Non-Environmental Contractor Claim Scenarios

A contractor designed and installed mechanical, electrical, plumbing (MEP) and fire sprinkler systems on a hotel project. Design errors in excess of $9 million were alleged by the project owner because the fire suppression system was found not to be in compliance with code and the electrical distribution system did not work properly. The MEP contractor did not carry professional liability insurance and was forced to seek bankruptcy protection.

Electrical contractor in California made field changes to the location of electrical utilities due to structural limitations. As a result of location changes, additional costs and delays were incurred when other trades had to modify their installations. A professional claim was brought by the owner alleging professional negligence. The total claim was in excess of $10M.

A drywall contractor in the mid-west used an equivalent product, in this case a zinc plated screw, to install sheet-metal panels on the exterior of the building under construction. Eventually, water intrusion occurred and early failure of the screws was predicted, resulting in a professional claim. While the screws were equivalent products and both the general contractor and project engineer signed off on the change, a professional claim was still brought resulting in a $10M demand. This claim involved professional claims against the general contractor, drywall contractor, construction manager and all traditional design professionals.

A general contractor was retained to construct a retail center using the design-build delivery system. The GC entered into an agreement with a design professional to provide the design for the project. The contractor secured indemnification and hold harmless agreements from the design professional. During construction, it was discovered that the design professional had erred laying out the site plan resulting in the retail center sitting several inches above the existing roadways. Correction of the problem was estimated to cost more than $1million. The contractor made a demand under the indemnification and hold harmless provisions of the design professional’s contract. Unfortunately, the design professional declared bankruptcy and the general contractor remained professionally liable to the project owner.

A lawsuit was brought against HVAC contractor in northern California for negligent design of HVAC system when temperatures within condominium building exceeded 80 degrees during summer of unusually warm weather in the area. Historically, air conditioning was not included in buildings due to normal summer temperatures not exceeding the low 70s. The HVAC contractor did not include air conditioning in design and air conditioning was not requested by developer. Despite this, a professional claim was still brought against the HVAC contractor.

A contractor was hired to act as an at-risk construction manager on a casino residence tower. The tower was estimated to be able to produce a gross income of $45,000 per floor per week from rental income. Additionally, gambling gains from the residents of the rooms was estimated to be $400,000 per floor per week. Time was of the essence for this project. Due to scheduling errors committed by the CM, the tower was completed four months behind schedule. The contractor was determined to be professionally liable for the delay and damages of $1,750,000.

These claims examples have been provided to us by our insurance companies over the years. These represent actual environmental claims they have seen. While the coverages we offer are designed to address these general issues, we make no guarantee or warranty that any individual policy we offer will respond to all issues as described herein. Please refer to the actual policy wording in each offered form to determine coverage applicability and acceptability.