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The Coverage Many Contractors are Lacking
10/10/2016

Contractors know they need general liability insurance, but they often aren’t fully aware of the potential gaps in coverage versus their exposures. Design firms and contractors work together to complete a project, but when something goes wrong, who is responsible for the damages?

Contractors are assuming nontraditional risk that their core coverages may not provide protection. Prior to a contractor signing a contract, they should make sure they are adequately protected with the right insurance coverages.

A contractor’s general liability policy with a professional exclusion endorsement can provide limited or no protection for design errors. A coverage that should strongly be considered to fill the gap is Contractor’s Professional Liability. Here are some reasons why contractors need this type of protection:

  • Substantial limits are available at competitive pricing
  • All contractors make field changes to design or offer value engineering. These “value added” services create coverage gaps unless a professional liability policy is in place
  • Many owners are selecting Design Build contractors to speed up the schedule and save construction costs
  • Errors by subcontracted architects and engineers create professional liability exposures for Design Build contractors
  • Insures a contractor for damages arising out of negligence of the contractor or its sub consultant architect/engineer
  • Broad protection for supposed errors or omissions in the delivery of design and construction management services
  • Provides coverage to the insured for both the cost of defending the claim and alleged damages

Design Error Liability has a very long tail; the Statute of Repose can last 10 or even 12 years depending on the location of the projects. The architect’s professional liability policy lapses or limits are exhausted with other claims.

The AssuredPartners construction team will help you investigate your professional liability exposures to secure and protect your assets. To learn more, visit AssuredPartners Construction.

Source: International Risk Management Institute

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