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.
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.
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.
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.
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