WHAT IS Contractors Professional Liability Insurance
Contractors professional liability insurance is liability insurance that provides coverage to contractors and building professionals for construction errors. Contractors professional liability insurance, or CPL insurance, is purchased by contractors that provide design and building services, and provides coverage of errors made by the contractor as well as errors made by third-parties hired by the contractor, such as engineers, architects and other vendors.
BREAKING DOWN Contractors Professional Liability Insurance
Contractors professional liability insurance, or CPL insurance, provides protection to contractors and building professionals in case construction errors occur during construction of a building project. Designing and building a structure can be a complex process involving many parties, including architects, designers, engineers, building contractors, and other building specialists.
Contractors may hire third parties to handle different aspect of a project, such as design work or engineering evaluations, along with hiring subcontractors to do aspects of construction that require specialized skills, such as plumbing, electrical work or drywalling. Larger contractors may provide these services in-house, which allows them to earn more profit but also exposes them to more risk. Contractors professional liability insurance is designed to protect contractors from these risks when they do most of the construction duties themselves.
CPL insurance protects contractors from errors created during the design and engineering process, and is especially useful when projects have many professionals involved in different aspects of the project. This type of insurance is usually reserved for contractors that provide design-build or construction management services.
Policies are designed to cover risks not covered by commercial general liability (CGL) insurance, which may not include professional liability exclusions. The professional liability policy offers third-party liability protection, first-party indemnity, as well as pollution liability. Damages that are covered include economic loss and costs associated with repair.
The activities covered under the policy may be included in a list found in the policy contract, or may be specific to the contractor that has purchased the policy. Many policies will also include a list of activities that are excluded from coverage.
Contractors can purchase a standing professional liability insurance policy that covers all work that the contractor performs, but can also purchase a policy that covers specific projects with finite time frames.
Contractors Professional Liability Insurance vs Builders Risk Coverage
Contractors professional liability insurance and builders risk coverage both protect similar sets of conditions, types of loss and entities involved in a building project. However, contractors professional liability insurance is usually taken out by a contractor, while builders risk coverage is usually taken out by the owner of the project. In addition, contractors professional liability insurance can be taken out on building improvement project but may not be available for a new project with no existing structure, while builders risk coverage can protect projects that don’t have an existing structure.