Source: Convex

XYZ Development Co. hired DB Co., a design/build firm, to build a cold storage warehouse facility. DB Co. retained a number of entities to  design and build this project including Cool Partners, a firm specializing in the design of cold storage facilities. After the project is  completed, XYZ Development leased out the facility to Frozen Veg, a company that distributes frozen vegetables. Frozen Veg found that the  warehouse could not maintain the required temperature to safely store veggies and had to find another facility. XYZ Development investigated and discovered this was due to a design error made by Cool Partners. XYZ sues both DB Co. and Cool Partners for damages it  incurred including the cost to repair the facility and lost lease income from Frozen Veg. However, it turns out that Cool Partners was insolvent and the design/builder’s professional liability insurance policy limits had been exhausted by other claims.

XYZ Development made a claim under the Protective Coverage provided in its Professional Liability policy for the damages it was not able to recover from the responsible entities.

The protective coverage allowed XYZ Development to recover its  own losses for repairing the facility along with the economic losses of lost lease income from Frozen Veg.