Architects do it. Engineers do it. General contractors should do it, too.
We’re talking about making sure they’re covered by professional liability insurance, coverage that can help protect GCs as the lines between design and construction continue to blur and they assume greater construction management responsibilities.
While a general liability will cover bodily injury or property damage that arise from design defects, professional liability policies cover any damages that result from professional negligence – no injury or property damage required.
Determining whether a professional liability policy makes sense for your construction business is fairly straight-forward:
You need one of these policies if, as GC, you’re overseeing the work of subcontractors, or have taken on the responsibility of scheduling and cost-estimating. The same goes for GCs who act as the lead design-builder or enter into a joint venture with a design firm. All these activities create a recognized standard of care and a corresponding professional liability risk.
Not all policies are uniform, but the best of these can help when GCs face claims they failed to make a project deadline. They also can help when claims are made that a project didn’t come in on budget. A GC dealing with allegations that their changes resulted in project defects or that they failed to discover design defects also would find a professional liability policy useful.
Consider, for example, a GC who hires a mechanical engineer who mistakenly orders an undersized cooling system and who happens to not carry errors and omissions insurance. That’s now on the GC.
Or the GC whose estimate for a new warehouse loading dock came in too low because the original design was found to be inadequate.
More seriously, imagine that a subcontractor improperly designed and installed an HVAC system and that, as a result, mold formed in the chillers, making people who work in the building ill.
The best construction professional liability policies include subpoena expense coverage, so that there’s money to help in case you’re served with a lawsuit or subpoena.
There’s also disciplinary proceeding expense reimbursement coverage, which, just as it sounds, helps cover the out-of-pocket costs when you or a staff member is required to attend a disciplinary hearing.
As in most things related to insurance, there’s more to this than meets the eye. But do keep one thing in mind: the appetite of carriers interested in writing construction managers is inconsistent.
Some will write strictly commercial projects. Others will write a mix of retail and condominium work. Some handle residential-only projects. Some require a licensed architect or engineer on staff to offer coverage on an architects and engineers policy form, while others will entertain the unlicensed construction manager under a miscellaneous professional liability form along with a contingent bodily injury and property damage endorsement for claims arising out of the insured’s professional services as construction manager.
Got all that? Yes? Maybe? Well, that’s where we can help. My email address is below or fill out the short form if you have any questions or would like to learn more.
Michael Kline is a CCIG Vice President. Reach him at MichaelK@thinkccig.com or 720-212-2042.
CCIG is a Denver-area insurance brokerage with the full-service capabilities of a national brokerage. We do more than make sure you have the right policy. We also help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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