Contractor's Professional and Protective Indemnity Policy Claim Examples

Source: Zurich North America

  • A Construction Manager providing “Value Engineering” services directed Architect to change design of mechanical system from four separate chiller systems to one central chiller plant. After startup, it was determined one plant was not enough to cool entire facility. Project Owners made a Claim against CM for cost overruns. Total loss was $8,500,000.
  • Delay damages – the contractor retained an architect for a school project, the architect provided certificate of insurance showing $3 million limit of liability. During construction, a design defect was discovered that delayed the project for several months. The school district was forced to rent portable classrooms and claimed substantial damages against the contractor. The contractor passed the claim on to the architect, but the $3 million limit of liability insurance had been blown on other claims. The contractor was held liable for the damages.
  • A Design/Build contractor hired a structural engineer to determine structural steel needed for a  mixed-use project. D/B contractor incurred a $5,000,000 cost overrun due to engineer’s failure to  design the steel to code, resulting in higher structural steel costs. Engineer had a $2M E&O policy. CPPI sat excess of this policy to cover remaining $3M in loss.
  • Design/Build Contractor sued the design subconsultants responsible for design flaws in flow in-take control systems at newly built $400,000,000 aquifer. The Design/Build contractor incurred in excess of $30,000,000 in additional costs due to pipe ruptures.  Various carriers settled the claim. Zurich contributed $14,500,000, of which $2,000,000 were claim expense related.
  • “Sick building syndrome” claim – A firm with the professional/pollution policy was installing a new HVAC system for an existing building. Sealant fumes from their work rose up through the ducts and the fumes made people in the building sick – there was a claim made against the contractor who installed the system.
  • Contractor installed an electrical control system for the air filtration systems of a manufacturing plant. The system malfunctioned and released pollutants into the air. As a result of the air pollution, businesses were shut down for two days and several people were hospitalized.

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