July 24, 2013

Why Construction Managers Need PL Coverage

Construction managers know they need general liability (GL) insurance. Like certifications and licenses, having GL protection is just another part of doing business.

General liability insurance, however is not comprehensive. It is only designed to cover liability expenses from physical or bodily damage caused, directly or indirectly, by the policyholder. It does not protect against other circumstances when construction managers can be held financially liable, such as negligence.

That is why construction managers also need professional liability (PL) coverage. Also know as errors and omissions (E&O) insurance, it protects construction managers when physical damage, bodily injury and/or pure economic losses take place due to negligence.

Without it, construction managers are financially vulnerable. Perhaps a firm does not perform according to contract, misses an important detail in the plans, or makes a costly error that affects the outcome of the project. That can be too much for an owner or other third party to forgive. In fact, lawsuits can be filed against construction managers based solely on their client’s belief that they were at fault.

Unfortunately, too many construction managers lack this important coverage for many reasons.

  • Overestimating GL coverage has already been mentioned. Denial, the common belief that “it can’t happen to me,” is another.
  • There can also be a misperception, especially by small firms, that a company’s legal structure, such as a limited liability company, provides more extensive liability protection than it actually does.
  • Believing the cost of coverage is not worth the risk is another common reason. Often, construction managers do not realize that premiums cost pennies on the dollar compared to being uninsured when a claim arises. Unfortunately, too many companies regularly confirm this with their own horror stories.

Purchasing both general and professional liability coverage is a best practice.

Buying insurance that integrates both is a better one.

ProSight Specialty Insurance offers an integrated GL/PL insurance product designed to specifically meet the needs of construction managers. Our Construction Managers Program removes the guesswork from claim filing and relieves the hassle of maintaining separate policies. It also contains assistance and coverage for such items as subpoena expense and disciplinary proceedings. Plus, the professional liability piece of the CM program covers legal expenses and, depending on the circumstances, can also provide compensation for wages lost when construction managers are defending their hard-earned credibility.