Top ten insurance coverages for Contractors:
Do you have enough coverage to protect yourself for the time that you suffer a claim? We know that you do exceptional work, so you will never suffer a claim, right? Wrong!! Statistically wrong. Someone will not like your work, or for some other reason feel compelled to get their money back on work that you did. Or you will be dragged into a lawsuit for which another contractor had responsibility, but the lawyers are looking for deep pockets.
Example; I had a plumbing contractor get dragged into a lawsuit that involved faulty window installation that was the source of water damage. Or when the general contractor absconded with the money paid him without ordering the work done by his subcontractors. Oh, you are the general? Congratulations; your sub did a poor job and you are getting sued. You don’t have to be guilty; just accused. Now you have to defend yourself in court.
So what do you need?
General Liability, or GL.
Covers you for any damage you do to person or property while you are on the premise.
Products and completed operations: This is part of your Comprehensive general liability coverage, and covers you for your work after you leave the job: did you leave a nail sticking out that hurt someone later on? Or did your assistant not double check that solder joint and your plumbing job sprang a leak and damaged 10,000 square feet of new wood floor? Oh, by the way, I am not making these examples up.
Endorsements to your general liability coverage:
If you specialize in commercial work, you will need a Commercial products and completed operations endorsement. This will cover your endorsee for the full 10 year statute of limitations on a lawsuit. Your customer and general contractor will demand this type of specific endorsement. Unfortunately, it is not available for residential work, but if you do both, you will need endorsements for both types.
Primary wording endorsement; This assures your endorsee that YOUR insurance policy will be the first to pay for any claims, and they don’t have to have their insurance pay it and come after yours for payment (subrogation.)
Oh, and peaking of subrogation, a Waiver of subrogation assures them that you can’t come back against them, even if it is their fault. YOUR insurance will pay it, no matter whose fault it is. What a great deal—believe me, they want it and they will demand it
And here is a new wrinkle that you may already have run across: they didn’t demand all of the above when you started the job, but now that you want to get paid, all of a sudden a page of requirements shows up as prerequisite to your getting a check. You already did the work and they didn’t warn you? Not their problem.
New condo work-an entirely new type of headache:
Let’s talk about work on New condominiums. A developer wants to build new condos, which he does. Then he establishes a separate organization called a homeowners association, to which he transfers all ownership responsibilities. Bad work? almost always. He can almost always count on being sued for roof work or some other item, because the homeowners association does not want to exceed the statue of limitations window. For that reason it is incredibly expensive for an insurance company to insure you if you do new condo work. it’s complicated, so if you do such work, let’s talk.
Independent Contractors? NOT. Let’s discuss Workers Compensation.
If you have employees, an employee, someone who might be an employee who works one hour per week, or even someone who gets paid on a 1099, almost certainly, you will need Workers Compensation insurance. The laws changed this year so that the definition of an “independent contractor’ has been so narrowed as to become almost nonexistent. The potential penalty for not doing it correctly is $100 per day per employee who was not insured.
Workers Compensation Waiver of Subrogation:
Same thing as for general liability coverage, but they can charge you by the job, by the year or decline to provide it at all.
Commercial vehicle coverage
Why get commercial vehicle coverage instead of just having personal vehicle coverage? well, for one thing, the coverage is higher; you can get $1,000,000 of coverage, which for a business is not a whole lot. You can also cover it under your commercial umbrella—see below.
And lastly, it can provide Non-owned auto liability coverage. send your assistant to pick up a part in their own car and the get into an accident? You get sued as the employer. Have an installer technician who uses his own vehicle? He is also covered. You can’t be without it.
Have tools and equipment? Office property? Building? If you work from your home, business property and tools will NOT be covered by your homeowners insurance.
And did I mention that $1,000,000 is not a lot of insurance for a business? If you are getting sued, it will likely be for more than that. If you are doing commercial business, they may want $5,000,000 of coverage before you can get a job. If you do municipal work, you may need $10,000,000. You will need excess liability coverage to increase your underlying coverage.
And then there are the contractor and performance bonds. A whole other conversation.
Complicated, yes. Difficult, maybe. Need help or advice with any of these? Give us a call. We have been writing contractor coverage since 1991. We can help.