The exposures confronting the construction industry continue to expand with the ongoing evolution of new building methods and materials. This has not only led to an increase in liability, but also an uptick in the severity of insurance claims especially in the areas of civil, healthcare, commercial building and habitational projects. 

As a result, Contractor’s Professional (CPrL) and Contractor Pollution Liability (CPL) policies have consistently expanded the scope and depth of coverage terms over the past few decades to cover liability issues and pay for losses. However, these innovations have accompanied greater complexities. A modern combined CPrL/CPL program can have up to seven separate coverage parts, each with its own triggers, exclusions and reporting provisions. 

In addition, many construction professionals are still learning that even the best policies cannot be renewed and simply set aside. All policies include clauses that dictate how and when claims must be reported. Compliance or the lack thereof for these clauses can often spell the difference between a claim being paid or its ultimate denial.

Unfortunately, while a wealth of material is available to explain coverage details, far less exists to highlight claim reporting conditions. This caveat is especially important since each policy is different and nuanced by the various carriers offering the insurance form. That’s why it’s especially important for every policy holder to firmly understand the requirements that must be met to not only file claims, but also resolve liability issues and avoid costly project delays.

Contractors Pollution Liability (CPL) and Contractors Professional Liability (CPrL)

CPL coverage varies among the numerous carriers and typically covers the expenses associated with pollution conditions resulting from the insured’s operations. In contrast, CPrL policies are normally written to address losses arising from errors or omissions committed by or on behalf of the insured. No matter the policy, the claims against each coverage form must be reported in writing to the carrier as soon as practicable and before the policy’s expiration. 

Things to consider:

• Does the policy have a “responsible insured” provision? While all policies differ to some extent, many base coverage forms consider individuals such as foreman, supervisors and even employees who are responsible for risk control or risk management issues to be “responsible insureds” under the policy terms. These individuals have an explicit duty to report claims and circumstances under the policy. Construction executives need to carefully review their policy to determine who in their organization would fall under this definition and then properly delegate responsibility. Coverage may be voided if such an individual is made aware of a circumstance or claim but fails to report it. 
• Do not undertake activities that could either prejudice the carrier’s position or void the coverage after a potential exposure is identified. This includes accepting responsibility or the incurring of costs and initiation of remediation actions upon the exposure’s discovery. Note that emergency actions which are necessary to prevent or mitigate imminent harm are permitted in most cases and will not void coverage.

Named Insured Location Pollution Liability (Sudden and Accidental)

This coverage protects the insured from pollution incidents occurring at their owned locations. Pollution conditions must be sudden and accidental in nature with a definitive beginning and end. 

Things to consider:

• Does the policy apply a time limit for discovery? Some policies require pollution conditions at an insured location to be discovered shortly after its commencement. Seven to 15 days is typical.
• Does the policy specify a dedicated time window for reporting? Rather than using “as soon as practicable,” some policies attach a specific deadline measured in days.

Emergency Response Expense (ERE) Coverage

Emergency Response Expense (ERE) coverage reimburses the insured for the costs incurred to mitigate or address pollution conditions that would jeopardize property or people if left unaddressed. ERE is unique among the coverages because the insured does not need to obtain approval from the insurance company prior to incurring costs. 

Things to consider:

• Does the policy reference the date that the pollution condition was discovered or the date it commenced?
• Costs must be incurred within a specified time period, with most policies being between three and 14 days.
• Costs must be reported to the carrier within a specified time period, typically between three and 14 days.

Rectification or Mitigation Expense

Rectification or Mitigation expense coverage is a first party coverage which reimburses the insured for expenses they incur to mitigate or rectify a professional error that would otherwise result in liability against the insured if left unaddressed. 

Things to consider:

• Generally speaking, the insured must submit their assessment of the professional error, a proposed course of action and the cost to implement such plans prior to incurring any mitigation or rectification costs.
• The carrier must approve of the proposed plan and expenses.

Protective Indemnity Coverage

Protective Indemnity is a first party coverage which reimburses the insured for losses they are legally entitled to recover from a negligent design professional they have hired. The insured must first file a protective claim against the design professional seeking to recover such losses. 

Things to consider:

• Once the insured submits their protective claim against the design professional, they must notify the carrier as soon as practicable.
• After filing their claim or demand against the design professional, the insured must pursue the protective claim, taking all steps necessary to obtain recovery of their loss.

While broader in terms, CPrL and CPL policies have never been more complex. In an effort to control losses, claims reporting practices have become increasingly stringent. Failure to comply with any of these requirements can result in the denial of coverage. Therefore, it is critical for construction executives to thoroughly understand CPrL/CPL policy requirements if they are to recognize its full value. Unfortunately, timely and costly project delays are not acceptable under any circumstance. As a result, there is no need to further exacerbate trying situations with unforced claims reporting errors.