What are the typical business insurance coverages, and how do they impact construction businesses? Professional liability or errors and omissions insurance (E&O) are used to insure against claims arising from negligent acts, errors or omissions that lead to a contractor’s failure to render specified services or advice. It provides liability coverage for specialists in various fields including engineers, architects, landscape architects and mechanical engineers, to name a few.
Many business owners are confused about why they should carry both general liability insurance and professional liability insurance. General liability insurance protects contractors from claims arising from alleged injuries or property damage to a third party (a customer or the general public) related to work on the jobsite. Most general liability policies will include protection for services you render or products you sell. Claim payments can include medical and property damage judgments, attorney fees, court costs and other claims-related expenses. In the construction industry, many general liability insurance policies exclude professional liability exposures or professional services that contractors provide. Always review your general liability insurance policy to make sure you are covered for the actual type of work you perform.
A good example of a general liability claim would be damage caused by a skidsteer collision with the project owners’ property such as their building, a fence or an automobile. A professional liability claim could be triggered by damage caused by a wall that collapses because of improper design or an improperly functioning HVAC system designed by a mechanical engineer.
But what if a contractor makes changes in the field and the original drawings are not revised to show those changes: Would this be a general liability claim or a professional liability claim? It depends upon how your policy is set up and the various endorsements that can be applied to your policies. Every claim is different, and these are questions you should ask your insurance consultant.
[Related: Pains, sprains and insurance claims]
Make sure you have a good understanding of your business insurance program. The right coverage can protect you from many of the undesirable risks you face every day at the jobsite.
Other important types of insurance
Workers’ compensation. Workers’ comp is required in most states, regardless of how many employees you have. It generally pays for medical costs and lost wages for a worker injured on the job. Keep in mind that as a business owner, you can be excluded from workers’ comp coverage for yourself.
Inland marine insurance. Inland marine is a type of property insurance used to insure equipment that cannot be conveniently confined to a fixed location. It includes coverage for equipment such as tools, tractors and other types of equipment typically used at a jobsite.
Property insurance. Property insurance is simply insurance to protect buildings and their contents.
Automobile liability insurance. This type of coverage protects the insured against financial loss because of legal liability for automobile-related injuries or property damage. Automobile physical damage insurance protects against damage to the insured’s own vehicle. Coverage is provided for perils such as collision, vandalism, fire and theft.