Insurance Considerations for Contractors

Contractors have enough items to juggle without adding insurance into the mix; however, insurance-related issues are often unavoidable and, in some cases, misunderstood. Sure, it’s easy enough to determine how much coverage is needed for tools and equipment and it’s usually no big deal to obtain insurance for vehicles and trailers associated with your business.

What about liability insurance, though? Is general liability insurance adequate? Or do you need to consider adding professional liability insurance? Depending on the exact nature of your operations, general liability insurance may not respond to certain types of claims. For example, if you make a mistake in the design of a project you are completing, you may need professional liability to provide proper coverage for losses stemming from the error.

Then there’s the unavoidable request that every contactor eventually faces: “please provide a certificate of liability insurance.”

While on the surface this seems like a simple request, the complexity lies in the detail of the request. If the requesting entity wants to be added as an additional insured and needs this shown on the certificate, you may have to add the requesting entity by endorsement (although some policies will automatically include additional insured status for situations where a written contract is in place).

Either way, it is important for contractors to fully understand what an additional insured request means. In short, the requesting entity is asking the contractor to extend liability insurance coverage from the contractor’s policy to the requesting entity!

Along the same lines, if you use subcontractors, are you implementing proper risk transfer? In other words, are you requesting to be named as an additional insured on your subcontractors’ insurance policies? This is also important, as you will certainly want coverage under their insurance program in the event they cause bodily injury or property damage while performing a job on your behalf.

Finally, let’s go back to the certificate of liability insurance request, as there are many instances in which they are not cut-and-dry. You may see a request for some additional language to be added in the “description of operations” section. Be wary of this! In some instances, the entities are requesting language that is not reflective of the insurance program you have in place and – in extreme requests – what they pressure you for in this section could be illegal.

In short, it is always a good business practice to discuss with your independent insurance agent any certificate of liability insurance requests you receive as well as review your business operations in detail with him or her. Your agent can address other insurance-related needs you may have – such as employment practices liability insurance, professional liability insurance or a commercial umbrella.

The information above is of a general nature and your policy and coverages provided may differ from the examples provided. Please read your policy in its entirety to determine your actual coverage available.

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