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Contractors’ professional liability insurance (CPrL) has expanded greatly in recent years, both in the number of carriers offering the coverage and the depth of the coverage itself. Not long ago, a CPrL program was comprised simply of a professional liability coverage part. Today it’s broadened significantly to include third-party liability and various first-party coverage.

As contractors educate themselves on the risks and potential claims associated with their services, the number of them purchasing these coverages has increased dramatically. Today, typical CPrL programs consist of three main coverage parts:

  • Professional Liability coverage (third-party): for liability arising out of negligent acts, errors or omissions in the performance of professional services performed by or on behalf in the insured
  • Protective Indemnity coverage (first-party): for damages incurred by the insured that they are legally entitled to recover from a design professional excess of the DP’s PL policy
  • Rectification/Mitigation (R/M) coverage (first-party): for expenses reasonably and necessarily incurred in mitigating or rectifying a negligent act, error or omission arising from professional services (performed by or on behalf of the insured) that would otherwise lead to a professional liability claim

R/M is intended to pay first-party costs incurred by a contractor to remedy design and/or professional services errors, while reducing the likelihood of third-party or liability claims. It differs from the other first-party coverage under a CPrL program—protective indemnity—because it’s a primary coverage subject to a self-insured retention (SIR). Protective indemnity is an excess coverage part that also pays for first-party damages, but in excess of the professional liability limits provided by design professionals hired by the contractor.

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