What You Need to Understand About Contractor’s Professional Liability Insurance

By on August 13, 2019

From Jobsite Procore:  As the contractor’s professional liability insurance market has grown, so have the claims. CPL Policy limits are also climbing, the average now double what it was just five years ago. Contractors pay a lot for these policies, and owners increasingly require them. Here’s what’s behind the flight to CPL, and the trends in coverage.

Contractor professional liability insurance arose in the 1990s to help cover risks from prime contractor design errors. As projects grew in complexity, contractors found themselves involving more third parties in making design decisions. Similarly, with more design work on their shoulders when working on design-build and other collaborative delivery methods, contractors created new risks. Simply adding an endorsement to the architect’s policy to cover these types of design errors grew less effective and fell out of favor.

The CPL Numbers

As of May 2017, the CPL capacity in the U.S. was $300 million and growing. The upper policy limits are growing as well, from one million to two million and even five million dollars. The bigger the project, the greater the limits, with $25 million common on projects having values of at least $500 million. However, the claims are also climbing.

Insurers report 20 percent year-over-year increases in professional liability claims, and the claim sizes reach eight-digit sums.

However, these CPL statistics don’t seem troubling to the insurance industry. Insurers are offering a broader range of coverage and are further expanding coverage types. They are even including other types of coverage in the CPL policies to improve value, for instance, by adding pollution coverage.

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