Insurance for Contractors

What Types of Insurance Coverages are Needed?

The type of work you perform, where you do your work, and your projects’ size may dictate some of your insurance needs. Further, the contracts with your customers more than likely contain insurance requirements. You also may face unique risks that your agent can help place for you. You may consider some common coverages for your construction or contractor’s business, including Commercial General Liability (CGL), Workers Compensation (WC), Pollution Liability, Professional Liability, Business Auto, Inland Marine, EPLI, Bonding, and others.

Commercial General Liability

The Commercial General Liability policy is one of the essential commercial policies you have for your construction or contracting business. Frequently, companies secure CGL on a Business Owner’s Policy (BOP); however, construction companies commonly purchase it on a stand-alone basis. The CGL is comprehensive and designed to protect from many risks, including bodily injury and property damage.

Completed Operations/Product Liability

Once work completes at a job site, this type of coverage extends. Completed operations and product liability coverage is designed for work completed away from the insured’s workplace and covers liability arising from completed operations or products sold or manufactured by the policyholder.

Advertising Personal Injury

You may wish to purchase Advertising Personal Injury coverage if you advertise your construction business. Personal & Advertising Injury protects you from the risk of harm to others’ reputations through slander, libel, or false advertisements.

Pollution Liability

Many general contractors and construction businesses work at job sites performing activities where they may generate pollution – mining, demolition, and new site construction, to name a few. Pollution liability insurance can help protect against claims resulting from work activities that pollute the environment, including property damage, personal injury, and clean-up and mitigation costs.

If you transport or dispose of hazardous materials or waste in the course of your business or have to work with government environmental agencies often, you may want to consider pollution liability coverage. Remember that these types of claims may take months or years to develop or be found, depending on the type of pollutant released in the environment.

Contract Liability

Sometimes Contract Liability coverage is included in a general liability policy, but not always. Check with your agent or carrier to be certain to have this vital coverage. If not, a separate contract liability policy is essential to handle the Risk from contract disputes that could arise from any of your business commitments.

Professional Liability

Professional Liability insurance is also called Errors & Omissions. This coverage protects businesses from Risk when providing their professional opinions in the course of their work. Engineers, attorneys, accountants, and corporate directors often carry professional liability insurance, which is also essential for construction businesses.

Professional liability cover can address risks from harm to a client based on action taken on your advice. Professional liability could include negligence, errors, or failing to include all information. You may want to consider this coverage if you, your employees, or your subcontractors provide advice to clients or third parties in the course of employment.

Workers’ Compensation

Depending on how many people you employ and in which state you operate, you likely need to carry Workers’ Compensation. You may determine your compensation rate by the number of employees you have, your industry, your prior claims history, and the type of work being performed by your employees. Having Workers’ Compensation coverage to protect your employees is an integral part of operating a safe workplace and is a legal requirement in many states.

Inland Marine Insurance

Inland marine insurance covers goods transported overland, via truck or train, instead of marine insurance, which covers products transported by sea. Inland marine also extends some cover to products while being temporarily stored by a third party. If your business ships goods, especially high-value items, you may need to consider inland marine insurance.

Builder’s Risk

Builder’s Risk is a type of inland marine insurance that protects materials and structures during construction, designed for either new construction projects or renovation projects. Builder’s Risk policies are also called Course of Construction policies. You may purchase Builder’s Risk policies in several increments, usually three-months, six-months, or twelve-months with one extension often possible.

A critical policy form often found in Builder’s Risk policies excludes damages resulting from faulty work, including design, materials, and planning. Other standard exclusions include no coverage for weather-related damage to property left in the open, employee theft, earthquake, and water damage. In some cases, endorsements are available to add excluded perils to the policy.

Business Owner’s Policy

You may bundle various commercial policies together into a packaged commercial policy called the Business Owner’s Policy. Packaging coverages can provide simplicity and cost-savings for business owners.

The BOP typically can include Commercial General Liability and policies for business income, commercial auto, and property damage. Other coverages may be bundled into the BOP, as well.

Common Commercial Exclusions to Know

While each policy differs, you may find some of the following exclusions common to the construction industry.

Prior Work Exclusion

The Prior Work exclusion can be attached to a Commercial General Liability policy, usually by endorsement. The prior work exclusion excludes coverage for damages or injuries sustained from the policyholder’s work product before a specific date.  It is essential to consider this exclusion when changing carriers or canceling a policy – if your new policy contains this exclusion, you will have a gap in coverage for projects completed in the past.

Action-Over Exclusion

The Action-Over exclusion refers to what can happen if an employee is injured at work and seeks Workers’ Compensation. If the employee sues beyond the Workers’ Compensation afforded to them because of third-party liability, the contractor’s general liability policy is exposed. This exclusion means an injured party cannot claim on the policy over the Workers’ Compensation claim.

Subsidence Exclusion

Insurance policies often exclude subsidence, which is the sinking or lowering of ground excavated back to its natural state. Subsidence can often result from faulty site preparation, and if the general liability policy excludes subsidence, the contractor must deal with the loss uninsured.

Conclusion

Understanding your unique risks and coverage needs is essential when it comes to protecting your construction business. Since every policy is different, you must carefully review terms, conditions, and exclusions to avoid costly errors. While the price is an important consideration when shopping for insurance, finding the right mix of coverages for your construction business is a top priority.

How do I Learn More?

Now that you know more about insurance for your construction business, you can contact the experts at Fusco & Orsini Insurance Services for more information. Our licensed professionals will be haphttps://foagency.com/py to answer any questions you have.

External Links:

1. https://www.irmi.com/term/insurance-definitions/products-completed-operations
2. https://www.wcirb.com/guide-to-workers-compensation/experience-rating
3. https://www.iii.org/article/understanding-inland-marine-insurance
4. https://www.theinsurancedictionary.com/faq/prior-work-exclusion/
5. https://www.irmi.com/term/insurance-definitions/subsidence