The lines of responsibility between design firms and contractors can sometimes merge, creating a bit of confusion when it comes to the roles both entities play in a building project. While it has created learning opportunities for people in either career, picking up new skills and perspectives, it has also brought about nontraditional risk in each area.
Contractors may face new liabilities that their insurance coverages do not address, which puts them at risk in everything from legal issues to physical damage to costly financial stress. Professional liability insurance coverage has become an essential part of a contractor’s operations, just like an architect or engineer. Here are some reasons why it’s so important for contractors to have professional liability coverage.
Outlining Professional Liability Insurance
Professional liability insurance is a top contractors insurance plan that protects both the firm in question and their client. This specialized coverage takes into consideration the potential risks of a given profession or activity. Also known as errors and omissions (E&O), this kind of top contractors insurance coverage is designed to provide protection for claims for damages alleged to be the result of the negligent performance of services for others.
These policies are typically designed to provide coverage to the insured for both the cost of defending against a claim as well as the damages that ensue.
Professional Liability Risks
Contractors know that there’s an element of risk in their jobs no matter what the project consists of. Errors and omissions associated with performing their services can result in costly time delays, budget overruns, and third-party bodily injury or property damage. Contractors who know and anticipate this financial liability can keep costly litigation at bay with understanding their risks.
For economic loss, it’s important to know the financial risks that contractors take on by promising to execute a project complete and on time. And when it comes to making a project work within a budget is also something that sees claims arise. It’s broken up into two parts: design delegation and design error.
For delegation, the contractor subcontracts engineers and workers to complete the job. If someone doesn’t have errors and omissions (E&O) on hand and something is miscalculated, such as roofing or ventilation, the building owner can demand payment. And for design error, if a contractor makes a cost estimate on a warehouse project, for example, but there need to be revisions, which ends up adding to the initial cost, a contractor can be held liable for that amount.
Third-party bodily injuries and property damage are also risks that contractors without top contractors insurance face. There can be liabilities such as detection of faulty workmanship, such as bad wiring in elevators, after a building is complete, resulting in an injured person(s) or complaints related to poorly designed and executed HVAC systems. These can cause serious harm to people habituating the spaces but can also end up costing a contractor plenty of legal issues.
About Newman Crane & Associates Insurance
Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Since 1965, Newman Crane & Associates Insurance has been helping Central Floridians make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (407) 859-3691 for a consultation.