Contractors have to watch out for the unexpected. To aid in this, our PAR insured agency placed general liability (GL) and umbrella coverages for its general contractor client and named the owner of a project the contractor was building as an additional insured on both policies.

While working on the project, an employee of a subcontractor fell 6-7 feet when a scaffold collapsed. He suffered a badly broken leg, along with other injuries. The injuries were reported to the general contractor’s GL insurer. However, the attorney representing that carrier stated there was no reason to report the claim to the umbrella insurance company, because it was believed the worker’s claim would not exceed the $1 million general liability limit.

But, just as construction jobs aren’t always completed within the expected budget, court proceedings also can produce the unexpected. Such was the case when a judgment in favor of the injured worker resulted in a demand for $1.5 million -- 50% more than what was provided by the general contractor’s GL policy. Following the court action, the umbrella carrier was notified of the claim, but that carrier denied any responsibility due to late reporting.

The injured worker’s claim ultimately was settled for the GL policy’s $1 million limit, plus $250,000 from the project owner. From the general contractor, the project owner then obtained the right to seek reimbursement for its $250,000 payment from the PAR firm, the umbrella insurer, and the subcontractor. Whether our insured and PAR owe any of the $250,000 has yet

To have sidestepped this E&O claim, it is worthwhile to consider if our insured agency ought to have checked more often with the general contractor’s GL insurance company on the status of the injured worker’s claim. Plus, it would have been wise for the PAR firm to report the claim to the umbrella carrier anyway -- even when the GL insurer’s attorney said that wasn't necessary. (It should be noted the attorney has notified his errors and omissions insurer of the potential of a claim against him.)