Contractors Professional Liability Insurance Overview
Contractors professional liability insurance protects contractors and building professionals from construction faults. Contractors professional liability insurance, or CPL insurance, is purchased by contractors who provide design and construction services. It covers both mistakes made by the contractor and errors made by third-party vendors hired by the contractor, such as engineers, architects, and others.
Understanding Contractors Professional Liability (CPL) Insurance
Contractors professional liability insurance, also known as CPL insurance, covers contractors and building experts from construction errors that occur during the course of a building project. Designing and creating a structure is a complex process that involves many parties, including architects, designers, engineers, building contractors, and other building specialists.
Contractors and Third-Party Hires
Contractors may employ third parties to handle various components of a project, such as design work or engineering evaluations, as well as subcontractors to do construction tasks that require specialized expertise, such as plumbing, electrical work, or drywall installation.
Larger contractors may perform these services in-house, allowing them to earn more profit while also exposing them to more risk. Contractors' professional liability insurance is intended to protect contractors from these risks when they perform the majority of the construction work themselves.
CPL insurance protects contractors from errors made during the design and engineering process, and it is especially valuable when multiple professionals are involved in various elements of a project.
Policies are intended to cover risks that are not covered by general commercial liability (CGL) insurance, which may not include professional liability exclusions. The professional liability policy provides third-party liability coverage, first-party indemnity, and pollution liability. Covered damages include economic loss and repair costs.
What Is Covered Under CPL?
The activities covered by the policy may be listed in the policy contract or may be tailored to the contractor who purchased the policy. Many policies will also specify which actions are not covered.
Contractors can obtain a standing professional liability insurance coverage that covers all of the work they do, as well as a policy that covers specific projects with set time frames.
CPL vs. Builders Risk Coverage
Contractors professional liability insurance and builders risk coverage cover similar sets of conditions, types of loss, and parties engaged in a construction project. Contractors professional liability insurance, on the other hand, is typically obtained by contractors, whilst builders risk coverage is typically obtained by the project's owner.
Furthermore, contractors can obtain professional liability insurance for building improvement projects, but this may not be available for new projects with no existing structure. At the same time, builders' risk coverage can safeguard projects without an existing building.
The Bottom Line
Contractors professional liability insurance covers both contractors and third-party hires, such as architects, designers, and engineers, against errors and blunders on the job, as well as other damages that may occur during a construction project.