The Insurance ServicesOffice (ISO) provides several endorsements to the CommercialGeneral Liability (CGL) Coverage Form that address constructionrisks. One such endorsement is CG 22 34, Exclusion — ConstructionManagement Errors and Omissions.

A general contractor is usually the person or entity withresponsibility and control over the means, methods, sequences andtechniques of the work in general, including the coordination andsupervision of the work of subcontractors. Some general contractorsalso may perform some of the work. Although a general contractordoesn’t have to be a professional or to perform work considered tobe of a professional nature, it’s common to find generalcontractors with professionals on staff who are qualified to, andin fact do, function as construction managers.

The term “construction management” is generally understood toencompass the activities undertaken by a construction manager whoseprofessional services are engaged by the project owner tocoordinate and manage the entire project from start to finish. Theactivities of a construction manager can vary widely, depending onthe nature of the project and the owner’s needs. The American Institute ofArchitects’ agreement between the project owner andconstruction manager describes the scope of the constructionmanager’s work to include:

• basic services,
• construction phase administrative services,
• additional services,
• contingent additional services, and
• optional additional services.

With knowledge and expertise in the means and methods ofconstruction, labor, and materials as well as the ability todirect, work with, and make decisions over the entire project,including design, the general objective of the construction manageris to help produce a quality project, with as little delay aspossible, and at the least possible cost.

Potential gray area?

The endorsement is designed for contractors that are involved inconstruction management such as design-build projects. The factthat a contractor’s professional liability policy is likely to bewritten by a different insurer than the one that writes thecontractor’s general liability policy means there may be a grayarea between the two. In fact, this problem confronts mostbusinesses that offer professional services.

Despite its title, this endorsement doesn’t limit the exclusionof bodily injury, property damage, personal injury, or advertisinginjury to errors and omissions. Coverage is flatly excluded if suchinjury or damage arises from any of the various activities noted inthe endorsement. However, an exception to this exclusion, andtherefore covered, is bodily injury and property damage due toconstruction or demolition work done by the named insured or itsemployees or subcontractors, subject to other policyexclusions.

The 1993 version of this endorsement includes reference to“employee,” as a defined term. This change also was made becausethe exclusion doesn’t apply to bodily injury or property damage dueto construction or demolition work by the named insured or itsemployees.

General contractors and construction managers are often involvedin projects with charitable organizations like Rebuilding Together or Habitat for Humanity, which include volunteers asworkers on the projects. In light of the 2001 CGL policy amendmentthat expands the definition of employee to include volunteers, whatapplies here to employees also applies to volunteers.

Related: Construction industry already feeling impact of newrisk management, technological tools

This article is excerpted from Commercial General Liability Coverage Guide, 11thEdition.