Are you taking on design-build work in California and wondering if your general liability policy will help when a drawing error stalls a job?
Or, after that close call at plan check, are you second-guessing your limits, retro date, and whether your professional liability actually matches the services you provide?
By the end of this article, you’ll know what professional liability (E&O) really covers for contractors in California, how it plays with general liability, how to choose limits and deductibles, what affects price, and the California-specific rules that should shape your decisions.
Here’s what we’ll cover next: coverage essentials, design-build exposures, real-world claims, limits & deductibles, GL integration, costs & optimization, California compliance, and practical next steps you can act on today.
Plain-English definition. Professional liability protects your business when a client loses money because of your professional services—design, engineering, project/construction management, value engineering, constructability reviews, BIM/coordination, and code consulting. It’s not for bodily injury or property damage (that’s GL).
Why design-build changes the math. On traditional projects, owners usually warrant the plans. In design-build, you own design adequacy—so errors, omissions, code misses, and coordination failures can come straight back to you.
Claims-made 101 (don’t skip this).
Retroactive date: Work done after this date can be covered; protect it like gold.
Continuous coverage: Gaps can strand past projects.
Tail/ERP
: If you switch carriers or wind down, buy extended reporting so old jobs can still be reported.
Defense costs: Many policies put defense “within limits” (every attorney/expert dollar shrinks what’s left to settle). Ask if defense outside limits is available and price the difference.
Make the wording fit your real services. Ensure “professional services” in the policy explicitly lists what you actually do. If it’s not named, it’s easier to fight.
Watch-outs (common exclusions/sublimits):
Intentional acts; warranties/guarantees
BI/PD (belongs to GL—even when design negligence is part of the story)
Pollution, cyber, and regulatory defenses (often sublimited; buy dedicated policies where exposure is real)
Design errors/omissions. Structural/MEP/civil/architectural miscalcs trigger redesign and delay.
Constructability gaps. “Looks great on paper” but breaks sequence, labor, or material availability.
Code compliance misses. ADA, CBC (including seismic), and fire/life safety issues often surface at plan check—right when schedules are tightest.
Discipline coordination. Cross-trade clashes discovered during build or commissioning (ducts vs. conduit vs. steel).
Fast-track pressure. Pricing off partial design raises the chance of decisions made on incomplete info.
Mitigation that works: progressive design-build. Early collaboration, risk registers, hold-point reviews, and pricing only after design matures. Fewer unknowns → fewer disputes.
Quick win: Treat peer reviews and clash-detection milestones like critical path activities—calendar them and gate long-lead purchases on sign-off.
A) Foundation redesign—structural/geo gap
Variable soils weren’t captured in early borings; foundation redesign + partial rebuild → months of delay and seven-figure costs.
What worked: CPrL limits high enough to sit above the engineer’s smaller PL, preserved retro date, wording that included subconsultant oversight.
Next time: Expand geotech scope, peer-review key assumptions, document owner acceptance when budgets limit testing.
B) Hospital MEP coordination
Ductwork, conduit, and medical gas conflicted across floors; rework delayed opening and triggered consequential loss claims.
What worked: CPrL expressly covering design coordination/BIM; auditable clash logs and discipline-lead sign-offs.
Next time: Weekly interdisciplinary model reviews, tracked issue logs with deadlines, approval gates before long-lead orders.
C) Plan-check compliance (education)
Accessibility misreads forced redesign during review; opening slipped.
What worked: CPrL for regulatory/code consulting; outside accessibility specialist peer review.
Next time: Early code checklist plus a pre-submittal “red team” review.
D) Value engineering performance miss (water/wastewater)
A VE process change under-performed at startup; costly modifications and penalties followed.
What worked: CPrL including value engineering; a clear record of performance basis and owner approvals.
Next time: Performance modeling, pilot tests where feasible, conservative VE on critical systems.
Bottom line: If you do it, name it in the policy—and keep coverage continuous so retro/tail protect finished jobs.
Don’t anchor to contract value. On design-build, consequential damages (delay, lost use, financing) can outpace the build price.
A quick framework:
Project lens: For each active job, model the worst credible loss (e.g., 10–30% of contract + delay).
Per-claim limit: Big enough for that scenario plus expected defense burn.
Aggregate: Sized for multiple mid-size matters in the same policy year.
Defense burn: If defense is within limits, add headroom or price defense-outside.
