Risk Tip – Rectification Coverage – What's in a Name?
By: Tim Farrell, RT New Day
While doing research documenting and comparing the carriers’ Rectification coverage, I was struck by the different names this coverage is given by the carriers. And while ‘Rectification’ is the most prominent name, I found ‘Mitigation Costs,’ ‘Recall Expense,’ ‘First Party Protection,’ ‘Redress Coverage,’ ‘First Party Indemnity’ – and in one policy, both ‘Rectification’ and ‘Mitigation’ are used.
Just a quick general description — under a contractor’s professional liability (CPrL) policy, rectification expense coverage pays first party costs incurred by the contractor (Named Insured) to remedy acts, errors or omissions in professional services performed by or on behalf of the named insured. The idea is to address a problem early and quickly with the intent to prevent a third-party claim (professional liability claim).
Naturally there is some confusion regarding the name of the coverage – and the coverage that it implies. Technically, ‘rectification’ means to fix a problem. And technically ‘mitigation’ refers to preventing the problem from getting worse. Ideally, the coverage should look to fix the problem or more specifically, pay for the costs to remedy the error created by the professional service performed. Part of the confusion is the result of carriers using the two terms interchangeably. The other names listed above are basically just the carriers’ way to distinguish themselves with unique nomenclature.
The tip is – look beyond the word or title and to the scope of the coverage provided. These phrases/words can have totally different meanings in the realm of CPrL.