Mind the Gap between Contractors Professional Liability and CGL's
Contractors Insurance No Comments

Do you ever get annoyed by the gap between the train and the platform when you begin your early morning commute (No? Okay, just me). But, I think more of you might be annoyed by an erroneous claim that results in financial loss for your company. A loss that could be avoided with a new kind of liability insurance.A contractors professional liability policy covers claims that arise from errors and omissions (a.k.a. claims involving inadequate work or negligent action) involving professional services performed by, or on behalf of, a contractor.

Contractors Professional Liability Coverage – Some Important Features

So, if you are a contractor and have any of the following responsibilities (design work, design delegation, or construction management) then you may want to consider acquiring a contractors professional liability policy.  Some of you may argue that you are already protected through your commercial general liability policy (CGL) but a CGL policy only responds to claims involving bodily injury and property damage. Without a contractors professional liability policy you could find yourself in a bit of a pickle when someone makes a claim that involves economic loss (nobody likes losing money). Here’s how you can protect yourself.

  • Coverage is typically written on a Claims Made Form, as opposed to an Occurrence Form. It is important to find out whether coverage applies to work done before the policy is purchased.
  • Whereas defense costs under a CGL policy are normally paid in addition to the policy limits, defense costs under a Contractors’ Professional Liability Policy are usually included in the limit. Be sure to purchase a high enough limit of coverage.
  • Company forms differ widely with respect to breadth of coverage and included features. It is important to review carefully the policy being offered.  The least expensive option is often not the best option.
  • Many companies include or offer Contractors’ Pollution Liability Coverage as part of the Contractors’ Professional Liability Policy. This feature should be explored if it is an available option.
  • Some companies are offering rectification/mitigation of damages coverage. This first party coverage applies when a design defect is discovered during the course of construction.  The coverage pays to correct the problem before it results in a more costly professional liability claim.
  • Coverage is limited to professional services defined in the coverage form or on the declarations page. Be sure that the definition is broad enough to cover all potential operations.

Gaps in real life are a nuisance, gaps in insurance are, well, a little more dangerous. So, even if you are not required to carry contractors professional liability insurance you may want to look into acquiring it. Stay safe and mind the gap!