General contractors are professionals who are responsible for overseeing construction projects, including remodels and improvements. They typically form direct contacts with property owners, verify that all workers on a project (subcontractors, suppliers, etc.) are compensated, and gather and organize lien releases from all of these individuals. Much like other professionals, such as architects and engineers, contractors are exposed to certain risks from which they need protection. Therefore, they often obtain professional liability insurance. Here is a close look at this subject.
What Is Professional Liability Insurance For Contractors?
Professional liability insurance, also commonly known as errors & omissions (E&O) insurance, protects workers against claims of negligence from clients.
If you’re a general contractor, this type of insurance shields you from construction-related mistakes. Here are the specific coverages that are included in a standard contractors’ professional liability (CPL) insurance policy:
Economic Loss Coverage
Financial loss is one of the largest risks you face as a contractor. Construction projects generally must be completed within a specified budget and by a certain deadline.
Economic losses can result from claims of design errors or design delegations and a CPL policy will help cover these losses.
For instance, if you incorrectly estimate the cost of a project (such as a tool shed), you could face liability for this discrepancy. This would be an example of a design error claim.
If you subcontract the design of a property’s electrical system to an engineer who does not have professional liability insurance, the property owner could hold you liable if the engineer does not correctly design the electrical system. This would be an example of a design delegation claim.
Pollution Liability Coverage
Construction sites are often hotbeds of several types of pollution, including air, soil, and water contamination.
Therefore, pollution claims from third-parties can arise following certain on-site tasks such as drilling, excavating, and land clearing.
These activities can especially cause significant pollution if they are performed using large vehicles or machines that emit diesel fuel.
Your contractors’ professional liability insurance policy will cover you against claims related to failure to detect contaminants on your job site.
The term “indemnity” refers to a contract that two parties agree to. Indemnity coverage protects you as a contractor if you file a first-party claim against a design professional, such as an engineer or architect, following a loss.
You must prove that the worker is legally liable to you for said damage in order to recover. Depending on the insurer, indemnity coverage may either be included in a CPL policy or offered as an add-on (with an extra premium).
Third-party Liability Coverage
This coverage will protect you in the event that a subcontractor incorrectly lists or omits a measurement on a property. For example, if an architect miscalculates the dimensions on a property’s front door (or leaves out a measurement), this could substantially affect the entire construction project and you can file a claim against this professional for the design error.
The risks, losses, and negligent acts that subcontractors and design-build professionals commit sometimes vary depending on the type of projects they work on.
Certain insurers will customize their CPL policies to cover your unique risks. Some insurance companies also offer umbrella policies that are designed to provide comprehensive coverage. Be sure to choose a policy with limits that are high enough to satisfy your needs.
It’s also important to note that CPL insurance is slightly different from builders’ risk coverage. Although both types of coverage provide protection against similar losses, the latter is typically purchased by a project owner rather than a contractor.
Speak to the Experts About Professional Liability Insurance For Contractors
Reach out to the experts at JMG Insurance Corp for more information on professional liability insurance for contractors. Since 1916, we have been dedicated to providing clients in Connecticut, New Jersey, New York, Hawaii, and Massachusetts with high-quality insurance solutions. As an independent agency, we work with several well-known insurance carriers.
If you’re a general contractor, you will benefit immensely from purchasing contractors’ insurance and E&O insurance. These types of policies will help protect you against a variety of risks, liabilities, and claims of negligence.
At JMG, we understand that construction projects involve the collaboration of many different professionals, each of whom can produce errors for any given reason.
We are committed to helping you minimize losses and recover from damages you sustain while working as a contractor.
In addition to general contractors, we serve contractors such as HVAC technicians, plumbers, and electricians. Call John M. Glover today at (844) 304-7332 or contact us onlinefor more information on our policies or to receive a free quote.