Things are changing all the time. It used to be when a traditional construction project was being formulated; there were three important and well-defined steps that took place: design, bid, and build. Under this method, an engineer or architect provided the design services; a project management company took care of bidding out the project, and the construction contractor built the project. Each party had their own responsibilities and the risks that would accompany them.
These roles and the responsibilities related to them are changing. Because newer projects have become more complex and design responsibilities are becoming more fragmented, the parties to a construction contract haven't the defined line between them that used to exist.
As these lines of responsibility between design firms and contractors become blurred, many contractors are assuming unusual risks that their normal contractor's coverage may not address. Contractors are now assuming risks that need to be mitigated with Professional Liability Insurance.
Construction Management Risks
Contractors today are likely to perform construction management services as an agent of the owner or hold separate contracts with subcontractors. In either situation, the contractor is now taking on the responsibility for supervising the subs, scheduling and cost estimating. These types of activities create a specialized standard of care, and a corresponding professional liability risk is presented. The contractor is no longer acting just as the builder of the project but has crept over to design recommendations and gotten involved with project management. All of which used to be a three part process done by three different firms.
Which Coverage For Which Risks
We know that the general liability policy will provide coverage for losses caused by ordinary construction means and methods as long as there is resulting bodily injury or property damage arising from the occurrence. However, the professional liability policy will provide coverage for damages that result from rendering or failure to render professional services.
Circumstances such as project delays cost overruns or having to reinforce a faulty structure wouldn't be covered under the CGL, but would be covered under a professional liability policy if it was caused by professional negligence.
The Contractor's Solution
Many insurance companies that have specialized in the contracting industry are now making available the Contractors Professional Liability Policy. The policy is an answer for contractors that are involved with project design and project management. Although policies differ depending on the carrier you select, most will provide the following coverages:
- Broad professional services definition
- Pollution Liability
- Blanket additional insured coverage for clients of the Named Insured for pollution claims
- Coverage for Joint Ventures
- Prior Firm coverage
- Supplemental coverage for insured expense reimbursement
- Coverage for innocent insureds
- Automatic extended reporting period
- Claims-made coverage with circumstance reporting provision
- $25,000 claims mediation credit
- No lead or asbestos exclusion
- Excess limits on specific projects
- Coverage can be primary or excess
- Subsidiary coverage
- Worldwide coverage
If your contracting firm finds themselves getting involved with the design, bid, or management of a project, your gate to professional liability risks has been flung wide open, and your standard Contractor's Insurance will fall short on many levels. Speak to the professionals at Skyline Risk Management, Inc. (718) 267-6600 and get the information you need to make an informed decision about your contractor's insurance.