Middle-market contractors in the United States that are venturing into new areas of work may face professional liability exposures as they take on unfamiliar projects.

Contractors professional liability insurance and the risks associated with projects in newer fields are often an afterthought for mid-market contractors, who are increasingly pursuing such work due to the sluggish U.S. construction market, industry experts say.

A middle-market company in the early 2000s, Mississauga, Ontario-based EllisDon Corp., grew from doing less than $1 billion in revenues then to $3 billion this year by expanding its capabilities to larger projects and design-build projects.

While the U.S. construction market differs from that of Canada, EillisDon pays careful attention to the contractual requirements of the project owner or general contractor when addressing professional liability exposures, said Brenda M. Giardetti, insurance manager at EllisDon in Mississauga.

“All the insurance that we place on specific projects are dictated by the insurance requirements in the owner contract,” she said. “On a design-build project, the owners are always going to want to make sure that there is professional liability in place. They usually would push that down to the design-build contractor, in our case, us.”

If the owner requests project-specific professional liability insurance, in which the policy is written for the term of the work, “we would buy a project-specific policy,” Ms. Giardetti said, noting that if the owner did not ask for such a requirement, the liability would be pushed down to the firm's architects, who have their own professional liability policies.

Since 2008, U.S. midsize contractors searched for more work in unfamiliar fields since they didn't have the backlog of work that larger firms do, feeling the heat immediately, said Atha Forsberg, senior vice president in Marsh Inc.'s FINPRO architects, engineers, and contractors professional liability practice, based in Chicago.

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“We have seen a shift in the type of work that certain contracting firms are working on that's probably been out of a pure desire to stay afloat and to keep the business going in some cases,” she said.

Historically, contractors' professional liability insurance was more project-oriented, Ms. Forsberg said.

Now, “it's not so much project type; it's project delivery type,” she said. “When you take that position as a design-builder, it's a huge shift in the allocation of risk on a project.”

Mid-market contractors taking on projects with delivery expectations tend to consider professional liability exposures and the risks associated with those projects, only after being pressured by owners or general contractors' contractual requirements, said Keith Jurss, senior vice president for professional liability within the national construction practice at Willis North America.

“Now when they're taking on that risk more in a contractual format, it creates some exposures for them and they really need to think about buying professional liability,” he said.

In the United States, owners and general contractors increasingly are requiring mid-market contractors to have either a professional liability policy in place, or a combination of professional liability with other coverages, such as pollution, said John Watras, vice president of middle-market construction, Zurich North America Commercial based in Medina, Minn.

“It's definitely a trend,” Mr. Watras said. “Most of the midsize contractors are considering acquiring combined professional and pollution products. It's a coverage that general contractors and owners are starting to see in the subcontracting community, in as such, they're regularly asking subcontractors to come to the table with those types of coverages.”

Mr. Jurss of Willis said the construction professional liability landscape for mid-market contractors is fairly steady, with new entrants in the market.

Allied World Assurance Co. Ltd., Philadelphia Insurance Cos. and CNA Financial Corp. recently have developed specific forms targeted at mid-market contractors that combine coverages, he said.

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“When you have new players entering the market that are chasing that construction professional, everybody's fighting for that business and it really keeps the rates pretty steady,” Mr. Jurss said. “So we haven't seen any real hefty decreases in rates, but what we are seeing is that it's been fairly steady; there are not any real major increases for contractors in the professional liability area.”

The combination of professional liability with pollution liability policies under a single form is becoming a trend in the industry, “especially with the middle market,” Mr. Jurss said, noting that contractors are trying to save money on insurance wherever they can.

“The view that a lot of the underwriters have, is that it makes it more attractive for a middle-market client when they can buy their professional and their pollution under one form versus two separate policies,” Mr. Jurss said.

For such coverage, minimum limits are typically $1 million, and depending on the market, minimum premiums can be about $10,000 to $25,000, Mr. Jurss said.

Providing the proper underwriting information to insurers can help mid-market contractors better secure proper professional liability coverages, experts say, because insurers are less willing to make manuscript, or customized, changes to the policy.

Geoffrey Smith, president and CEO of EllisDon in Toronto, said insurers are used to offering conventional coverages.

“So when you start asking them if they want to get creative about how they structure coverages, especially with respect to higher deductibles, they're more resistant to change than sometimes we like them to be,” he said. “Probably, when you say mid-market, the way we are, it's less worth their while than if we were three times the size. We're pushing, but sometimes we have to push people to change.”