Do your design, engineering, and contracting clients fully understand the value of rectification coverage in their professional liability insurance?
What Is Rectification Coverage?
Rectification coverage is a first party insurance coverage that helps cover the costs of correcting a defect discovered before it results in a professional liability claim. There are many benefits of discovering and rectifying issues early such as: cost savings, prevention of delays, and preserving professional reputation.
How can discovering an issue help with cost savings?
Discovering and addressing defects before a claim is filed can minimize the potential for greater damage and costly litigation further into construction of a project. Often, the cost to fix an issue before construction is fully complete can be minimal compared to discovery once a job is completed.
For example, an engineer designs a building or parking garage and forgets to add a support beam or pillar, then construction begins. Down the line the engineer goes back to add or amend the design and notices the beam/pillar is missing. Correcting the issue at this point could be a cost put on the insured versus the project owner suing them for damages later.
Upon early discovery, the insured can develop a plan and calculate costs, submit this to the carrier and with written consent, the carrier would cover the costs under the rectification coverage. Another benefit of rectification coverage is helping to maintain the project schedule and budget. Being able to address issues early can help prevent costly delays and interruptions in the project.
Claims Example:
An engineering firm was hired to design a water retention system. Construction started and it was discovered that the system was inadequate due to the soil conditions on the construction site. At this point, they are not able to change the site, unfortunately the work done on the system needs to be re-designed and adjusted. Catching this at an early stage allowed them to make the appropriate adjustments to the design and continue with the project in a timely manner. With the consent of the carrier on the adjustments, they stepped in and helped with the cost of the changes needed.
As you can imagine, catching problems early to minimize delays and additional costs for clients protects the insured’s professional reputation. By carriers stepping in to help with rectification costs, Insureds can maintain good standing with project clients and contactors they are working with.
In summary, rectification coverage is an added benefit for insureds when shopping for Professional Liability Insurance. This coverage helps in minimizing the likelihood of disputes, costly claims and the Insured’s reputation: a benefit to the insured and the insurance carrier in the long run.
About the Author:
Jackie Jacobs is a Regional Practice Leader at Wholesure. Jackie focuses her efforts on assisting her retail agency partners in finding solutions for their hard-to-place professional liability & management liability risks. Jackie can be reached at [email protected].