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Insurance & Bondingaka: E&Oaka: design professional liability

Professional Liability

In Plain English

Insurance for professionals that covers them when a mistake in their work causes financial harm.

Definition

Professional liability insurance covers claims arising from a professional's failure to perform duties to the expected standard of care, including errors, omissions, and negligent acts. In construction, this coverage is essential for architects, engineers, project managers, and design-build contractors. Professional liability policies are typically written on a claims-made basis, meaning the policy in force when the claim is filed—rather than when the error occurred—provides coverage.

Why It Matters in Bidding

On design-build and design-assist pursuits, the owner often requires professional liability coverage in the bid, and the premium becomes a real cost the estimator must carry in general conditions or markup. Because policies are claims-made, lapses in coverage between project completion and a later claim can leave a contractor exposed, making continuity a contractual and pricing consideration.

Example

Bidding a design-build wastewater upgrade, the GC confirms its policy limits meet the owner's required professional liability threshold and loads the additional premium into the project's insurance line before submitting.

Related Terms

Errors and Omissions (E&O)Commercial General Liability (CGL)Indemnity

Frequently Asked Questions

Whenever the scope includes design responsibility, such as design-build, design-assist, or delegated engineering of components. Owners typically specify minimum limits in the bid documents. If your firm performs or contracts any design, confirm coverage and limits before bidding so the premium is reflected in your price.
General liability covers bodily injury and property damage from operations, while professional liability covers financial harm from design errors, omissions, and negligent professional judgment. Many GL policies expressly exclude professional services, so a design-build contractor needs both to avoid a coverage gap on the design portion of scope.
Claims-made means the policy active when a claim is filed responds, not the one in force when the error occurred. To stay protected after a job closes, maintain continuous coverage or buy extended reporting (tail) coverage, since a later allegation against past design work could otherwise go uncovered.

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