Professional Liability Insurance for Contractors
Construction projects are not just physical. They involve plans, measurements, schedules, recommendations, and decisions that directly impact cost, safety, and performance. When something goes wrong, the claim is often not about property damage or bodily injury. It is about an alleged mistake, oversight, or failure to perform professional services.
Professional Liability Insurance, also known as Errors and Omissions insurance, is designed to protect contractors from these non-physical claims.
This coverage has become increasingly important as contractors take on more design responsibility, coordination duties, and advisory roles.
What Is Professional Liability Insurance?
Professional Liability Insurance protects contractors against claims arising from professional services performed or alleged to have been performed incorrectly.
These claims typically involve allegations of:
- Design errors or omissions
- Incorrect specifications or measurements
- Inadequate recommendations or advice
- Failure to meet professional standards of care
- Cost overruns tied to professional decisions
- Delays caused by design or planning issues
Unlike General Liability, these claims do not require bodily injury or property damage. A financial loss alone is enough to trigger a lawsuit.
Why Contractors Are Increasingly Exposed
Many contractors assume Professional Liability only applies to architects or engineers. In reality, contractor exposure has expanded significantly.
Common reasons include:
- Design-build contracts
- Value engineering services
- Shop drawings and submittals
- Means and methods recommendations
- Project management and coordination responsibilities
- Pre-construction consulting and budgeting
Even if you outsource design work, you can still be named in a lawsuit for professional decisions tied to the project.
If your contract includes any language around design responsibility, professional judgment, or advisory services, this coverage should be strongly considered.
What Professional Liability Typically Covers
Coverage varies by policy and carrier, but most contractor Professional Liability policies address:
- Defense costs, even if the claim is groundless
- Alleged errors or omissions in professional services
- Negligent acts related to design or planning
- Financial damages resulting from professional mistakes
- Claims arising after project completion, subject to policy terms
Defense costs alone can be significant, even when a contractor ultimately prevails.
What Is Not Covered
Professional Liability is not a replacement for other core coverages.
Common exclusions include:
- Bodily injury or property damage, which are handled under General Liability
- Faulty workmanship without a professional services component
- Intentional acts or fraud
- Contractual guarantees beyond the standard of care
- Known issues prior to policy inception
This is why proper policy structure and coordination with your other coverages is critical.
Claims Made Coverage and Why Timing Matters
Professional Liability policies are typically written on a claims made basis.
This means:
- The policy in force when the claim is made responds, not when the work was performed
- Continuous coverage is critical
- Gaps in coverage can leave prior work uninsured
- Retroactive dates matter
Contractors often overlook this and only discover the issue when a claim is denied years later.
Part of our role is helping you structure coverage that aligns with the long tail nature of construction claims.
How Professional Liability Fits With Other Contractor Coverages
Professional Liability works alongside your other policies, not in place of them.
- General Liability addresses bodily injury and property damage
- Builders Risk addresses physical loss during construction
- Commercial Auto addresses vehicle-related losses
- Workers Compensation addresses employee injuries
- Professional Liability addresses financial loss from professional decisions
Gaps often occur when contractors assume one policy will respond to everything. It will not.
Contract Requirements and Owner Expectations
More project owners and developers now require Professional Liability coverage, especially on:
- Design-build projects
- Public works contracts
- Larger commercial developments
- Projects involving engineering or consulting services
Limits, retroactive dates, and policy form language are often contractually mandated. Incorrect coverage can delay project approval or violate contract terms.
Risk Management Matters More Than Ever
The professional liability market for contractors has tightened. Claims frequency and severity have increased, and carriers are more selective.
Strong risk management helps improve both availability and pricing, including:
- Clear contract language defining scope and standard of care
- Proper documentation of decisions and recommendations
- Defined roles between contractor and design professionals
- Change order discipline
- Claims reporting protocols
We work with contractors not just to place coverage, but to reduce claim likelihood.
Who Typically Needs Professional Liability Insurance?
