If you’re a general contractor or specialty contractor in Austin and Central Texas, you may have noticed that the roles of design professionals and contractors are becoming more similar. As a result, professional liability exposure is heightened, with contractors now commonly involved in design-build or construction management contracts. Therefore, it is essential to consider a contractor’s professional liability insurance to safeguard your business from financial damages arising from negligent professional advice.
Understanding General Liability and Professional Liability Insurance
General liability insurance covers bodily injury or property damage from a contractor’s negligence. However, it does not provide coverage for financial damages caused by negligent professional advice. With claims from project owners seeking compensation for monetary damages arising from contractors’ professional advice becoming increasingly common, professional liability insurance has become more important than ever.
Professional liability insurance protects professionals providing advice or services against allegations that their error or omission led to their client’s financial loss. These policies do not cover bodily injury or property damage, making them a complementary addition to general liability insurance.
Growing Need for Contractor’s Professional Liability Insurance
According to the latest Assurex Global 2023 Construction Benchmark Report, 20% of surveyed construction firms have purchased some form of contractor’s professional liability insurance coverage, up from 13% in the previous survey. This coverage can be purchased on a per-project basis or for a contractor’s entire work program. An overwhelming 89% of firms purchasing contractor’s professional liability coverage do so on a practice basis, while only 11% purchase it for a specific project.
Evaluating Your Need for Contractor’s Professional Liability Coverage
Before deciding whether to purchase contractor’s professional liability insurance, consider the following questions:
- How often do you provide meaningful professional advice to your clients? The more frequently you offer professional advice, the greater your need for coverage.
- To what extent do you perform design-build projects? Higher involvement in design-build projects increases the likelihood of providing significant advice to project owners.
- To what extent do you work as a construction manager? Construction management roles entail greater exposure to liability for financial losses to clients than general or other types of construction.
- Do your contracts require you to carry contractor’s professional liability coverage?
Making an Informed Decision
As the distinction between construction activities and professional advice continues to blur, purchasing contractor’s professional liability insurance has become more commonplace. Base your decision on evaluating your exposures in consultation with your insurance professional.
Want to learn more? Contact Tye Hardin at Watkins Insurance Group for further information and advice tailored to your construction business.
