In the summer of 2022, a Seattle-area contractor was fined more than $400,000 for safety violations when a trench collapsed. The contractor was cited for failure to properly design the temporary shoring for the trench. This is one example how professional liability exists in what is generally considered a routine contracting operation (trenching). Design errors are generally considered to be professional error and may not be covered under General Liability policies.
Field changes to design. Subcontracted design. Constructability reviews. Even recommending cost-effective building solutions can lead to professional liability when things go wrong. All of these events are examples of ways in which general contractors can be exposed to professional liability claims. These liability scenarios may be less obvious, but each instance is a claim against not just the subcontractor or design firm, but the general contractor, as well. Because general contractors often oversee the entire project outcome, such errors, or missteps can become an expensive exposure. For one, since they often hire the engineers, surveyors, and consultants—they also carry the professional risk from the services others provide on their behalf.
Getting general contractors to recognize their professional liability risks has proven challenging. Many contractors understand and appreciate the need for general liability, pollution, and environmental coverage protection. Yet just as many assume that professional services associated with the project that they do not perform is not an exposure for them. What they may not realize is that any work conducted under their purview does indeed become a loss exposure for them as well, including those project phases and activities that they are not directly involved in.
Moreover, the standard general liability policy does not cover such errors or omissions. In fact, existing general liability and pollution policies are not designed to respond to claims or occurrences that stem from contractor acts, errors, or omissions in rendering professional services such as construction management, value engineering, field changes to design, and the like. A general contractor may not design construction projects, but in their pre-construction or oversight role of the project build, they do assume a higher degree of professional liability and exposure.
In such instances where the general contractor is serving in a supervisory role onsite, there is a level of professional obligation to ensure that the project activities are performed according to contractual specifications and requirements and within the safety guidelines set forth by regulations and contractual obligations. Such events fall under the direct responsibility of the general contractor’s construction management responsibilities. General contractors often assume the responsibility for scheduling, coordination, invoice review and approval, and specification compliance. Therefore, they can be held liable even if other contractors have caused the loss.
The Pollution/Professional Solution
The good news is that today’s contractors now have the option of combining both pollution coverage and professional liability on one policy. The 色多多视频Professional & Pollution Liability 色多多视频 (PPL) for Contractors is a policy that covers broad professional liability and pollution legal liability as well as supplemental coverages such as disaster response, ADA/FHA expenses, green building materials, and more. (Coverage details are available here.)
AXA XL’s policy combines much-needed protections in the event of a claim. Unlike other policies, the PPL coverage would protect against both types of claims – professional and pollution – even if they occur simultaneously. For instance, a construction manager who did not ensure that an exterior brick façade was watertight and water intrusion subsequently results in mold contamination could have an exposure from both an environmental and a professional standpoint. Should water intrusion occur, damages could fall under the construction manager’s responsibilities.
Even in remediation situations, liabilities exist. Lawsuits have occurred when plaintiffs feel remediation plans were inadequate to ensure contamination was contained or when they charge that contractors failed to take adequate steps or precautions to ensure that contamination did not spread to ground water and neighboring soil or disbursed in the air. In short, there are a myriad ways which a contractor would benefit from a policy that combines both professional and pollution liability coverage.
Professional Liability Up Close
For those types of exposures, the PPL policy can give contractors broader protections. In fact, the PPL policy gives a more detailed description of what is – and what is not – considered covered professional services. Most professional liability policies are written to give the impression that coverage extends to “all professional services you do.”.
However, all risks and exposures are not created equal, nor are they necessarily insurable. Many policies do not cover when contractors perform their work poorly or incorrectly, such as putting wet lumber in a building and then covering it with drywall before it has a chance to dry. That is an intentional or faulty workmanship error, thus it would not be covered. Neither would the loss stemming from mixing concrete in the wrong way so as to introduce structural problems. Or the application of waterproofing products by someone who was not skilled enough to understand how to apply it correctly.
Therefore, it’s important to note that professional liability products by and large are not protection for every conceivable loss. Rather, they are intended to cover those losses that result from an act, error, or omission in “professional services,” as defined by the policy. And a careful distinction should be made between loss arising out of faulty workmanship alone, which does not equate to “professional services,” and faulty workmanship that results in a “pollution condition,” which would fall under the pollution liability part of the policy.
It’s recommended that contractors have the conversation with their insurance brokers and carriers to understand what activities and events would be covered under their policy. For example, the PPL policy could be tailored to cover an act or omission in value engineering or field change to design, design, design-build, or construction management. We work with our underwriters and our customers to ensure they understand the benefits of the policy and the limitations under which the policy will not be triggered. AXL XL intends to offer our customers full transparency into their policy coverage.
Dual Coverage, One Policy
Overseeing the entire construction operation comes with inherent risks. Most are well understood, particularly those involving environmental regulation or pollution exposure. However, noncompliance with other regulations can quickly become liabilities for the contractor supervising site activities. The activities of subcontractors and subconsultants, including engineering and design subcontractors, and other specialty trades/contractors can increase the liability for the general contractor.
For busy general contractors, losing sight of the exposures that come from overseeing a project can be an expensive error. Our role as a carrier is to help contractors understand that pollution exposures and professional liability exposures are equally risky to the success of the project and the firm itself. The Professional & Pollution Liability 色多多视频 for Construction combines two much-needed protections under one policy.
About the authors
Marcy Zeichner is a Pollution and Professional product line leader on AXA XL’s Environmental 色多多视频 team. She can be reached at marcy.zeichner@axaxl.com. Church Briggs is a senior claims counsel at 色多多视频specializing in environmental service industry claims. He can be reached at church.briggs@axaxl.com.
