A. Contractors Professional Liability Insurance (Practice and Project Specific Policies)
The term, Contractors Professional Liability policy, can appear to be a misnomer because that term may convey the wrong impression that a Professional Liability policy is only for persons or entities performing Professional Services for which a license is required, i.e. Architecture, Engineering, etc. A General or Trade Contractor not performing such services may conclude that it does not have a Professional Liability Exposure. But besides providing coverage for claims involving licensed services, a Contractors Professional Liability Policy can serve as a CGL Wraparound policy that may fill certain coverage gaps in a CGL policy, for instance, when:
• the Claim is not an “Occurrence”,
• the Claim involves actual or alleged "Property Damage” for which an Exclusion applies, i.e. Property Damage to Your Work; or, one of the other Exclusions related to Property Damage;
• the Claim is for pure economic loss, i.e., money damages resulting from cost overruns; or money damages resulting from delays not covered under a CGL policy.
See the below link for an on point example of this. Pages 3 through 5 of the decision are determinative. Take particular note as to how California Law, with regards to General Contractors, applies to the language "that particular part..."
Succinctly, this recent decision, applying California Law, filed March 2, 2017 by the U.S. Court of Appeals for the 9th Circuit, upholds the lower court’s decision regarding an Insurer's declination of coverage based on two Property Damages Exclusions, those being:
(i) Property Damage to “that particular part of real property on which (the contractor)…(is) performing operations, if the Property Damage arises out of those operations; and
(i) Property Damage to “that particular part of any property that must be restored, repaired, or replaced because (the contractor’s) Work was incorrectly performed on it.
In addition to the above, here are a few items to consider - there are many more. You should contact us if your policy or your client’s policy has any one of the below issues:
1. Definition of PROFESSIONAL SERVICES - how the language of this definition is crafted is important. It should be a compromise between specificity and generality. The best approach is succinct language which imparts a broad range of covered services. Compare a definition which is concise yet comprehensive to one that is a laundry list of many services. One may think that the laundry list is preferable since it lists a plethora of covered services - it’s not. Designating a list of specific services can in itself, limit the covered scope. Our advice: stick with the concise yet comprehensive.
2. Definition of CONSTRUCTION MANAGEMENT - our experience has shown that Construction Management should be an undefined term. That means that not only should the policy’s Definition Section make no reference to the term, but that the term cannot be limited or restricted by language elsewhere, i.e. the policy’s Exclusion Section, etc.
3. Means, Methods and Techniques (MM&T) Exclusion - Unless properly crafted, an Exclusion that pushes all claims for actual or alleged Bodily Injury and Property Damage to a CGL policy resulting from MM&T is dangerous (see the preamble to this Section - as all PD claims are not covered under a CGL policy). If your policy has such an Exclusion, Limitation or Restriction you should contact us.
4. Faulty Work Exclusion - This Exclusion must have an exception for actual or alleged claims resulting from the rendering or failure to render Professional Services. Since Construction Management is a Professional Service - well you get the picture.
5. Severability - A big item for any Professional Liability policy is Severability. There is Severability of the Application - which protects Innocent Insureds in the event that the information was misrepresented or concealed during the application process. There is also Severability of the Intentional Acts Exclusion(s) which protects Innocent Insureds in the event that another Insured committed an intentional, fraudulent or similar act. And Severability for Breach of Policy Conditions - which provides protection in the event that an Insured breaches its Duties and Responsibilities under the policy. These are essential. You need to contact us if you or your client’s policy is lacking.
B. Architects & Engineers (A&E) Professional Liability (Practice and Project Specific Policies)
If your or your client’s firm has anything greater than a incidental design-build exposure please also read Section A. above.
1. Faulty-Work Exclusion - A&E Professional policies typically have a Faulty-Work Exclusion. That’s likely okay if the exclusion only applies to work that was performed by or on behalf of the firm. However, an absolute Faulty-Work Exclusion; one without any exception, must always be avoided.
2. Services outside of North American - In many foreign countries, an alien insurer cannot defend and pay claims. In order to protect your firm, it is essential for your A&E Professional Liability policy to expressly specify something along the lines that:
…where we (the insurance company) are unable to provide a defense or pay DAMAGES….because of a law, rule, regulation or other prohibition, that we (the insurance company) will advance to your firm, on a current basis, reasonable defense costs that your firm incurs; and, will indemnify you, the Insured, for Damages determined upon a final judgment or agreed settlement.
3. Product Design Exclusion - An A&E Professional Liability policy typically contains a Product Design Exclusion that specifies that coverage does not apply to Claims based upon or arising out of:
The design or manufacture of any goods or products which are sold or supplied by your or by others under license from you.
There is often an exception only for software development.
Should your firm be involved with the design of products, it is essential that an appropriate exception to the Exclusion be crafted.
4. Builder's-Risk Insurance - If your firm provides Professional Services at a project that is insured under a Builder’s Risk policy, you must ensure that the Builder’s Risk policy provides an unqualified Waiver of Subrogation in your favor. Many Builder’s Risk policies provide no waiver at all, or provide a limited waiver for claims relating to your On-Site Visits only. Without an unqualified Waiver, your A&E Professional Liability policy limits could be eroded or totally exhausted as a result of a subrogation action brought against you by a client’s Builder’s Risk insurer.
