Contractor and construction mistakes, such as failure to follow a blueprint, can be financially devastating for your client. As a result, your business could be sued to recoup losses. Contractors' professional liability insurance, sometimes called errors and omissions insurance (E&O), will help provide indemnity for legal costs when facing accusations of negligence or errors.
This policy offers liability coverage related to professional services, including:
Your insurance company can usually add this coverage to a general liability policy, typically for a discounted rate.
Most professional liability insurance policies are written on a claims-made basis. So, in order to collect insurance benefits, your professional liability policy must be active when an alleged mistake occurs and when the claim is filed.
Delays are common in the construction industry, but when it affects your client’s bottom line, you could face a lawsuit. If a customer sues a general contractor, plumber, building design professional, or other construction professional for missing a deadline or failing to deliver promised results, a professional liability policy can pay for your legal expenses, such as hiring a lawyer.
If a customer accuses your business of negligence – whether or not you’re at fault – you could face a costly lawsuit. Contractors’ E&O insurance can help with court costs, attorney’s fees, and judgments or settlements when a client questions the quality of your carpentry, electrical, or welding work.
If a client claims that your work mistake caused financial damage, you could face a legal battle that leads to bankruptcy or worse. For example, an electrician could be sued for failing to repair faulty wiring that led to a costly reinstall. Your professional liability insurance policy pays for legal expenses related to work mistakes, including judgments if the court rules against you.
While professional liability coverage shields against accusations of work errors, it does not offer complete protection. No matter your specialty, personal injuries and property damage are part of the trade. Other policies to consider include:
General liability insurance: This policy can cover expenses related to customer injuries and property damage, along with advertising injuries.
Business owner's policy (BOP): A BOP bundles general liability coverage and commercial property insurance at a discount. It protects against the most common lawsuits and property damage.
Contractor’s tools and equipment insurance: This policy helps pay for repair or replacement of a contractor’s tools and equipment if they are lost, stolen, or damaged off-site or on route to a construction project.
Surety bonds: These bonds reimburse your clients for financial losses if your company is unable to fulfill the terms of its contract.
Builder’s risk insurance: This policy can pay for damage done to a structure still under construction. It can cover costs resulting from fire, vandalism, on-site theft, and more.
Additional insured endorsement: This extends coverage to anyone other than the policyholder, and can be required by clients, contractors, and subcontractors depending on the project or contract.