Short answer
Report to both. A construction defect claim may fall under general liability or professional liability, and often involves both. General liability is built for physical damage caused by your work. Professional liability is built for errors in your professional services, which for a design-build firm can include oversight, coordination and construction management. Professional liability is usually claims-made, so reporting late may cost you coverage even if the policy later applies.
What is each policy built for?
General liability responds to bodily injury and property damage caused by an occurrence, and it is usually occurrence-based. Professional liability responds to claims from negligent professional services and is usually claims-made and reported.
Many design-build professional liability forms include construction management or design-build services when they are scheduled on the policy. Check your declarations to see what yours lists. Whether a policy responds depends on its wording and the facts.
Why is “we did not design it” not the end of the question?
Claim letters often start with workmanship and expand once the owner’s experts finish their review. Phrases like “deviates from the permitted plans,” “code violation” or “overstressed structure” can lead to questions about design review, submittals or supervision.
On a design-build job, you may be responsible for the design even if an outside architect drew it, depending on your contract. Your project oversight, scheduling and coordination may also count as professional services under your policy.
Example: a hypothetical defect claim on a house
A design-build principal receives a defect claim letter on a house that an outside architect designed. The letter says the investigation is still underway, and the firm oversaw construction. The principal asks why the firm would notify professional liability when it didn’t draw the plans.
In this hypothetical, the agent explains that the claim may evolve and that professional liability is claims-made. The firm reports to both carriers to keep its options open. How each policy responds depends on its terms, exclusions and underwriting.
Why does reporting a construction defect claim to both policies make sense?
Claims-made policies usually require the claim to be reported in the policy period when it is first made, or within a short window after. If professional liability later turns out to be needed and was never notified, the insurer may raise late notice. If it decides the claim isn’t its own, you have usually lost little by reporting.
Reporting a claim can still affect pricing at renewal, so ask your agent how your insurers treat it.
What will each insurer look at?
General liability insurers often look at:
- Whether there is property damage
- When the damage happened
- Exclusions, such as damage to your own work
Professional liability insurers often look at:
- Whether the allegations involve professional services as the policy defines them
- Whether you knew about the problem before the policy started
What happens if both insurers get involved?
The insurers may share the defense, or one may defend under a reservation of rights. A reservation of rights letter means the insurer is handling the claim while keeping the option to decide later that the policy doesn’t apply.
Send the same complete file to both insurers and keep one point of contact. For background on design-build delivery, see the AIA and the Design-Build Institute of America.
What to check
- What services does your contract say you provide on this project?
- Are design-build or construction management services scheduled on your professional liability policy?
- Do the allegations touch design, review or oversight, or only installation?
- When was the claim first made, and are you inside the reporting window?
- Has each insurer acknowledged the claim in writing?
Questions to ask your attorney
- What services did our contract say we were providing on this project?
- Do the allegations touch design, review or oversight, or only installation?
- Has each insurer acknowledged the claim in writing?
This article is general education, not legal advice. Hardcover is an insurance agency, not a law firm.
Related questions
Is a construction defect claim covered by general liability or professional liability?
It depends on what is alleged. Physical damage from workmanship is usually a general liability question. Errors in design, review or oversight are usually a professional liability question. Many claims involve both.
Why report to professional liability if we did not do the design?
Your role on a design-build job may still count as professional services, and claims-made policies can deny late reports. The insurer decides if it applies.
It is a construction issue, so it is just a GL claim, right?
Not always. A claim that starts as a workmanship complaint may later involve design review or oversight. Reporting to both keeps your options open.
Will reporting a claim to both insurers raise my premium?
Any reported claim can affect pricing. An unreported claim that later grows may cost far more. Talk to your agent.