Professional Liability Insurance
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What is Professional Liability Insurance?
Professional Liability Insurance also known as Errors and Omissions Insurance provides coverage for individuals and companies offering professional services such as construction management, design-build contractor services, architects, and engineers.
Professional Liability Insurance provides insurance coverage for only one general cause of loss, or claim against the insured; the rendering of, or failure to render, errors and omission of the specified type(s) of professional services.
What Does Professional Liability Insurance Cover?
- Professional Liability Insurance provides insurance coverage for only one general cause of loss, or claim against the inured; the rendering of, or failure to render, errors and omission of the specified type(s) of professional services.
- Defense on claims, regardless if you are at fault, or indemnity is required.
Who is covered under Professional Liability?
- You, the business owner.
- Your salaried and hourly employees.
What does Professional Liability Cover?
- Insurance often covers both court costs and any settlements up to the amount specified by the limits of the insurance contract.
- Reasonable and necessary legal defense cost fees and court costs, these fees are usually inside the limits or liability.
- Indemnity of damages, as a result of errors or omissions to render services by you or your employees.
What is a Construction Manager?
A construction manager is contracted by the project owner to manage all or a portion of the construction process for a fee. It is important to note that an W2 employee of the owner would most likely not have any professional liability exposure. The construction managers services create an exposure to errors and omissions, that could result in damages to the owner of the project, which gives rise to the need of professional liability insurance. The common contractual duties of the construction manager may include: materials take-off, project cost estimating, project scheduling, the selection and writing of subcontractor agreements and project management.
What Activities Would Create a Need for Professional Liability?
- Does the company enter into design-build or construction management projects?
- Does the company perform construction services for a fee?
- Does the company assist project owners in the selection of professional services, such as architectural or engineering services, and or assist in the directing of these service for the owner?
- If you or your employees fail to exercise the appropriate degree of skill and care, could this cause damage to others?
- Does the firm have any licensed professionals such as architects or engineers, on staff? Do you subcontract these professionals, for services, to others for a fee?
What is a Design-Build Contractor?
The design-builder or design-build contractor, contracts with the project owner to manage the project from inception to completion of the construction, or any portion of the design or construction process.
The design-builder is usually the general contractor, or a design professional such as an architect or engineer, and like a construction manager to a greater or lesser degree, the design-build contractor provides direct or managerial control of the design and engineering process and construction management services to the completion of the project.
The challenge of the design build contractor is to reduce the exposure to errors and omissions. The experienced design-build contractor accomplishes this through a well-crafted design-build contract with the owner, requiring the owner to be involved at all critical junctures of the design process, material selection, color selection and construction process.
Some of the key exposures to errors and omissions for design-build contractors include: the failure to select the correct consultants, errors or omission in subcontracting or subcontractor agreements creation, improper material selection, improper color selection, scheduling errors, construction estimating errors or omissions, failure to have the owner sign off on critical design junctures, material selections, scheduling, subcontractor selection, budget, and or budget revisions.
What determines the price of Professional Liability or Errors and Omissions Insurance?
- Type of work being performed; Design-Build Contractor, Construction Manager, Architect, or Engineer, or another type of professional consultant.
- Project size and value.
- The cities and states where your work is being performed.
- Annual Receipts of your company.
- Years’ experience, years in business, years licensed.
- Experience in as a consultant, design builders, construction manger or other professional consultant.
- Limits of liability.
- Number of employees.
- Well defined and controlled service processes, prime contracts, subcontractor agreements and checklists would indicate good control of exposures to loss.
What is the difference between General Liability and Professional Liability?
- General liability insurance, often called business liability insurance and commercial liability insurance, provides coverage for your business against claims of: bodily injury, property damage, personal and advertising injury, and the defense costs for covered claims.
- Professional Liability Insurance also referred to as Error and Omissions insurance, provides insurance coverage for only one general cause or loss, or claim, against the inured; the rendering of, or failure to render, or errors and omission of the specified type or types of professional services.
