Environmental & Construction Professional Exposure Claim Scenarios You Need to Know About
This blog post will cover common scenarios and offer insights to help advisors recommend appropriate coverage for their clients. Staying informed can aid in protecting clients’ businesses from potential claims related to environmental and construction professional exposure. Gain critical insights by reading this post.
GENERAL CONTRACTOR (GC)
A GC under a design-build contract hired an HVAC subcontractor to design and install an HVAC system for a residential apartment project. Once completed and occupied, the apartment units began developing mold, and residents began complaining of respiratory problems, headaches, and other physical ailments. An error in the HVAC design plans caused significant condensation in the system resulting in mold generation. The GC’s legal costs, remediation costs, as well as costs for bodily injury claims to rectify the problem caused by the design error were over $1,000,000. Neither the GC nor the subcontractor carried professional liability coverage. The subcontractor declared bankruptcy, leaving the GC to pay all the associated damages.
CONSTRUCTION MANAGER (CM)
A CM for a bridge replacement project was responsible for scheduling the procurement and delivery of steel beams necessary for the project. Due to a communication error, the delivery of the beams was going to be delayed for 4 weeks. Rather than have the steel subcontractor sit idle on the job site, the CM procured steel beams from another vendor with minimal delay, although at a higher cost. The owner claimed against the CM for professional negligence, alleging project mismanagement, and sought payment for associated cost overruns of over $200,000.
GENERAL CONTRACTOR (GC)
A GC was hired to build an athletic field using plans from a civil engineer retained by the owner to complete a preliminary design. The GC hired the civil engineer under a design-build contract at the owner’s insistence. After the field was constructed, it was determined that the completed design was flawed, and there was a significant drainage problem causing the field to be unusable. The owner filed a lawsuit against the GC, and the GC initiated a subrogation action against the civil engineer. The cost to repair the field at an accelerated schedule to minimize the owner’s business interruption costs were in excess of $400,000. The GC’s legal costs were in excess of $50,000.
A roofing contractor was hired to design and install the roof of a new office building, including a solar panel array. The design was performed in-house by a licensed PE employed by the contractor. After the building was complete, the roof collapsed during an ice storm. The PE failed to consider the appropriate load factors in the design specifications associated with regional weather events. The costs to defend the contractor, repair the roof, and pay the associated property damage claims were in excess of $650,000.
A specialty concrete contractor under a design-build contract for a parking garage hired an engineering firm to provide the structural specifications. Following construction, the garage owner noticed cracks in the support columns. The cause was determined to be that the rebar specified in the engineering plan was insufficient to support the structure. The cost to replace the rebar with appropriate materials was over $140,000. As the contractor hired the engineering firm under a design-build contract, the owner filed a lawsuit against the contractor for the repairs and resulting business interruption losses.
A heavy highway and bridge contractor was hired to build an elevated highway. The contractor hired an engineer to design the temporary support structures (falsework) to support the permanent structure until the highway was completed. A design flaw in the falsework caused a partial collapse of the highway resulting in property damage to a subcontractor’s equipment and project delays. The costs to repair the highway and pay the associated property damage and delay were over $550,000.
A general contractor (GC) hired a specialty contractor to design and build a retaining wall for commercial development. The GC was responsible for the initial site development and infrastructure. Upon completion, the building developed cracks in both the walls and floors. It was determined that the design of the retaining wall was insufficient, resulting in soil movement and subsidence, which caused the cracks. The cost to defend the GC and repair the retaining wall and building cracks was over $150,000 after contribution from the contractor’s insurance coverage which was limited to $250,000.
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For more claims scenarios on contractor pollution insurance, visit the Resources section of our website.
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