By Gary Semmer, AssuredPartners
Does your General Liability & Umbrella Liability Insurance provide coverage for Design activities or modifications and Environmental or remediation services?
Great question- probably not!
Let’s explore the issues:
Commercial General Liability and Umbrella policies have evolved over the years, but one thing has remained constant, they contain Professional Liability and Pollution Liability “exclusions or restrictions” that negate coverage.
In addition, more Subcontract Insurance Agreements require Contractors Professional Liability (Errors & Omissions) coverage for design/build activities or design modifications and Contractors Pollution Liability coverage for environmental/remediation services provided.
1. Contractors Professional (Errors & Omissions) Liability:
Contractors Professional (E&O) Liability provides coverage for design/build or design modifications made by the Contractor which result in a consequential damage to the project.
We see Subcontractor Limits of Liability requirements range from $1,000,000. to $5,000.000. with typical Retention/Deductibles starting at $2,500. up to $50,000. Coverage is on a “Claims Made” basis which means the Policy that is in force at the time the Claim is being made is the Policy that triggers. Therefore, it is important that If you change Insurance Carriers that your “retroactive date” on the new Policy goes back to the original date you started coverage to provide prior acts coverage. Conversely, if you decide not to renew, or cancel coverage, you should secure an Extended Reporting Endorsement (Tail coverage) for a specified time period to cover claims that may have occurred but haven’t been reported. In recent years, more Insurance Carriers have offered Rectification or Mitigation coverage which is a First Party type coverage to pay expenses to mitigate a negligent act or omission that otherwise may lead to a Professional Liability claim. The key is to report the Claim to your Insurance Carrier as soon as practical so they can review the circumstances to determine what needs to be done to rectify the error and the costs associated to remedy the issue. We highly recommend securing the coverage as part of your Contractors Professional Liability coverage.
2. Contractors Pollution Liability
Contractor’s Pollution Liability provides coverage for environmental claims caused by the Contractor on the job site, in transit or from a waste disposal or treatments site.
General Liability and Umbrella policies typically have Asbestos, Lead, Silica, Synthetic Stucco (EFIS/DEFS) and Absolute Pollution exclusions because Insurance Carriers feel these types of exposures are “outside” the scope of traditional General and Umbrella Liability coverage and as such are unable to properly price the coverage. Again, we see Subcontractor Limits of Liability requirements range from $1,000,000. up to $5,000,000. with Retention/Deductibles starting at $2,500. up to $25,000. Coverage can be secured either on a “Claims Made” or “Occurrence” basis. We recommend Occurrence policies if possible, so you don’t have to secure “prior acts” coverage if you change Insurance Carriers or if you decide not to renew or cancel coverage, you don’t have to purchase Tail Coverage.
Both Coverages can be purchased as either standalone or as a combined Contractors Professional and Pollution Liability policy. Oftentimes the combined Policy approach is priced better, particularly if you have an incidental environmental exposure. You should consult with your Insurance Agent or Broker to discuss coverage options.
About the Author
Gary Semmer, CIC CWCA is Executive Vice President and Construction Practice leader with AssuredPartners. Gary specializes in providing Insurance & Risk Management solutions to the Construction and Real Estate industries. He has served as President of the Independent Insurance Agents of Illinois (IIAI) and Associated Risk Manager (ARM) of Illinois. AssuredPartners is the 10th largest Insurance Broker and Consultant in the country providing Commercial Insurance, Risk Management, Employee Benefits through consulting and services. For more information on AssuredPartners, please Gary by email at Gary.Semmer@assuredpartners.com or asa@assuredpartners.com
