“Rectification expense means reasonable and necessary fees, costs and expenses incurred by the Named Insured for rectification of a design defect caused by professional services in any part of the construction works or engineering works for any project upon which the Insured is responsible for design. Rectification expense does not include: overhead, mark-up, profit or any fee, charge, cost or expense incurred by any Insured for materials supplied or services performed by any Insured.”
Rectification coverage enables you to take the lead on design-build projects while supporting early resolution of design problems on all projects by limiting the risk that a design error will lead to a major financial loss. The coverage extends to any design defect caused by professional services on any construction project. With the new policy, you do not have to be responsible for construction. Whether you are performing design services for a project client directly or a design-build entity as a subcontractor, the policy expedites the early resolution of a design problem.
What is the change?
The new policy expands rectification coverage by setting up a system for the early involvement of a CNA claims specialist when you discover a design deficiency while providing design services. Some of the features of the rectification coverage are the following:
- provides mitigation of loss payments for design defects that could result in a claim;
- covers reasonable and necessary fees, costs, and expenses incurred by you because of a design defect caused by professional services in any part of the construction or engineering works for any project upon which you are responsible for design;
- covers design services, but not actual or alleged negligence in the review of shop drawings, issuance of change orders, observation of construction, or review of pay applications because those allegations would be subject to normal negligence coverage of the policy; and
- is subject to the deductible obligation and excludes overhead, mark-up, profit or any fee, and charges, costs or expenses incurred by you for materials supplied or services performed.
Why did we change it?
When a problem happens during construction using traditional design-bid-build, there is often a claim from the project owner against the design team. In some cases, the construction entity that discovers the problem brings a contractual claim for delays and extras against the project owner, who then involves the design firm in the claim’s resolution. About 33% of claims against design firms occur before a project is substantially complete. If technical design errors are identified early, they are usually resolved quickly and often at a minimal cost of time and money.
The rational solution is one that enables you to take the lead on a design-build project and minimize the risk to your firm, the project owner, and the public: a mitigation of loss coverage called rectification.
How does it benefit my practice?
The expanded rectification provision equips you with another tool to increase your control over your professional liability exposure in providing design services on all projects, including those where you take the leadership position on a design-build project. You can cite the expanded coverage when educating clients on your ability to provide a timely and responsive project.
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