Public entity work has been in the economic forefront due to the passage of the American Recovery and Reinvestment Act of 2009.
This economic recovery package provides $787 billion in stimulus spending and tax cuts. Much of those funds will be allocated toward the upgrading and improvement of infrastructure such as roads and bridges. Even though economic cycles are impossible to predict with any degree of certainty, we all look forward to an inevitable economic upturn. In the interim, it's clear that public sector work will be one of the drivers of our nation's recovery. Being able to anticipate some of the possible insurance coverage issues that are seen most typically with public sector work is important. Following is insight into four areas of coverage concern when working in the public sector and how they align with your Commercial General Liability (CGL) coverage.
Unique Coverage Requests
Contracts entered into with public entities should always be in writing so any risk transfer expectations are fully understood. Public entity projects often require separate limits or policies and unique additional insured forms. They also frequently insist that non-standard certificates of insurance be issued. It's critically important that you don't rely on verbal agreements.
While most insurance carriers will work with these requests, that is not always the case. It's important that you discuss any anticipated public sector work with your broker to assure that your carrier can quickly respond to any non-negotiable requirements of the public entity.
Collaborative or Virtual Design and Construction
Many public entity buildings are being done via collaborative or virtual design, more commonly known as Building Information Modeling (BIM). This process promotes the development and use of computer software to simulate the construction and operation of a facility. The process is currently being used on many major public sector construction projects and is projected to be more commonly used in the years ahead. In addition, trends toward public-private partnerships or integrated delivery models will further merge the distinctions between design and construction on some projects in the future.
There are many benefits to processes like BIM. Done properly, it leads to fewer errors, more efficiency and fewer change orders. It also provides non-technical participants on a project the ability to better understand the link between their work and the final product. It is seen as a more effective way to identify problems within the traditional contracting means and methods of the construction process.
On the other hand, as with any new technology, there are potential pitfalls. Risk allocation, protocols for sharing digital information and possible liabilities are all areas that need to be and are being addressed.
There are important coverage considerations. You need to be aware that many policies contain exclusions for professional liability coverage. Professional services are typically defined as preparing, approving or failing to prepare or approve maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings and specifications. They also extend to supervisory, inspection, architectural or engineering activities.
The Insurance Services Offices (ISO) offers standardized forms that are available to the insurance industry, and the ISO's portfolio includes various exclusions. These are the typical ISO exclusions a contractor might find on their policy for professional liability exposures under a standard CGL coverage form:
- CG 2243 excludes coverage for liability arising out of the rendering or failure to render any professional services by you or any engineer, architect or surveyor who is either employed by you or performing work on your behalf in that capacity. This is the most restrictive of the standard exclusions.
There are two alternative ISO exclusions that contain exceptions to the above exclusion:
- CG 2279 includes an exception to the exclusionary language. It says that professional services do not include services within construction means, methods, techniques, sequences and procedures employed by you in connection with your operations in your capacity as a construction contractor (and thus are not excluded). Contracting
