Project Professional Liability Insurance for Construction Firms
November 2009
Project professional liability insurance for
contractors doesn't exist, right? That's probably what you have been hearing
over the past several years. As a matter of fact, that is partly true.
by Jeff
Slivka
New Day
Underwriting Managers
If you're a construction firm currently insuring your professional liability
exposure, the odds are your current insurer will offer some level of project
professional liability insurance to comply with those pesky insurance requirements
that require you to secure project-specific limits. (There are a number of insurers
that will not offer project coverage regardless if you are a client of theirs
or not.) If you are one of those firms that have not, it's a whole different
story when you run into those insurance requirements.
What Is Project Professional Liability Insurance?
When referring to "project professional liability" insurance, many times
we are referring to insuring the design team, not the construction team. Finding
alternatives to insure the design team is a bit easier than insuring the construction
team as there are more available options. In the past, it was fairly easy—project
professional liability policies were structured to include all entities performing
a professional service. There was no distinction between a construction or design
firm. Today, that is much different. For various reasons, insurers today are
much less enthusiastic about offering contractors project professional liability
if the firm is not currently buying a practice program from them.
However, there are a couple of insurers that are just beginning to offer
project coverage for contractors. (But don't get too excited about it because
we have a long way to go before we can say there is a "market" for it.) Even
though their appetite is quite defined and narrow, on certain projects for particular
contractors, there are options today where only a year or two ago, there was
none.
Markets
One insurer is Zurich Construction. A longtime provider and leader in the
area of construction-related professional liability, Zurich offers project coverage
for contractors under their contractors protective professional indemnity (CPPI)
and liability policy form. The CPPI offers both professional liability and protective
coverage. Contractors pollution liability (CPL) can also be added via endorsement.
Under a project program, Zurich will name as the primary named insured any contractor
entity required to secure project coverage, subject to satisfactory underwriting
criteria. This could include design builders, construction managers, general
contractors, and specialty subcontractors. Limits offered are up to $50 million
per claim/aggregate. The maximum policy term offered is 10 years, including
an extended reporting period, if any. Zurich will offer project coverage to
existing clients. In addition, as part of its InfraSolutions™ campaign, Zurich
will offer project specific coverage on a case-by-case basis for infrastructure
projects.
The other insurer offering project coverage to contractors is Catlin US.
Fairly new to the marketplace, but not new to underwriting contractors professional
liability coverage, Catlin offers project coverage under its "Contractors Protective,
Professional and Pollution Legal Liability" policy or CP3. In this program,
the CPL is built in as a separate coverage part. Catlin's appetite is to insure
only "brick and mortar" contractors and projects, i.e., infrastructure, institutional,
hospital, financial, commercial and light industrial. Caitlin tends to stay
away from engineering/procurement construction (EPC) contractors, "fast-track"
project work, or heavy industrial, refinery, chemical, power, or any process
demanding work. One other aspect of the Catlin program is that it will offer
such coverage regardless of whether the contractor is currently purchasing coverage
from another insurer. Limits offered are up to $15 million per claim/aggregate
with a 10-year total term, including extended reporting periods.
Conclusion
Regardless of professional liability insurance requirements, construction
firms should investigate the costs and benefits of securing contractors professional
liability coverage because, aside from design liability (both direct and vicarious
liability), construction firms are exposed to a variety of day-to-day professional
risks that, if unmanaged, could prove costly.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author's employer or IRMI. Expert Commentary articles
and other IRMI Online content do not purport to provide legal, accounting, or other
professional advice or opinion. If such advice is needed, consult with your attorney,
accountant, or other qualified adviser.