We work with retail agents every day who field tough questions from their design and construction clients. Here’s a few common questions we get asked about general contractors.
Is it wise of General Contractors to require professional subconsultants to sign their usual subcontract form?
No. Contractors that require the use of the same contract form used for construction subcontractors may unwittingly void the precise coverage they are seeking from their design professional. Again, design errors & omissions policies typically exclude warranties and guarantees which are generally an integral part of construction sub-contracts. As previously stated, if the design firm “agrees” to the warranties and guarantees or any other responsibility excluded by their professional liability policy, the design firm will be assuming the defense costs and payment obligations if an award is granted by the courts.
The General Contractor has requested to be named as an “Additional Insured” on my professional liability policy. Can I accommodate this request?
No. It is extremely rare to name the Contractor or Owner as an Additional Insured on your professional liability policy. The principal reason involves the “insured vs insured” exclusion found in virtually all design professional liability policies. If the contractor believes he has a cause of action against his sub-consultant design firm, this exclusion will eliminate coverage for both the contractor and the design firm.
How can the General Contractor protect themselves?
The General Contractor may purchase Contractor’s Professional Liability insurance. This would protect the General Contractor from vicarious liability claims from third parties and also solves the problem of the “Insured vs.Insured” exclusion that would apply if the contractor would bring an action against the subconsultant design firm, when named as an additional insured. Another benefit is a separate set of insurance limits. The General Contractor would have their own set of insurance limits that would not be subject to dilution or reduction from other claimants against the design professional’s errors & omissions policy covering their general practice.
Why would the General Contractor need Professional Liability coverage?
The General Contractor has the same “vicarious liability” for the negligent acts, errors or omissions of their professional subconsultants as they do for the non-professional subcontractors. The General Contractor cannot rely solely on the hold harmless indemnity clause in the contract document. The hold harmless may not be enforceable in certain jurisdictions because of the language of the indemnity clause. The subconsultant may not have sufficient insurance or their policy limits may be reduced or exhausted from other claims. The policies may be cancelled by the carrier giving notice or for non-payment of premiums. The General Contractor is then left with a false sense of security if they rely on the general liability insurance of the sub-consultant, which excludes professional design activities and responsibilities.
If you have tough questions, give our professionals a call. We’d love to help you work any issues you’re having. It’s what we do.
(some content in this post courtesy of a/e Pronet and used with permission.)
PDI is an Indianapolis-based wholesale brokerage firm with a national network that includes thousands of insurance agents, brokers, architects, engineers and contractors in all 50 states. Since PDI’s beginning in 1980, we’ve handled a single line of coverage: errors & omissions (E&O) for design professionals. Contact Us today for a review of your design client's insurance program.