As a general contractor, the one thing you know is that you are ultimately responsible for everything that happens from the time a job is contracted until it’s complete. This means that you not only have your own employees working on any given project, but you may also have subcontractors working the job as well. Even so, whether the only team on a job or one of several, you may be wondering if you need to carry liability insurance. The best answer would be that you should, and in many cases, you must carry general contractor liability insurance from a provider that you can trust. If you want to know why this is the case, here is some information you need to understand.
Many Jobs Require You to Carry Liability Insurance
Typically, the general contractor is the one who bids on a construction job. It could be anything from a new construction to a renovation or refurbishment project, but the point is, you will ultimately be held responsible for anything and everything that goes wrong during the process. In most cases, several contractors bid on a job. It isn’t always the lowest bid that wins the contract. Sometimes the decision is made based on referrals as well as cost.
Your name in the industry can often get you the job, but what happens if something goes wrong and you don’t have the right kind or the right amount of liability insurance to cover the cost of damages resulting from something you or your subcontractors did? This is why most clients won’t award a contract to any general contractors that don’t have adequate liability insurance. They want to know that any losses will be covered quickly. Yes, they can sue you in a court of law, but that may delay the project unnecessarily. Insurance companies are likely to settle quickly if it can be proven that the contractor and anyone working under them was negligent.
What Does General Contractor Liability Cover?
This is the important information you should familiarize yourself with. Understand what general contractor liability insurance covers and what it doesn’t. Typically, a general contractor liability insurance policy will cover:
- Property Damage
- Bodily Injury
- Libel, Slander, Defamation of Character
However, it should be noted that these coverages may not be sufficient, and you may need a gap policy, sometimes referred to as umbrella coverage.
Property damage is a pretty straightforward type of coverage. Just as you would think, it covers losses to property (physical property) as a result of something your business (and often subcontractors) did or didn’t do. Usually, it’s classified as negligence and you will be held liable if you are at fault. Remember, just as you have bid a job and are trying to stay within cost, so too is the client who awarded the contract. They cannot afford to pay for losses any more than you can, so if something causes damage to their property, the client will expect you to cover the cost of repairing or replacing that damage.
Again, the name says it all. If someone should get hurt as the result of work you did or didn’t do, that can also be construed as negligence. In tort law, negligence is the key word to remember. Intentional acts can also nullify your policy coverage, so negligence is what will be covered. For example, if you knowingly use substandard materials and injury results from this intentional act, some policies may not cover those injuries.
Another way to look at medical coverage for bodily injury would be to equate it with the real estate mantra. In real estate, they say “Location. Location. Location.” In the insurance industry, it falls down to “Negligence. Negligence. Negligence.” Can an intentional act be construed as negligence and will it be covered? Read the fine print in your policy and you will know the answer!
Libel, Slander, and Defamation of Character
This can be a big lawsuit if you say something verbally or in writing that slanders another person or company’s reputation. You can be held responsible for any damages done due to libel, slander, or defamation of character. Although often used together, there are key differences you should understand.
What if you win the bid because the client heard something you’ve said about another contractor? What if your client does something you don’t like, and you begin spreading it around, causing them to lose trust in the community and resulting in a loss of business?
If you want the best advice, listen to what your mother always told you, “If you can’t say something nice, don’t say anything at all.” Your mom would have made a great lawyer! This is a coverage that could very well save everything you worked so hard to build.
So then, does your business need liability insurance? You bet it does in more ways than one! Not only will most clients require you to carry sufficient coverage, but it could be the difference between staying afloat and being bankrupt if you are sued for any of the coverages listed above.