Very few companies write project insurance or owners protective insurance. There’s a reason for that. Every project is unique. As a result, the coverage must be individualized.
With a small number of project insurance providers available, it’s even more important to have a partner with a depth and breadth of experience. At PDI, we have decades of that experience. We’re well acquainted with the complicated nature of the coverage. We’ll help increase the viability of your bid through the competitive pricing we can obtain. We’ll also make sure every detail is considered so your project begins with iron-clad coverage.
Project insurance and owners protective insurance are the most complicated and detailed coverages in the design professional field. PDI will help make them simple.
Project Insurance & Owners Protective Insurance: What’s the difference?
The protection offered by Project Insurance and Owners Protective Insurance is very similar. But the route the two policies take to arrive at that protection are very different.
There are three routes an owner could take when insuring the design of a project:
The first option is simply to accept the limits your design team already has in place with their firm’s professional liability policies. In most cases today, we are seeing contracts require the prime architect and all professional sub-contractors to increase their limits on a project-specific basis. Many believe this is the least costly option, but that is not necessarily the case.
There are significant costs to each design firm to increase their limits, and that cost will be multiplied by the number of the the contract requires. The downside to this approach on a large, complicated project is that each of the design teams’ policies respond only to that insured’s liability. If there is a design error on the project, the liability needs to be sorted out, and all of the insurance companies involved will be battling it out.
This process takes time and draws money out of the available limits. Additionally, until the issue is resolved, the owner of the project will have to put more money into the project to keep it moving. This option may end up being the most costly for the owner.
The second option is an Owners Protective Policy. This type of coverage is essentially an excess policy. The underlying coverage is the limits the design team has in their individual practice policies. Under an Owners Protective Policy, the insurance company will require that each firm maintain a certain limit in their practice policy (MIR). This MIR requirement is generally $1 million. They will also require that a deductible (SIR) set for the Owners Protective Policy. Generally the SIR is set at $500 thousand.
In order for the Owners Protective limits to pay out, the SIR must first be met. The design firm responsible for the error would report this to their insurance carrier and their policy would respond to the SIR limit. Once this happens, the excess limits would be available. This type of coverage is generally less costly than a Project Policy. However, the same negatives apply to this option as those stated for Option 1.
The third option is a Project Policy. This type of policy is written for the specific project and generally carries high limits of $3 – $25 million (or more). This coverage is primary, covers the entire design team and insures against professional errors, omissions or negligent acts. A big benefit of this policy is that once professional negligence has been determined, the policy responds to keep the project moving.
This policy is written to cover the design team through the design and construction phase. Once the project reaches substantial completion the second phase of the coverage kicks in, and that is an extended reporting period which extends the coverage another three to five years. This is the option most often chosen for very large projects.
For a more detailed explanation, contact Terry Lee or Ken McComb at 317-649-4485.
Contact us and let us go to work for you. Our expertise will make insurance one less worry for you.