Professional liability insurance.

Contractors carry professional liability when part of what they sell is judgment: a design, a spec, a load calculation, or a recommendation the client relies on. A pure install crew working to someone else’s drawings rarely does. A design build mechanical firm that sizes the system and then installs it does, because if the system is undersized the client’s loss comes from the design, not the workmanship, and general liability walks away from it. Contracts increasingly ask for it by name. What changes the answer is whether you put your own design or advice on paper, so we look at the services you actually sell before adding the policy.

The difference between general and professional liability is the kind of harm. General liability pays when someone is hurt or property is damaged: a customer trips, a pipe floods the floor below. Professional liability pays when your advice, design, or spec costs the client money with nothing broken: the system you sized cannot keep up, so the client pays for a redesign and lost time. GL says no to that claim because there is no injury and no damage. The two also differ in form, since GL is occurrence based and professional is claims made. What changes the answer is what the client says went wrong, which is why we read the letter before deciding which policy to notify.

A retroactive date is the earliest date of work a professional liability policy will cover. Work performed before it is not covered, no matter when the claim arrives. It is usually set at the start of your first policy and, if the coverage never lapses, it stays there through every renewal and carrier change. A firm that switches carriers and lets the new policy reset the retro date has just uninsured every project it finished before the switch. What changes the answer is whether the date is carried forward each time, which is why we check it at every renewal and write it into the new policy before binding.

Claims-made means the policy that pays is the one in force when the claim is made, not the one in force when the work was done. A design finished under last year’s policy that draws a claim this year is handled by this year’s policy, as long as the retro date reaches back to the work. Most professional liability is written this way. The opposite form, occurrence based, is how general liability works and pays under the policy that was in place when the accident happened. What changes the answer is keeping the coverage continuous, because a gap between policies can leave a claim with no policy to land on.

Defense costs are usually inside the limit on a professional liability policy. That means the lawyers, experts, and court costs are paid from the same number as any settlement, and every dollar spent defending the claim is a dollar less available to pay it. A drawn out design dispute can use up a meaningful share of the limit before anyone talks about damages. General liability works the other way, with defense outside the limit. Some carriers offer defense outside the limit for an added premium. What changes the answer is the form and what the client contract asks for, so we size the limit with the defense costs counted in.

If you switch carriers, old work stays covered only if the new policy carries the old retro date forward. Because the coverage is claims made, the new carrier picks up claims about past projects as long as its retro date reaches back to them and there was no gap between policies. A firm that moves carriers at renewal with prior acts coverage written in keeps every finished project insured. If the new carrier will not match the date, tail coverage from the old carrier keeps the past covered instead. What changes the answer is what the new carrier agrees to before binding, so we get the retro date in writing before the old policy ends.