During the course of any design or construction project, there are various factors that can cause damages or delays, which can be financially costly and detrimental to your firm’s reputation. For this reason, it is essential to have comprehensive liability insurance. In recent years, many insurance carriers have begun to offer a new form of protection called rectification coverage which is available to contractors under their professional liability policy and to design professionals who have a lead role in design/build projects.
Rectification coverage, also known as mitigation of loss or mitigation of damages coverage, is first-party insurance for contractors or design professionals that have assumed responsibility for construction. If a design defect is discovered after construction has begun, rectification insurance will provide first-party insurance for the costs a contractor incurs in correcting a design defect that is discovered after the construction is in place, but before it results in a professional liability claim. These costs could include additional wages, fees, or the price of additional materials. Some mitigation policies cover only the cost of work to prevent additional damage, while others allow for funding for the re-design process.
However, this is not what’s commonly known as “rip and tear” insurance, which covers a construction issue that can be easily removed out and corrected. Rectification coverage dictates the existence of a core design flaw. For this reason, rectification or mitigation coverage may be specifically appealing to contractors or other professionals not responsible for project design.
Rectification insurance can be valuable to design and construction professionals for a number of reasons. Your insurance company must be alerted as soon as the issue or defect is recognized, which often means the error is discovered earlier in the process and the matter can be resolved for less money. Rectification coverage provides funding for work to continue while the problem is resolved, which will help avoid missed deadlines. It will preclude the filing of a professional liability or negligence claim, which can help prevent animosity between the firm and the client. Rectification coverage also avoids the necessity of bringing a lawsuit against a sub-contractor or another firm.
As always, the language and scope of coverage varies from provider to provider, so it is essential that design and construction professionals have full knowledge and understanding of their policies.
If you have any questions about rectification or mitigation coverage, please call us at (864) 327-5000. We would be happy to assist you!