General contractors have an obligation to complete their work for their clients efficiently, securely and with as few issues as possible. However, you can’t eliminate the possibility that something could go wrong, and that it might be your fault. In these circumstances, you might owe your clients compensation. One of the tools you can use to repay them is commercial liability insurance.
Because of the specialty nature of your business, you’ll need to tailor your liability insurance to address the risks related to general contracting. Often, this will mean buying several types of liability insurance. Each can apply to a variety of third-party losses that might be your fault.
It’s imperative that you structure your liability insurance portfolio in an appropriate way. You will need to start with the basic coverage provided by a commercial general liability policy and then augment your portfolio with other coverage. Take some time to review the liability policies that you should ask your agent about.
General Liability Insurance
In all businesses, there are liability risks that the business owner poses to others. Whenever someone does business with you, there is a chance that they could get hurt as a result of your negligence. Since the accident occurred on your watch, you might have to repay them.
That’s what commercial general liability (CGL) insurance is supposed to do. When you cause harm to others, you might have a legal responsibility to repay them. So, if the party in question sues you, liability insurance will help you provide them a settlement.
Most business owners, contractors included, start their liability insurance with a general liability insurance policy. It will apply to the common liability risks that threaten most businesses, such as:
- Bodily injuries, such as if a client slips and falls in your store and gets hurt.
- Property damage that you cause to another person’s property.
- Advertising injuries or copyright infringement that a competitor alleges you caused them.
- Personal injuries, such as allegations of libel or slander levied against you.
- Product liabilities caused by the items you create and market.
- Completed-operations liabilities related to property damage or injuries that arise after you finish a project.
The policy can provide a settlement to the party affected by your losses. It can also cover the legal expenses of both the business and the plaintiff that arise from the lawsuit.
The benefit of liability insurance is that your policy can protect you from having to pay for a third party’s losses out of your own pocket. Your stability and solvency will remain intact despite the challenge.
However, by only buying CGL insurance, you might not achieve the full protection you need. As a contractor, you will usually face numerous risks, some specific to your industry. You will need to expand your liability insurance portfolio appropriately.
Expanding Your Liability Insurance Portfolio
To implement proper risk management in your operations, you’ll need to grow your liability insurance portfolio beyond a general liability insurance package. There are many specific types of coverage that contractors might need, including:
- Umbrella Liability Insurance
General liability insurance will only pay for claims up to the policy's limits. For example, if you have a $500,000 bodily injury limit on your CGL policy, then your policy will only pay up to $500,000 for a given claim.
If someone’s injury lawsuit exceeds these limits, then you might face a deficit in what your policy will pay. By buying umbrella liability insurance, you can receive additional benefits. This coverage will pay extra losses beyond the limits provided for in your standard coverage.
- Errors & Omissions Insurance
An E&O policy covers you when your professional mistakes cause harm to others. For example, you might provide consulting or professional advice to your clients or even other contractors. Should the advice you provide cause them a loss, then this coverage can help you cover your losses.
- Hired/Non-Owned Auto Liability Insurance
Suppose that you use a personal car to visit work sites or perform your day to day duties. The liability insurance provided by your personal auto insurance will not apply. The policy generally excludes driving done for commercial purposes.
To obtain coverage, you will need hired/non-owned liability coverage. It insures the business against at-fault accidents when someone drives their personal car on business. Keep in mind, this is not the same as full commercial auto insurance, which you will need to buy if the business owns a vehicle.
- Pollution Liability Insurance
Through the nature of your work, you will disturb the local environment in order to build. However, you have to do so responsibly so you don’t contaminate the area with hazardous materials. In the event that this happens, you might have to pay for the cleanup. Therefore, pollution liability insurance can assist you in this regard.
To appropriately expand you liability insurance portfolio, you might be able to add endorsements to your CGL policy. In other cases, however, you will have to buy your coverage as a separate policy. Supplemental policies can work alongside your CGL policy to offer you the necessary benefits.
Also Read: Why Contractors Need Pollution Liability Insurance