The Insurance Services Office (ISO) provides several endorsements to the Commercial General Liability (CGL) Coverage Form that address construction risks. One such endorsement is CG 22 34, Exclusion — Construction Management Errors and Omissions.
A general contractor is usually the person or entity with responsibility and control over the means, methods, sequences and techniques of the work in general, including the coordination and supervision of the work of subcontractors. Some general contractors also may perform some of the work. Although a general contractor doesn’t have to be a professional or to perform work considered to be of a professional nature, it’s common to find general contractors with professionals on staff who are qualified to, and in fact do, function as construction managers.
The term “construction management” is generally understood to encompass the activities undertaken by a construction manager whose professional services are engaged by the project owner to coordinate and manage the entire project from start to finish. The activities of a construction manager can vary widely, depending on the nature of the project and the owner’s needs. The American Institute of Architects’ agreement between the project owner and construction manager describes the scope of the construction manager’s work to include:
- basic services,
- construction phase administrative services,
- additional services,
- contingent additional services, and
- optional additional services.
With knowledge and expertise in the means and methods of construction, labor, and materials as well as the ability to direct, work with, and make decisions over the entire project, including design, the general objective of the construction manager is to help produce a quality project, with as little delay as possible, and at the least possible cost.
|Potential gray area?
The endorsement is designed for contractors that are involved in construction management such as design-build projects. The fact that a contractor’s professional liability policy is likely to be written by a different insurer than the one that writes the contractor’s general liability policy means there may be a gray area between the two. In fact, this problem confronts most businesses that offer professional services.
Despite its title, this endorsement doesn’t limit the exclusion of bodily injury, property damage, personal injury, or advertising injury to errors and omissions. Coverage is flatly excluded if such injury or damage arises from any of the various activities noted in the endorsement. However, an exception to this exclusion, and therefore covered, is bodily injury and property damage due to construction or demolition work done by the named insured or its employees or subcontractors, subject to other policy exclusions.
The 1993 version of this endorsement includes reference to “employee,” as a defined term. This change also was made because the exclusion doesn’t apply to bodily injury or property damage due to construction or demolition work by the named insured or its employees.
General contractors and construction managers are often involved in projects with charitable organizations like Rebuilding Together or Habitat for Humanity, which include volunteers as workers on the projects. In light of the 2001 CGL policy amendment that expands the definition of employee to include volunteers, what applies here to employees also applies to volunteers.
This article is excerpted from Commercial General Liability Coverage Guide, 11th Edition.
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