Knowledge Corner

Building Owners, Developers, Governmental agencies, and any other entity undertaking a design and construction project, face a wide range of risks before, during and after the work has been completed. In undertaking this project, you will engage a wide variety of professionals to provide everything from consultation, to design, to construction management, and inspections. Each entity is hired to provide professional services within their respective field, to ultimately deliver your desired outcome within your overall project schedule.

Though most projects offer smooth, or relatively smooth sailing, the complexity of today’s buildings and systems can pose challenges which may give rise to a loss that you sustain as the project owner. These can take the form of cost overruns, delayed completion, property damage and bodily injury. 

For example, an improperly designed window system could allow moisture to infiltrate your building. This could result in direct property damage, mold growth— which can cause both bodily injury and property damage—and business interruption costs to your tenants. As this situation arose from a design flaw, your recourse for recovery would be against the designer firm’s Professional Liability Insurance (PLI).  Unfortunately, PLI policies for the vast majority of firms have significant limitations in terms of coverage and limits, such as:

• Architect & Engineers typically have “house” policies that carry maximum limit of liability of $1MM to$2MM. Large national firms and Construction Managers typically carry more, but that would rarely exceed $10MM to $20MM.
• PLI policy forms dictate that defense costs are within the limits of the policy. Should you sue your designer, the costs they incur defending against the claim will erode the limit available to pay your claim, should you prevail in court.
• PLI policies typically cover all work undertaken by the firm, so they are spread very thin and often already eroded before your claim even hits their policy

With such limitations of PLI polices supplied by design firms and other professional services vendors, how can risk conscious Owners protect themselves? Owner’s Protective Professional Indemnity insurance (OPPI) is one solution. OPPI provides first-party indemnity to the owner (insured) for damage they incur as a result of negligence on part of the design professionals. It is in the owner’s name and sits excess of the design firm’s professional liability insurance. No one on the design team is named to the policy. OPPI can be written on a project-specific basis or “blanket” (all construction projects of the owner) basis. 

Call TSIB at 201-267-7500, and ask to speak to one of our Risk Advisors to learn if OPPI is right for your project.

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