What Is the Design-Build Coverage Gap Between GL and Professional Liability?

Short answer

A design-build coverage gap can appear when one firm acts as both designer and builder, and a claim falls between two policies. General liability policies commonly exclude professional services. A professional liability policy may treat the same claim as a construction matter. Report to both carriers at the same time. How each policy responds depends on its wording and the allegations.

How the design-build coverage gap happens

A design-build firm carries two main policies that were often written separately. The general liability policy generally responds to bodily injury and property damage, and it commonly excludes professional services. The professional liability policy generally responds to errors in professional services, and it may exclude or limit work that looks like contracting.

When a homeowner alleges both bad design and bad construction, each carrier can point to the other policy. The firm may be left in the middle while a response deadline runs. Firms that act as architect and general contractor on the same project face this risk more than most.

The scenario below is an anonymized composite based on a real claim file. Project details have been changed, and the matter was unresolved at the last update.

A scenario where each policy pointed to the other

A small design-build firm acted as architect and general contractor on a residential project. The homeowners were additional insureds under the contract, and they demanded that the firm report to its general liability carrier.

The homeowners later added a professional negligence count and moved to add the principal personally. The firm had hired its own lawyer and hadn’t reported to its insurers at first. When it did report, three things happened:

The general liability carrier acknowledged the claim, but its policy excludes professional services
The professional liability carrier issued a disclaimer
The general liability examiner told the broker the insured might want to push back on the professional liability disclaimer, since the counterclaim plainly alleged professional negligence

The matter was unresolved at the last update. The same firm later received a state pre-suit construction-defect notice on another project and reported it to both carriers.

The disclaimer was challengeable, and pushing back on it was worth considering. Carrier positions at the start of a claim aren’t always final, and a broker can help build the argument for reconsideration. No one can promise the result.

What design-build firms can do

Ask your agent whether your general liability and professional liability policies were written to work together
Report to both carriers at the same time, even if you think only one applies
Don’t let personal counsel delay notice to your insurers
Ask your broker to review any disclaimer or denial before you accept it
Review the additional insured promises in your contracts, because they can lead homeowners to expect coverage your policy may not provide

Notice timing matters because most professional liability policies are claims-made. Our professional liability and general and property liability pages explain how each policy works on its own.

Does general liability cover a design-build firm’s design errors?

Usually not. General liability policies commonly exclude professional services, so design errors may fall outside them. Check your policy wording and ask your agent how your two policies fit together.

Why would professional liability deny a design-build claim?

A professional liability policy may treat a claim as a construction matter, or it may exclude contracting work. Whether that reading is correct depends on the wording and the allegations. A denial can be challengeable, so ask your broker to review it.

Should a design-build firm report to both carriers?

Many firms do, especially when the complaint alleges both design and construction problems. Reporting to both at the same time can avoid delay. Your broker can help you decide where to send it.

Can I push back if my carrier issues a disclaimer?

Yes, you can ask the carrier to reconsider. A broker can help gather the contract, the complaint and the policy language to support the request. Results vary by case.

What does an additional insured promise in my contract mean?

Many contracts require you to name the owner as an additional insured. That promise can create expectations about coverage, so review it with your agent before you sign.