Recently, I started laughing as I recalled the time (many years ago…not yesterday, just so we’re clear) my older brothers “coaxed” me into tying a pull string firecracker to the barn door that stood between my dad and his truck. The next morning at 5 a.m., coffee in hand, my dad met a loud KABOOM when he opened the door.

Did I know my actions would result in consequences? Likely. Did I point the finger at my brothers because “they told me to do it”? Totally. Did it get me out of trouble? Not even a little. Was it worth it? Yep!

What’s the correlation to my story and professional liability…simply put…consequences. Every action has a consequence — good or bad — especially in construction.

General Liability Insurance Isn’t Enough for Contractors

Collaboration. On time. On budget. Construction management. Project management. Program management. These are words we hear in conjunction with construction projects every day.

Contracts are getting more onerous — some of you are assuming responsibilities broader than your scope of work; many of you start work with incomplete designs; and still others of you are construction managers, project managers, or program managers.

The lines of responsibilities have blurred between design firms and contractors, including construction means and methods as well as professional liability. Gone are the days of relying on your Commercial General Liability policy as a primary source of insurance protection.

Exclusions and Limitations of General Liability Insurance for Contractors

So, here’s what you need to know about your professional liability. The following are general liability exclusions and limitations that expose the need for Contractors.

Full Professional Liability Exclusion

Full Professional Liability Exclusion wording includes, but isn’t limited to, those preparing, approving, or FAILING TO prepare or approve:

• shop drawings, opinions, reports
• field order, or change orders
•  supervisory and inspection activities

A fair General Liability and Umbrella policy should give back coverage for damages related to “Construction Means and Methods” and “design errors” resulting in a third-party bodily injury or property damage claim.

Be aware of Coverage Trigger, which refers to loss to a third party for bodily injury or property damage related to an occurrence and Economic Loss when no coverage applies here.

Contractor Professional Liability

Contractors Professional Liability can shore up these General Liability holes by providing coverage related to economic loss damages and contractor professional services.

Contractor professional services are mistakes in or failing to prepare or approve shop drawings and field modifications from the design, or catching issues during your supervisory and inspection activities.

Don’t Face Risk Alone

Consider this real-life situation for a moment on how a Contractors Professional could help with daily risks face by contractors.

An HVAC contractor, who’s ahead of schedule, elects to make a field modification on the path to run their duct so they don’t have to wait on the electrical contractors to run their conduit above their path. Upon completion, the owner sues for $1,500,000 (the difference in energy savings they were promised to what they will realize as a result of the field modification to the duct path by the HVAC contractor). The problem? The path the duct was laid prohibits the system from maximizing its potential.

• General Liability — Carrier excludes on two fronts: loss damages and the Professional Liability Exclusion (no coverage for activities for field modifications without prior approval).
• Contractors Professional — This would provide coverage for defense counsel and the $1,500,000 in economic damages as a result of the field modification.

Questions

Hopefully your head isn’t spinning too much right now. If it is spinning, then I double dog dare you to write your questions and thoughts below, as I’d like to hear them. What makes sense? What doesn’t? What do you need more information on? What can our team at Holmes Murphy help you with? You can trust me — I’m beyond pulling the firecracker stunt on people these days!