Public Sector Insurance

Professional liability (or) omissions (E&O) insurance is a type of coverage that protects professionals and businesses from claims arising due to negligence, mistakes, or failures in the services they provide. Those who work professional services are subject to a higher duty of care and responsibility because of their unique qualifications and expertise. E&O is  essential for various professions, including doctors, lawyers, accountants, and consultants, as it covers legal defense costs, settlements, and damages related to claims of inadequate work, misrepresentation, or failure to deliver services as promised.

This covers claims of financial loss due to a cyber attack or privacy breach. It should include both first party (breach response, loss of income, systems restoration, ransomware, data restoration) and third party (privacy liability, network security liability, regulatory liability) coverages.

Abuse liability coverage helps organizations defend themselves against allegations of abuse and molestation. Organizations who deal with vulnerable populations are those who require coverage the most such as schools & daycares, retirement and nursing homes, sports teams & sports leagues, churches or religious organizations, camps or sports and recreations centres.

This blanket liability coverage protects all parties involved in a construction project from liability arising from bodily injury or property damage to third parties during construction. 

Wrap-up liability insurance can either be purchased by the contractor in charge of the project (contractor-controlled) or the owner of the property (owner-controlled). 

Some advantages of Wrap-up liability include:

• A single policy that includes multiple coverages reduces the risk of having coverage gaps and insufficient limits.
• Cost savings, better protection and higher limits than purchasing multiple insurance coverages separately. 
• Significant time savings compared to managing multiple liability policies of subcontractors. 
• Simplifies the settlement of claims by eliminating lengthy litigation to establish blame.

Insured parties:

• Owners
• General contractor
• Project manager
• Sub-contractors
• Consultants, engineers and architects (subject to a professional liability exclusion).

Legal Expense

For small businesses that can’t afford to have a lawyer on retainer, this covers legal costs for unexpected legal events. It provides access to legal information and can be used to defend or pursue legal rights, including contract disputes and debt recovery.

Bonding & Surety 

A surety bond guarantees that an obligation (or contract) is fully satisfied. If it is not satisfied, the bond holder will be entitled to compensation for associated losses. Many clients, including those in government, will request you obtain a surety bond. Some Canadian provinces may even mandate a surety bond before work can begin.

A surety bond isn’t considered to be business insurance for a few reasons:

• It involves three parties
  • The owner and/or government body requesting the bond
  • The business responsible for fulfilling the obligation
  • The insurance/bonding company that guarantees the bond
• It’s paid out to a client, not to your business.
• You are required to pay back the entire amount of the bond to your surety provider.

Types of bonds:

Performance Bond – This guarantees that the obligation the contractor has with the owner is satisfied.

Labour & Material Bond (Payment Bond) – By guaranteeing the contractor will pay all subcontractors and suppliers in relation to the obligation (project), this limits the possibility of lien claims against the owner.

Bid Bond – This bond assures a contractor is prequalified to bid and they are serious about their obligations with respect to their tender and will follow through.

Consent of Surety (Agreement to Bond) – Not technically a bond, this is a commitment to provide the requested performance and/or labour and material bonds to the owner if the contractor is successful on their bid.

Maintenance Bond – This bond guarantees, for a specified period of time (typically one or two years), that the contractor’s work will be protected from any defects, faulty workmanship, and design.

Excess liability insurance, increases your total limits of insurance beyond those of your primary liability policies, such as general liability and automobile liability. For example, your primary CGL policy has a $5 million dollar limit. In order to have a $10 million total limit, you can purchase another $5 million dollar Excess Liability to stack on top of your primary  policy.

Umbrella Liability policies typically provide broader coverage than the primary terms and conditions and can sit above multiple primary policies such as CGL and Automobile.

Property covers your physical assets including buildings, contents, electronics, inventory, machinery and equipment when damaged by perils such as fire, flood, windstorm, or earthquake.  It can cover the cost to repair or replace the damaged property for Replacement Cost or Actual Cash Value.

Actual Cash Value (ACV) covers the cost to repair, rebuild or replace with like kind quality LESS: Depreciation (wear & tear).

Replacement Cost Value (RCV) covers the cost to replace with a new, similar product of like kind and quality.

For example, a fire occurs on your premises and damages a laptop purchased 5 years ago for $2,000. 

ACV – you will be reimbursed the value of a 5-year-old laptop in the same conditions as the one destroyed in the fire. In this, case, the settlement may be $500.

RCV – you will be reimbursed for the value of a new laptop of like kind and quality that was destroyed in the fire. In this, case, the new laptop of the same specifications costs around $1,500.

Covers the loss of income suffered by a business when their property is lost or damaged which causes them to cease or slowdown operations. Business Interruption is often included in commercial Property policies and include coverage for:

Business Income – pays for the loss of income and continuing operational expenses (mortgage, rent, lease, payroll, taxes and loan payments) when operations are forced to stop for an extended period of time.

