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. Butbesides 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.