This coverage is especially important for:
- Design-build contractors
- General contractors providing pre-construction services
- Specialty contractors involved in system design
- Contractors producing shop drawings
- Contractors offering consulting or advisory services
If your work involves professional judgment beyond pure labor, this coverage deserves a serious conversation.
Frequently Asked Questions About Professional Liability Insurance for Contractors
What triggers a Professional Liability claim for a contractor?
Professional Liability claims are triggered by allegations that a contractor made a mistake, oversight, or error in professional services. This can include design input, specifications, measurements, scheduling decisions, value engineering, or recommendations that allegedly caused a financial loss, even if no physical damage occurred.
Why would a contractor be sued if there is no property damage or injury?
Many construction lawsuits are based on economic loss. Examples include cost overruns, delays, redesign expenses, or lost revenue that an owner claims resulted from a contractor’s professional decisions. General Liability does not respond to these claims.
Is Professional Liability only needed for design-build contractors?
No. While design-build contractors have clear exposure, many traditional contractors also face professional liability risk through pre-construction services, shop drawings, coordination responsibilities, and advisory roles. If your contract involves professional judgment, this coverage should be evaluated.
Does this policy cover mistakes made by subcontractors or consultants?
Coverage depends on how the contract is structured and how responsibilities are assigned. Contractors are frequently named in lawsuits even when design work is subcontracted. Professional Liability can help address defense costs tied to those allegations, but policy wording matters.
Does Professional Liability cover faulty workmanship?
Not by itself. Faulty workmanship is generally excluded unless the claim involves a professional services component. For example, a construction defect caused by improper installation would not be covered, but a defect tied to a design or specification error may be.
Why is Professional Liability written on a claims made basis?
Professional Liability claims often arise years after a project is completed. Claims made coverage ensures the policy in force when the claim is reported responds, which is why maintaining continuous coverage and protecting the retroactive date is critical.
Are defense costs included in the policy limits?
Often yes. Many Professional Liability policies include defense costs within the policy limits, which means legal expenses can reduce the amount available to pay a settlement or judgment. This makes proper limit selection especially important.
How much Professional Liability insurance do contractors typically carry?
Limits vary widely based on project size, contract requirements, revenue, and risk profile. Choosing limits should be based on realistic exposure, not just minimum contract requirements.
Is Professional Liability required by law?
No, but it is increasingly required by project owners, lenders, and public entities. Even when not required, it can be critical to protecting a contractor’s balance sheet.
Why is the Professional Liability market tightening for contractors?
Claims involving design responsibility, delays, and cost overruns have increased significantly. Carriers are responding with stricter underwriting, higher premiums, and more restrictive terms. Strong risk management and proper policy structure matter more than ever.
How does Professional Liability work with Builders Risk and General Liability?
Each policy addresses different types of loss. Builders Risk covers physical damage during construction. General Liability covers bodily injury and property damage. Professional Liability covers financial loss tied to professional decisions. None of these policies replace the others.
How can a contractor reduce Professional Liability claim risk?
Clear contract language, defined scopes of responsibility, disciplined change order processes, thorough documentation, and early claim reporting all play a major role. Insurance is only one part of managing professional risk.
Why work with a contractor-focused insurance agency for this coverage?
Professional Liability policies are not standardized. Coverage differences can significantly impact claim outcomes. Working with an agency that understands contractor operations, contracts, and claims trends helps reduce coverage gaps before a loss occurs.
Why Work With Contractor Insurance Professionals
Professional Liability coverage for contractors is not standardized. Policy forms, exclusions, and endorsements vary significantly.
We specialize in contractor risk and understand how Professional Liability interacts with:
- Construction contracts
- Project delivery methods
- Other coverage lines
- Claims trends in the construction industry
Our goal is to help you avoid coverage gaps before a claim ever happens.
Talk to a Contractor Professional Liability Specialist
If your projects involve design responsibility, professional judgment, or advisory services, Professional Liability Insurance should be reviewed carefully.
Let us help you evaluate your exposure, contract requirements, and coverage options so your business is protected when it matters most.
Coverage availability, terms, and conditions vary by insurer and policy form. All coverage is subject to underwriting approval and the actual policy language.