Sublimits: Lift pollution/cyber/regulatory if those risks are real on your projects.
Excess: Consider follow-form excess for healthcare, water/wastewater, transit, and other complex verticals.
Deductibles/retentions: Use the highest retention your cash flow can truly carry, and set aside a claims reserve. Pressure-test against a two-claim year.
Aggregate management: Track used/available aggregate quarterly. If it’s thinning, add reinstatement or adjust at renewal.
Think in damages, not just policies.
GL covers bodily injury, property damage, personal/advertising injury.
CPrL covers pure economic loss from professional services.
One incident can touch both. Example: a design oversight causes water intrusion (property damage → GL) and owner lost revenue (economic loss → CPrL). Expect professional services exclusions in GL and BI/PD exclusions in CPrL—so wording, tender strategy, and carrier coordination matter.
Additional insureds: Routine on GL. On CPrL it’s narrower and often limited to vicarious liability. If owners want AI on your PL, negotiate scope and defense obligations carefully.
One-carrier package vs. separate placements: Same-carrier programs can reduce finger-pointing on hybrid claims. Still, compare wording and capacity; don’t trade quality for convenience.
Broker checklist: Map who handles what on mixed claims, confirm notice language for both policies, and align your contract indemnities with what your policies actually do.
Pricing drivers you can influence:
How much design control you take on (DB vs. CM-at-risk vs. consulting)
Limits/retention structure and defense within/outside
Project size/complexity (healthcare, water, transit, seismic zones)
Claims history and the maturity of your quality program
Geography (jury trends vary across California metros)
Nine levers that consistently move premium:
Keep your retro date intact—no resets.
Document a design quality program (independent technical reviews, code peer checks).
Formalize BIM clash detection with auditable logs.
Use progressive design-build on complex public projects.
Right-size sublimits (pollution/cyber/regulatory).
Raise retentions only to what you can cash-flow in a bad year.
Price defense outside limits vs. within; think total cost of risk, not just premium.
Consider project-specific PL for mega-projects with tight performance specs.
Hand underwriters your QA manuals, training records, and claim learnings—credits follow documentation.
Licensing & GL facts. You’ll handle licensing, bonds, and (with employees) workers’ comp. For home improvement, you must disclose to consumers whether you carry GL; many owners and public agencies require GL and PL by contract even when the license doesn’t.
Ten-year tail. California allows latent defect claims up to 10 years after substantial completion. Continuous claims-made coverage (and tail planning) matters here more than most places.
Seismic design. CBC seismic provisions and local amendments demand tight structural/geotech coordination; missed assumptions can be catastrophic. Use specialists and document peer reviews.
Environment & water. Projects touching air or water quality bring extra compliance risks. Pollution or permit issues often need their own coverage—not every PL policy fills that gap.
Public works & progressive DB. Many California public owners specify PL limits for design-build procurements; PDB is increasingly available and favored for risk management. Showing a collaborative process and clear risk-sharing can boost your scores.
Policy structure
Claims-made with the oldest possible retro date
Extended reporting options (1–3 years) priced and ready
Coverage wording
Professional services include: design, PM/CM, VE, constructability, BIM/coordination, code consulting
Confirm defense within vs. outside limits
Align pollution/regulatory/cyber sublimits or buy stand-alone policies
Limits & retentions
Per-claim = worst credible loss + defense burn
Aggregate = enough for multiple matters
Retention = cash-flow realistic, with a reserve plan
Integration
Clear GL vs. PL responsibilities and a claim-tender playbook
Owner AI needs on PL addressed (if required)
Staff trained on notice requirements (who, when, how)
California specifics
Plan for the 10-year tail
Seismic and code peer reviews on high-risk scopes
Public owner PL limits reviewed before shortlist
You now have a California-specific game plan for professional liability: what it covers, how it differs from GL, how to size limits and deductibles, what shapes pricing, and the CA realities that make continuity and wording so important. In design-build, you carry more design risk than ever; one coordination or code mistake can snowball into seven-figure delay costs.
Before you bid again, do this:
List every professional service you actually provide and compare to your policy definition.
Verify your retro date and notice requirements; fix gaps now.
Model the worst credible loss on current projects; sanity-check limits and aggregates.
Ask your broker to quote defense outside limits and a follow-form excess option.
Schedule a code/seismic peer review for your highest-risk job.
When you’re ready to see real numbers tailored to your project mix, risk profile, and budget, tap the button below.