Te policy renews during this time-


frame. The situation is not resolved through the contract change process; a claim is made by the owner, and it gets escalated to corporate. Te risk depart- ment tenders the claim to the professional insurer. Te professional insurer denies on the basis that either (1) the contractor knew, prior to the policy period, about the circumstances that ultimately gave rise to the claim, or (2) the contract change process constituted a claim itself. We have litigated countless variants of this scenario.


Training on Professional Insurance is Essential Most of the time, the denial scenario above can be avoided with a clear plan for communication with the project team timed to streamline with the professional insurance program’s renewal date. Ide- ally, contractors should provide training for project personnel and any non-risk management personnel from corporate who may be interfacing with them while troubleshooting larger issues that arise during construction. Tis training should outline the struc-


ture of professional insurance and the importance of escalating any significant issues on the project potentially subject to the contract change process, whether that be issues for which the contractor may seek a change order or those for which the owner has or may issue a construction change directive. A plan should then be put in place to


facilitate a quarterly update from all proj- ect leaders to the risk team regarding any issues potentially meeting those criteria. Te risk team should then evaluate all such issues based on the prior knowledge exclusion standard. Tis exclusion varies slightly from policy to policy, but that standard is typically along the lines of whether a reasonable contractor in the


Contractors should provide professional insurance training for project personnel and any non-risk management personnel from corporate who may be interfacing with them while troubleshooting larger issues that arise during construction.


same situation should anticipate that it is likely that the owner, if the issue is left unresolved, would bring a claim against the contractor.


Notice of Circumstances Provision In any scenario where the risk team de- termines that an issue may likely lead to a claim by the owner, if not resolved, the contractor should take liberal advantage of the policy’s notice of circumstances provision. Tis provision, found in most professional policies, typically permits the contractor to provide notice of circum- stances which the contractor reasonably believes may result in a claim. By providing notice of circumstances,


the insured is then locked into the policy period in which that notice was given. If


a claim later develops in another policy period, the claim is deemed to have been made, and the insured is deemed to have reported it during the policy period when notice of circumstances was provided. In our experience, project leaders


are willing and interested to participate in training on these issues, recognizing that implementing these concepts greatly increases the likelihood of finishing a project that experiences a professional issue “in the black.”


Will Bennett is a Partner with Saxe Doernberger & Vita, P.C. He can be reached at WBennett@sdvlaw.com.


CALIFORNIA CONSTRUCTOR MAY/JUNE 2025


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