The Ins and Outs of Contractors Professional & Pollution Liability Coverage

Does standard General Liability insurance provide coverage for design activities or modifications and

environmental or remediation services? Great question, and the chances are likely that the answer is no. 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. Additionally, more subcontract insurance agreements require Contractor’s

Professional Liability (errors & omissions) coverage for design/build activities or design modifications

and Contractors Pollution Liability coverage for environmental/remediation services provided.

Contractors Professional (Errors & Omissions) Liability: This provides coverage for design/build or

design modifications made by the contractor which result in a consequential damage to the project.

Subcontractor limits of liability requirements can 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 made is the policy that triggers. Therefore, if a

carrier change occurs it is important that the ‘retroactive date’ on the new policy goes back to the

original date coverage began.

Conversely, if the policy is not renewed or coverage is canceled, an extended reporting endorsement

(tail coverage) should be secured for a specific time period in order to cover claims that may have

occurred but have yet to be 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 the

insurance carrier as soon as practical so the circumstances around the claim can be reviewed and

needed actions can be determined to rectify the error and the associated costs. As an industry standard,

it is highly recommended to secure the coverage as part of the contractors professional liability

coverage.

Contractors Pollution Liability: This provides coverage for environmental claims caused by the

contractor on the job site, in transit or from a waste disposal/treatment 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, which makes them unable to properly

price the coverage.

Subcontractor limits of liability requirements can range from $1,000,000 to $5,000,000 with

retention/deductibles starting at $2,500 and going up to $25,000. Coverage can be secured either on a

‘claims made’ or ‘occurrence’ basis. It is typically recommended to obtain occurrence policies if possible

so that in the chance of a carrier change, ‘prior acts’ coverage does not need to be secured, or if a policy

cancellation occurs then tail coverage will not be required either.

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 there

is an incidental environmental exposure.

There are many factors to consider when reviewing General Liability and Umbrella policies as well as

how to best obtain Contractors Professional and Pollution liability coverage. Reach out to the

AssuredPartners Construction team today to discuss more coverage options, what coverage is adequate,

and how to best protect assets and keep building projects secured.