not financial damages.
And because most claims filed against contractors in design are for financial damages, CGL coverage does not apply.
If you make an error during a service and a claim is filed, contractor’s professional liability insurance (CPLI) is there to fill the coverage gap.
When Might a CPLI Claim Arise?
Situations where a CPLI claim may be filed are:
- Improper design of a concrete floor that cracks under load.
- Installation of a heating and cooling system found to be incapable of properly ventilating a building.
- A design defect that prohibits a building from being certified.
- A flaw in a building’s structure that causes a business interruption in order to have the flaw repaired.
What if the design work is subcontracted?
Even if you subcontract the design work and release any liability, you should still carry CPLI.
There are several reasons for this:
- The hold harmless clause or release of liability, may not be enforceable.
- If the design company goes out of business or no longer carries professional liability coverage when the claim is made, you may be out of luck and held responsible for the damages.
- If the design professional’s policy limits are low, you may be liable.
What would result in a claim being filed?
Although claims can be filed for a variety of reasons, here is a common scenario:
A contractor fails to detect the faulty workmanship of a masonry contractor who placed hollow concrete block without proper re-bar reinforcement as specified in the plans.
Once discovered, the structure had to be torn down and rebuilt at a cost of approximately $1 million plus resulting delays in project completion.
How does a CPLI policy work?
CPLI is usually written on a claims-made basis. So, your policy must be active when a claim is made for you to be covered. Because of this, you should carry CPLI continuously so there is no possibility of a claim being denied in the future.
How do I get the right coverage for my needs?
The level of coverage your business needs is based on your individual operations and can vary depending on your range of exposure.
If you work in a certain niche market the policy can be tailored to include specific types of work. If your work varies the policy can be broadened.
Contractors professional liability insurance covers the ever-changing work of contractors. It is designed to cover what a general liability policy won’t.
MRG can tailor a policy to your specific business operations.
As your business grows, make sure your coverage grows with it.
MRG is a Construction Industry Risk Specialist and can help you analyze your needs and make the right coverage decisions to protect your operations from unnecessary risk.
Call us today for a consultation over the phone at 888-245-5180.