Extra Expense – additional costs to keep your business running after loss such as renting leasing a temporary location, renting temporary equipment, paying employees overtime or hiring temporary workers.

Contingent Business Interruption – helps pay your lost income if one of your key suppliers or customers suffers a loss to their operations.

Civil Authority – covers lost income if a government entity denies access to your property. For example, mandatory evacuation order or prohibition of access due to a natural disaster.

Property

Property covers your physical assets including buildings, contents, electronics, inventory, machinery and equipment when damaged by perils such as fire, flood, windstorm, or earthquake.  It can cover the cost to repair or replace the damaged property for Replacement Cost or Actual Cash Value.

Actual Cash Value (ACV) covers the cost to repair, rebuild or replace with like kind quality LESS: Depreciation (wear & tear).

Replacement Cost Value (RCV) covers the cost to replace with a new, similar product of like kind and quality.

For example, a fire occurs on your premises and damages a laptop purchased 5 years ago for $2,000. 

ACV – you will be reimbursed the value of a 5-year-old laptop in the same conditions as the one destroyed in the fire. In this, case, the settlement may be $500.
RCV – you will be reimbursed for the value of a new laptop of like kind and quality that was destroyed in the fire. In this, case, the new laptop of the same specifications costs around $1,500.

Fiduciary liability covers the individuals who take part in the decision-making of an employee benefit plan, administer a plan or its assets, or whose name or title is included on benefit plan documents. It is designed to provide financial resources when a business or representative has a lawsuit filed against them for claims of negligence or breach of duty. Those covered by a fiduciary plan may include directors and officers, plan trustees, employers (plan sponsors), internal investment committees, and plan administrators.

Provides coverage for losses caused by mechanical or electrical breakdown of equipment, including production machinery, HVAC equipment, printers, photocopiers and computers. Covers the cost to repair or replace the equipment and any other property damaged by the breakdown. Business interruption and extra expense loss is often included. Stock spoilage from the loss of power, light, heat, steam or refrigeration can be covered as well.

Environmental Impairment Liability (or) Pollution liability insurance protects businesses against third-party claims and first-party exposures resulting from pollution conditions. These claims could be for costs associated with the cleanup of contaminated sites, third-party bodily injury, and property damage claims arising from environmental incidents, such as spills or leaks of hazardous substances. It can also address regulatory fines and legal defense costs related to environmental lawsuits.

Employment Practices Liability (EPL) insurance protects organizations against allegations and lawsuits by employees who claim their legal rights have been violated. EPL exposures have expanded from discrimination or harassment brought by employees to include a wide range of evolving exposures including accessibility, gender issues and disputes over performance reviews and promotion. Policies can be broadened to cover claims from third parties such as customers, clients, vendors and suppliers.

Directors and officers (D&O) liability insurance is designed to protect individuals who are personally sued for wrongdoing while serving as directors or officers of an organization. It provides coverage for defense costs and any resulting settlements the directors, officers and the organization are required to pay.

Wrongful acts and allegations covered under D&O policies include:

• Errors, misstatement or misleading statements
• Acts of omission or neglect
• Attempted or committed breaches of duty

Crime coverage helps protect against criminal acts committed by employees and certain types of fraud committed by third parties such as credit card forgery or alteration, computer fraud and theft, stealing and embezzlement, destruction of property, and social engineering.

Covers bodily injury or property damage claims from a third party as a result of your business operations. It usually includes personal & advertising injury, products-completed operations and can include extensions for tenant’s legal liability and medical payments.

Covers physical damage to your commercial vehicles and third-party liability.

A fleet policy applies to a number of vehicles, usually with the requirement that they be under common ownership.

Covers all property being incorporated into a project during the construction phase. It is designed to protect against direct physical loss or damage to a project as well as construction material waiting to be installed onsite, in transit or offsite.

This type of policy is recommended for all types of projects including: 

• Residential new builds
• Renovations
• Commercial buildings
• Industrial buildings
• Civil buildings and projects (i.e. bridges, dams, etc.)

Common Exclusions

Course of construction insurance is designed to cover damage caused by accidents, not faulty or improper material, workmanship or design. Other common exclusions include liability for property damage or bodily injury to third parties (covered under wrap-up liability insurance usually purchased for each project), equipment breakdown, work vehicles (which are covered under separate policies), employee theft as well as contractors’ equipment and tools.

Warranties

It’s critically important to be aware of any warranties in your policy wording. Common warranties for wood frame projects include having requirements for fencing, security, fire extinguishers, open flame or hot works procedures​, etc. Breach of a warranty voids your insurance coverage.

Equipment Breakdown

This coverage pays for sudden and accidental damage to mechanical or electrical machinery or equipment, commonly excluded in course of construction policies. It will also pay for repair or replacement, and is particularly important during the testing and commissioning phases.

Delayed Opening/Start-up

This coverage can be purchased in addition to a course of construction policy. It provides coverage for financial losses as a result of project delays caused by covered losses, which can include increased interest on financing, increased labour costs, and loss of anticipated rental income or revenue.