Contractors Professional and Pollution Liability Coverage: A Must-Have Solution for Contractors
A recent Arizona mishap highlights the importance of pollution liability coverage for contractors. Many plumbing and other contractors work under the misunderstanding that their general liability coverage is sufficient to cover their negligence, even if it involves gas work and other polluting substances. It is critical that agents always offer pollution coverage and document the rejection by your clients if they choose not to buy pollution coverage.
Contractors Professional and Pollution Liability Coverage:
A Must-Have Solution
Although most contractors do not realize it, they face significant coverage gaps with standard Commercial General Liability (CGL) policies, particularly in instances of professional and pollution liability. The Contractors’ Professional and Pollution Liability (CPPI) policy is a comprehensive solution that addresses these gaps, offering protection for risks not always covered by CGL policies.
Why the CGL Falls Short
CGL policies cover bodily injury (BI) and property damage (PD), leaving contractors exposed to financial losses caused by errors or omissions that do not result in bodily injury or property damage. For example, if an HVAC contractor installs a faulty ventilation system, the costs of removal, replacement and delays are usually not covered by the CGL. Nor normally would the arising injuries to a person exposed to harmful fumes.
In the Arizona case now filed and linked below, it is doubtful this contractor had any pollution coverage. In fact, for unlicensed contractors, even a CGL policy may not exist.
The CGL’s “absolute pollution exclusion” limits coverage for pollution-related incidents, leaving contractors vulnerable to cleanup costs, transportation risks and bodily injury caused by pollution. It also leaves them open to lawsuits such as the one recently filed in Arizona.
In the linked article, according to the lawsuit, an Arizona unlicensed contractor “improperly, carelessly, and illegally installed venting carbon monoxide inside the property rather than outside.” See the article here: Improper venting caused carbon monoxide to cause alleged injuries to hotel occupants.
All plumbers install gas water heaters and issues like this can easily arise to any of your plumbing contractor clients.
Contractors Professional and Pollution Liability Coverage: Filling the Gaps
CPPI policies combine four key coverages to protect contractors against gaps found in the CGL.
- Professional Liability Coverage: Covers financial harm from professional services like design, engineering, or construction management. For example, a client may request a plumber to provide advice on a septic system on a property they are considering purchasing. The plumber provides inaccurate information and the client then sues the plumber, alleging, “I never would have bought the property if you hadn’t said the septic system was good.”
- Protective Liability Coverage: Provides excess or backup coverage if a contracted professional’s insurance is insufficient or unavailable. This coverage acts to provide excess coverage when a design professional’s liability coverage limits are insufficient.
- Mitigation Expenses Coverage: Covers the insured’s costs to fix issues during construction before they escalate into claims. It is always less expensive to fix a problem before the project is complete, so this coverage can help contractors fix a problem before the client presents a liability claim.
- Pollution Liability Coverage: Protects against pollution-related claims at job sites, during transportation, or from the contractor’s business location. It can also cover BI or PD resulting from the release of a pollutant; damage to soils and water, and more, after a pollutant release; the cost to clean, treat and restore damaged resources resulting from the release of a pollutant; coverage for pollution released within a building, and more.
Key Features of CPPI
- Professional Liability: Covers errors in design or installation, such as the septic tank example, including costs for removal, replacement, and income loss.
- Pollution Liability: Extends coverage for pollution incidents both on-site and at the contractor’s location, including cleanup costs and environmental damage abatement.
- Consent to Settle Clauses: Policies may include “hammer clauses,” which limit the insurer’s payout if the contractor refuses to settle a claim. Agents should discuss hammer provisions with their clients when binding coverage.
Who Needs a CPPI?
CPPI is essential for nearly all contractors, including general contractors, construction managers, design-build firms and specialty or environmental contractors. CPPI coverage helps to ensure protection against the unique risks contractors face.
For a more thorough article on this important coverage by Chris Boggs, click this link.
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