CHANGING LEGAL L ANDSCAPE


Communication = Coverage: Stimulating the Flow of Information to Maximize Professional Insurance Recovery


BY WILL S. BENNETT, SAXE DOERNBERGER & VITA, P.C.


T


oo often, we are approached by general contractor clients who have had claims denied by their


insurance companies because of some- thing that can be traced back to a lack of communication between the project team and the risk management team. In many of these situations, the issue could have been easily avoided. There are multiple lines of insurance that are deeply impacted by this problem, but we focus on professional liability reporting issues here. For any general contractor undertak- ing design-build, design assist, construc- tion management, value engineering, or other potentially “professional” activities, professional liability insurance is a critical piece of the general contractor’s insurance


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CALIFORNIA CONSTRUCTOR MAY/JUNE 2025


portfolio. Tis coverage is almost always issued with a “claims made and report- ed” structure, meaning that rather than covering injury or damage that occurs during the policy period, as is common with CGL insurance, it covers claims made against and reported by the contractor during the policy period. In other words, if a covered claim is not both made against and reported by the general contractor during the policy period, the contractor is not entitled to coverage. Te policy does not differentiate between claims made on the 360th


day


of the policy period (five days to report it) and those made on the fifth day of the policy period (360 days to report it). Teoretically, a claim brought against the contractor at 9 p.m. on the last day of the


policy period would be subjected to the same standard as any other. Further exacerbating the problem, these policies commonly exclude cover- age if the insured (often including project foremen) had knowledge of circumstanc- es likely to lead to the claim prior to the policy period, even if the claim is not made until the policy period begins and the claim is otherwise properly reported during the policy period. These strict criteria repeatedly give


rise to iterations of the same insurance dispute. For example, consider a scenario where the contractor’s foreman, who knew there was an issue but was still working through it with the owner through the normal contract change process, does not escalate the issue to corporate.


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