5. Severability - a big item. This is our last item for now but maybe it should be the first. Why? There is Severability of the Application - which protects Innocent Insureds in the event that information was misrepresented (intentionally or unintentionally) or concealed during the application process. There is also Severability of the Intentional Acts Exclusion(s) which protects Innocent Insureds in the event that another Insured committed an intentional, fraudulent or similar act. And; Severability for Breach of Policy Conditions - which provides protection in the event that an Insured breaches its Duties and Responsibilities under the policy. These provisions are essential. You need to contact us if your own, or your client’s policy is lacking.
II. ENVIRONMENTAL INSURANCE - We handle all types of Environmental Related Insurance, not just Contractors & Site coverage.
A. Contractors Pollution Liability (CPL) - a few items to consider - there are many more:
1. Insuring Agreement - DUAL TRIGGERS are dangerous
Whether it's a Practice Policy or Project Specific Policy you should contact us if your policy’s Insuring Agreement has a dual trigger. There should only be a single trigger - that being language akin to:
Coverage for a LOSS, or Bodily Injury, Property Damage or Clean-up Costs, or a Pollution Condition caused by YOUR WORK or YOUR CONTRACTING SERVICES or some other similar language (emphasis added).
The YOUR WORK or similar language should be the single and only trigger. But in some policies it is NOT. For example, there are policies that specify that coverage only applies if the:
LOSS or Bodily Injury, Property Damage or Clean-up Costs or a Pollution Condition was also caused by an "OCCURRENCE" - which is the second or dual trigger. This is potentially problematic and must be avoided. Underwriting companies that employ this dual trigger requirement support it’s utilization by noting that a CPL policy was developed as a spin-off of a Commercial General Liability (CGL) policy. The problem - what’s an "OCURRENCE"? CGL policies typically define an “OCCURRENCE” as an accident. Is faulty work an accident? CGL case law is voluminous on what is and what is not an "OCCURRENCE". In many jurisdictions, insurers restrict coverage for faulty work under a CGL policy because courts have determined that faulty work may not be an “OCCURRENCE” or an accident. If your CPL carrier contests a claim because it is not an “OCCURRENCE”, what case law do you think that insurer will attempt to rely upon to determine what is or what is not an “OCCURRENCE” under a CPL policy? Obviously some CPL insurers will refer to longstanding CGL case law. Do you or your client need that? Of course not. Why then have a policy that could place you or your client in a big jam?
2. Does the policy have a Consent to Settlement Clause? - That being, language that requires the INSURER to provide the INSURED with prior written notice before they settle a Claim. Some policies don’t. Rhetorical Question: Why would you or your Insured not want to be notified in advance of the carrier’s likelihood of settling a Claim?
3. Does your policy contain a DAMAGE TO YOUR WORK EXCLUSION? If so, is there an exception that totally nullifies the exclusion; or does the exception to the exclusion only apply to work performed by a Subcontractor? If the latter (or something more onerous) you should contact us.
4. The Employers Liability Exclusion of your Project Specific CPL - is likely not properly modified if sub-contractors (one or multiple) are also included as INSUREDS under the policy. While there may be an appropriate Contractual Liability Exception to the Exclusion; what about other types of claims? Does your policy address that?
5. Severability - a big item. This is our last item but maybe it should be the first. Why? There is Severability of the Application - which protects Innocent Insureds in the event that information was misrepresented (intentionally or unintentionally) or concealed during the application process. There is also Severability of the Intentional Acts Exclusion(s) which protects Innocent Insureds in the event that another Insured committed an intentional, fraudulent or similar act. And; Severability for Breach of Policy Conditions - which provides protection in the event that an Insured breaches its Duties and Responsibilities under the policy. These are essential. You need to contact us if you or your own, or your client’s policy is lacking.
B. Site Pollution - also a few items to consider - there are many more:
You should contact us if you have questions as to whether you or your client’s Site policy properly addresses any of the following:
1. Underground Storage Tanks (UST) - Reinstatement of Annual Limit of Insurance as Required by the Code of Federal Regulations (CFR) - Do you or any of your clients maintain a multi-year Site Pollution Policy (not a stand-alone UST Policy) that provides coverage for Scheduled USTs? If so, do the policy limits reinstate annually for USTs? If not you or your client may be in violation of the CFR's Financial Responsibility Requirements which under many circumstances requires annual reinstatement of limits for Pollution Conditions caused by USTs.
2. Has any Naturally Occurring Materials or Radioactive Materials Exclusion been negated, neutralized or appropriate softened?
3. Does the policy’s definition of CLAIM include a request to waive or toll a statute of limitations? Separately, is the Insured required to report Pollution Conditions/Circumstances that may give rise to a CLAIM? AND does the policy provide coverage for post-expiration CLAIMS made against the INSURED involving such Conditions reported during the policy period? While not every Site carrier provides this, it can be negotiated. This is an important coverage extension.
4. Definition of POLLUTANTS or POLLUTION CONDITION: Do you or your client have an exposure to Electro-Magnetic Fields (EMF)/Electro-Magnetic Emissions (EME)? If so, does the definition of POLLUTANTS or POLLUTION CONDITION affirmatively include EMF/EME?
5. Does your Policy contain a Real Estate Development Endorsement which restricts coverage for Dewatering Expenses or Soil Removal and Disposal Expenses pertaining to property that is planned to be developed? If so, you should contact us as it is likely that the Endorsement may not provide an appropriate exception to such Exclusions.
6. Material Change in Use Exclusions - This Exclusion should not be unqualified. It must include appropriate exception(s).