If you’re a contractor who designs, plans, consults, or engineers any portion of what you build, and you’re counting on your Commercial General Liability (CGL) policy’s Products-Completed Operations Hazard (PCOH) coverage to cover a mistake, you need to pay close attention. The legal landscape has shifted. And it isn’t shifting in contractors’ favor.
The Core Issue
For a long time, contractors and design-builders assumed that if something went wrong after a project wrapped up, their CGL’s completed operations coverage would kick in. That assumption is unraveling in courtrooms nationwide. Insurers are increasingly securing summary judgment, meaning the dispute never reaches a jury, by invoking the Professional Services Exclusion (PSE) embedded in virtually every modern CGL policy.
If the root cause of a defect traces back to an engineering decision, a design choice, a consulting recommendation, or any “intellectual” element of the work, courts are determining that the loss falls under a Professional Liability (Errors & Omissions) policy, not your CGL. No E&O coverage in place? No coverage. No defense. No payout.
What Has Actually Changed
The legal principle driving these denials is known as the “Inseparably Intertwined” doctrine. Courts are no longer willing to separate a loss into “the design portion” and “the construction portion” and allow CGL coverage to attach to the latter. If a field failure can be traced back even in part to a professional judgment call, courts are classifying the entire claim as a professional liability matter and shutting out CGL coverage.
The case most frequently cited in this context is Admiral Insurance Co. v. Ford, 607 F.3d 420 (5th Cir. 2010), decided under Texas law, which is directly applicable to contractors and operators in our region.
The situation: A contractor was engaged to develop a drilling plan and provide on-site technical guidance for an oil well. The well experienced a catastrophic blowout. The contractor looked to its CGL policy, arguing the loss occurred during operational activity and should therefore be covered. The Fifth Circuit ruled otherwise. It held that the Professional Services Exclusion completely barred coverage. The court directly rejected the contractor’s argument that applying the exclusion this broadly would make the policy’s operational coverage meaningless.
The logic was clear: specialized engineering and planning constitute a professional service, and any field failure stemming from that professional work is excluded full stop. That ruling is now being cited more frequently than at any previous point since it was handed down.
Who Faces the Greatest Exposure
Your business is at risk under this doctrine if your work involves any of the following:
- Design-build contractors of any size
- Oil and gas service contractors providing drilling plans, well plans, or technical consulting
- Trade contractors offering “value engineering,” shop drawings, or design assistance
- General contractors whose agreements include any planning, design coordination, or consulting language
- Specialty contractors (mechanical, electrical, structural) whose scope expands into engineering decisions
- Marine and maritime contractors handling rigging plans, lift plans, or load engineering
If your contracts reference your scope using terms like planning, design, consulting, engineering, analysis, supervision of means and methods, or technical advisory, and you don’t carry a dedicated Professional Liability / Contractors E&O policy, then you’re carrying a coverage gap that the courts will hold against you.
The Contract Trap Many Contractors Overlook
It gets more complicated. Many construction and service contracts explicitly require contractors to maintain Professional Liability coverage when the scope involves design or consulting components. If you signed such a contract without obtaining that coverage, you’re now facing two compounding problems:
- The carrier denies the claim under the PSE.
- The contracting party has a breach-of-contract claim against you for failing to carry the coverage you expressly agreed to maintain, which, depending on jurisdiction and contract language, can expose you to indemnity obligations, additional damages, and attorney’s fees.
Some courts are now treating these contractual failures as an aggravating factor when apportioning liability. The contractor ends up personally and corporately exposed for a loss they believed was insured.
Steps to Take Right Now
This is not a hypothetical risk. Summary judgment is being granted at the pleading stage which means the matter never reaches a sympathetic jury. The carrier wins on the paperwork alone. Three actions to take immediately:
- Audit your scope of work language: Pull your last five contracts. If any describe your services using terms like design, planning, consulting, or engineering, you need professional liability coverage. No exceptions.
- Locate the Professional Services Exclusion in your CGL policy: Read it carefully. Every modern CGL contains one. Understand exactly what your carrier has excluded. If you can’t find it or interpret it, that’s precisely what we’re here to help with.
- Get a Contractors Professional Liability (CPL) or Architects & Engineers (A&E) policy quoted and bound: For most design-build and service-focused contractors, this is no longer a discretionary purchase, it’s a foundational requirement of operating in today’s legal environment. The premium is a fraction of what a single denied claim will cost you.
A Final Thought
The insurance market doesn’t reward assumptions. Carriers are tightening underwriting on any account that shows design or consulting exposure without a corresponding professional liability policy. Some are now declining the GL risk altogether if the scope suggests intertwined professional exposure and no E&O is carried alongside it.
If your work touches design, planning, engineering, or consulting even occasionally, even as a small part of your overall business reach out to us. A thirty-minute review of your contracts and current coverage can reveal whether you’re exposed before a loss forces the issue.
The courts have made their position clear. Make sure your insurance program reflects what they will actually enforce.
Sameer Khan is the Brand Director of TWFG Khan Insurance, a leading commercial insurance agency in Houston, Texas. With over 20 years of experience, he specializes in risk management solutions for diverse industries, offering tailored insurance programs that ensure protection and peace of mind for businesses and professionals.
