Insurance for Design-Build Projects - Design-Build for Water and Wastewater Projects - page 152

professional indemnity (OPPI) policy to serve as excess for the design professional's cov-
erage and provide first-party coverage for the owner in the event the design professional's
limits are insufficient to cover the claim. Contractors can purchase a contractor's protec-
tive professional indemnity (CPPI) policy instead of standard PL policies when they self-
perform, subcontract design services, or provide construction management services to the
project owner in the role of construction manager at risk or agency construction manager.
Contractors engaged in DB are subject to the same standard of professional care as design
firms, but their commercial general liability (CGL) policies do not cover the professional
exposure.
The CPPI policy consists of two main coverage parts, with an optional third part for
pollution liability. Coverage Part A protects the contractor when third-party claims result
from the professional negligence of the contractor. Issues covered here include the con-
tractor's direct or vicarious liability for
1. Negligence in preparing plans, drawings, and specifications
2. Failure to detect poor or faulty workmanship
3. Negligence in the specification of building materials
4. Subcontractors
Coverage Part B provides the contractor with first-party protection for losses result-
ing from the design negligence of its subcontractors. When the contractor detects a design
error of its subcontractor, Coverage Part B allows the contractor to fix the error before it
results in a third-party claim. As indicated by DBIA (2008), coverage is only available in
excess of the designer's PL policy.
Commercial General Liability (CGL)
The CGL policy pays sums that the insured is legally obligated to pay as a result of cov-
ered injury or damage and defends the insured against suits seeking such damages. The
policy covers bodily injury, property damage, personal injury, and advertising injury that
were caused by the acts of the insured parties. Coverage should be secured for both cur-
rent premises and operations exposures, as well as completed products and operations.
For the design firm that is adding the role of builder to its repertoire, the increased
exposure to loss covered by the CGL policy is significant. This is a material change in the
operations of the firm and needs to be reported to the CGL carrier. Additional underwrit-
ing information will be required, and a higher premium will likely result. The designer's
CGL policy probably already includes a PL exclusion, but with the mixing of design
and construction services, the firm should make sure the exclusion is no narrower than
required by ISO's CG 2279—Exclusion-Contractors-Professional Liability. This endorse-
ment removes coverage for liability arising from a contractor's rendering of professional
services, but “construction means, methods, sequences, techniques and procedures”
employed in the firm's operations as construction contractor are specifically pulled from
the definition of professional services, exempting them from the exclusion. This allows
the CGL policy to exclude what is more appropriately covered under a PL policy (i.e.,
negligent acts, errors, and omissions) while still covering the design professional's con-
struction services.
The construction firm adding licensed designers to its staff or subcontracting for
design services must also report this material change to its CGL carrier. If the policy