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Jul 11

Why Restoration Contractors Need Professional Liability

lead paint removal 300x200 Why Restoration Contractors Need Professional LiabilityI am continuously asked why restoration contractors should carry professional liability insurance.

Professional liability should be carried by those who prepare reports or provide opinions that others rely on.

“Professional Liability coverage can be offered along with CPL to many non-environmental contractors (general contractors, restoration contractors, construction managers, or specialty contractors) performing project management, plan review, field modifications, contractor and subcontractor selection, scheduling and sequencing services.”

I have had claims where our insured is a restorer and is asked by an adjuster to do a “bid comp” for them.  The adjuster has a scope and pricing put together and the property owner has a contractor not using Xactimate, who does not do insurance work, write a scope of repairs that is on the moon.  Our insured prepares an estimate for the adjuster, may charge him a fee, and is willing to do the job at a set price plus supplementals as the job dictates may be needed.

The insured then gets a lawyer, sues the carrier for bad faith, and our insured gets named because he is allegedly the “insurance company puppet”, may be on their vendor list, etc.  GL will not respond to this claim ad it would be denied as there is no bodily injury, property damage, or completed operations.

In the event our insured gets sued and there are multiple causes of action in the suit including “ means or methods” or reports, the carrier would have no duty to defend those particular causes of action as there is no coverage under the general liability for them.  This may include a claim where there was damage to the property caused by the negligence of the contractor as well as “means and methods” Someone could allege the contractor should have used 20 dehumidifiers instead of 10.  This cause of action would not be covered under this scenario.

Another scenario may involve an IICRC Certified techs dispatched to a water damage claim.  He inspects the loss and states to the insured that the site is dry and there is no damage. The contractor submits an invoice only for a service minimum. Five days later the insured calls his homeowners insurance company again because the smell is overwhelming. The insured has mold. The homeowner’s insurance company hires a professional investigator who determines that the original technician knew, or should have known, based on the tech’s IICRC training, that the site was in fact saturated at the time of inspection.  The General Liability Insurance might not cover the damages caused by the opinion rendered by the “expert” technician.

There has also been some recent court decisions in various states that a state licensed person including contractors are in fact professionals and have professional liability exposure as well.  Contractors are being called professionals like doctors, lawyer, insurance brokers, real estate brokers, etc. They are being held liable for means and methods claims as well.

2 comments

  1. Michael L. Mello

    Hey Ross,

    Very good article, very imformative, I enjoyed reading it. Keep up the great work!

    By the way, thanks for the wings in Nashville! We had a good time.

    Regards,

    Mike

  2. Chris Crawford

    Great article and again just goes to show you why documentaion and qualified personal are so important.At anypoint during a mitigation coversations,comments or just one of those kinda jobs.Things can go south very quickly and not just from a field technician point of view but also adminastrative.It is very important to have a clear line of communication from contractor to adjuster to insured.Around every corner in this industry is liability issues you have authorazations,inspection’s and reports,microbial growth,lead,asbestos,cat 3 and lets not forget that green horn fresh out WRT ready to take on the world.My ASD instructor Brandon Burton always said to account for unexpected variables and that’s just what are industry is unexpected variables sometimes.

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