Q: You have spoken in the past and mentioned that if you do design build projects that you should carry insurance for this type of work. Can you give me any details as to what is recommended?
A: Yes,what I referred to was errors & omission, and professional liability insurance. Most system contractors carry general liability and property and casualty insurance, but they don’t often carry errors and omission. That additional coverage will protect you on claims arising from a dispute over the performance of the system based upon owners’ expectations. An example I often use is this; if you purchase a new wood floor in your house and the floor later develops a problem caused by a design or installation flaw, and not attached to a manufacturer’s warranty claim, the policy would cover that. It’s often the misuse of a product for a particular application, or a flaw in the design or installation process that caused additional labor or materials to be used to satisfy the owner. Note: I try not to use actual industry examples, but I have plenty.
Your standard policy cover damages caused by your employees, but not necessarily mistakes they make that would be the cause of a performance or workmanship claim by the owner. When our members start doing design-build work they often become part of the design process. By contributing advice, recommendations, substitutions, alternative approaches, value engineering (and all the other buzz words) for deviating from an original system design, you become responsible for the performance of the system. It’s very different than a bid to spec job where the performance is the responsibility of the design consultant, engineer, or owner. Our Systems Plus insurance representatives can review your existing coverage and see how well that fits with your current business model. — CW