Why “Design-Build” Contractors Should Be Careful

Many contractors whether landscapers or home builders may advertise their services as Design & Build, but have you ever wondered what the implications of this can be from an insurance perspective?

First, design aspects are never covered under a regular liability insurance policy. Errors that are a result of design work would typically be covered under a special coverage insurance referred to as Errors & Omissions insurance. This insurance is typically carried by Architects & Surveyors and those making plans for a house but very rarely carried by contractors.

Take this situation as an example: if you are a foundation contractor, pouring in forms. And the corner of the foundation is off by a foot. But you had followed the plans correctly, why should you as a foundation contractor be responsible for this mistake? In fact, this error can create a huge problem especially if the bylaw set back has been compromised.

This example would not be covered under contractor’s liability insurance. Why? Liability insurance is just there to cover you for third party liability property damage and bodily injury. But, there are ways to mitigate this risk. This is why working with an Insurance Broker that knows  the business of contracting. The way to mitigate the risk in a situation like this would be.

  1. Make sure the surveyor who surveyed the property has given you a written contract with warranty and that they are licensed and insured.
  2. Make sure you have used a licensed & insured architect who is taking responsibility for the design.
  3. Prior to pouring foundation, have a surveyor mark exactly where the foundation should be going.

By taking these 3 measures you can shift the responsibility of “design” to trades who are actually responsible for the aspect of designing a house. This will also fix the problem before it even occurs by taking the necessary precautions.

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This information above should not be relied upon as insurance advice but just general information not be acted on. This is because every situation is different and before acting you should speak with a licensed insurance professional about the coverages you may need and exposures that your business may face.