CPLI fills that coverage gap by protecting contractors from claims made due to an error or omission that occurred while they were performing a professional service. Examples of situations in which a CPLI claim may arise include:
• Improper design of a concrete floor that cracks under the weight of a company’s equipment
• Installation of a heating and cooling system found to be incapable of properly ventilating a building
• A design defect that prohibits a building from being certified
• A flaw in a building’s structure that causes a business interruption in order to have the flaw repaired
Even if a contractor subcontracts the design work and indemnifies the contractor from any liability, CPLI is still a good coverage to have. There are several reasons for this:
1. The indemnification, also known as a hold harmless clause (or provision), may not be enforceable.
2.If the design company went out of business or no longer carries professional liability coverage when the claim is made, the contractor may be out of luck and held responsible for the damages.
3.If the design professional’s policy limits are low or exhausted, the contractor may be found liable.