According to the International Risk Management Institute, contractors, project owners, and project professionals are increasingly interested in the niche market of Contractor’s Professional Liability Insurance (CPLI). Yet, less than half of all contractors in need of the coverage are buying it. Why is that? It might be that contractors don’t fully understand what the coverage is designed to do. We hope this update will help our clients analyze their exposure and determine a course of action.
Contractors have a professional liability exposure when they perform or subcontract design, modify plans, change a manufacturer’s specifications, or provide professional construction management services to a project owner. This exposure is of increased risk in design build projects. Most, if not all, contractors’ general liability insurance policies include a professional liability exclusion that removes coverage for claims arising from their professional services work.
Contractor’s Professional Insurance is designed to provide the contractor with coverage for defense costs, third-party losses resulting from professional negligence, and pollution, if coverage has been added. Defense cost coverage alone is important, even if allegations against the contractor are false, which can present the contractor with a financial burden that might significantly impact the bottom line. Sometimes the biggest exposure is a simple conversation or discussion between the contractor and owner that causes a professional liability situation.
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