Properly protecting contractors requires a deep understanding of the construction industry. No matter the size of your operation, there are several key areas to understand to ensure you have the coverage you need when it matters most.
Many times a contract is required specifying specific coverages and limits required. Coverages requested often include:
- Builders Risk/Installation Floater
- Builders Risk – Builders Risk policies can provide coverage for all parties with insurable interest including the owner, general contractor, and subcontractors. This policy provides property damage coverage for buildings and structures under construction. Typically, there is a required limit of coverage determined through the construction budget. Builders Risk policies can also include coverage for materials waiting to be installed, transported to the site, or held in temporary storage offsite. Most Builders Risk policies are written for a specific term concurrent with the anticipated length of construction with extensions available should construction extend beyond the projected time for completion. There are many available builders risk coverage forms available and not all options should be treated equally. Policies can include “soft costs” or expenses not directly related to construction if property damage causes a delay including lost sales, taxes, interest on loans and rental income. In addition there are extensions of coverage for many important areas including debris removal, pollutant clean up, testing, construction forms and scaffolding. Lastly, many forms carry standard exclusions for flood or earthquake, wind in CAT areas etc. that should be reviewed and possibly amended to afford broader coverage. Coverages can be written on a blanket reporting form or for specific projects.
- Installation Floater – installation floaters protect specific contractors for property being installed, fabricated, or erected. Property includes materials, supplies, machinery, fixtures, and equipment that will become a permanent part of an installation or construction project on the build site, in temporary locations or in transit to and from. Most installation floaters are written as a blanket for all work performed – not specific to any one project per se. Installation floaters do not provide coverage for any other party on a project site other than the contractor who purchased the policy. A CGL insurance policy will usually cover the costs of your legal defense and will pay on your behalf all damages if you are found liable—up to the limits of your policy.
- Commercial General Liability (CGL) – General Liability offers protection from financial loss for third party property damage, bodily injury or personal and advertising injury caused by your services, business operations or employees. It is important to highlight that General Liability insurance covers non-professional negligent acts. General Liability insurance will pay on your behalf damages up to the limits on the policy if you are found liable in addition to your legal defense. Not all CGL policies are written equally either so it is important to understand exclusions added to your policy and their effect on coverage. Standard General Liability policies include a $1,000,000 Each Occurrence and $2,000,000 Aggregate limit.
- Automobile Liability – Automobile Liability covers what you are legally obligated to pay for damages due to bodily injury or property damage to which the policy applies, caused by an accident and resulting from the ownership or use of a covered auto. Contracts will often require coverage for hired and non-owned exposures as well as owned autos.
- Workers’ Compensation/Employer’s Liability
- Workers’ Compensation coverage provides medical expense, rehabilitation and lost income to employees who are injured in the course and scope of employment. Workers’ compensation was devised as the sole remedy for employees should a compensable illness or accident occur while on the job. Workers’ Compensation benefits are available only if the injury or illness is caused by their duties while on the job. Not all losses that happen at work are automatically deemed compensable. In addition, benefits and requirements vary by state.
- Employer’s Liability offers protection if you are sued regarding a work injury or illness. This can include legal defense when an employee blames an employer’s negligence for a work-related incident. Workers’ Compensation pays for medical bills and lost wages to the employee during recovery but Employer’s Liability would apply if an employer is faced with third party over action lawsuits, loss of consortium lawsuits, dual-capacity lawsuits, or consequential bodily injury lawsuits.
- Umbrella/Excess Liability – Commercial umbrella or excess policies provide additional coverage for certain types of liability insurance and extend over primary liability policies including General Liability and Automobile Liability. It’s important to note that an umbrella or excess policy doesn’t automatically cover every type of liability claim and it often times won’t extend over certain types of liability like professional or pollution. Usually contracts require certain umbrella limits
- Professional Liability – Depending on the scope of work performed, contracts can ask for specific professional liability coverage as well. Contractors professional liability is often required for contractors that provide design and building services and includes coverage for errors or omissions made by the contractor or third parties hired by the contractor, such as engineers, architects, and other vendors. Contractors can obtain a professional liability insurance policy that covers all work performed or a policy that covers a specific project with specific time frames. It is important to note that Contractor’s Protective Indemnity Insurance is available for contractors working on design/build projects, or with subcontracted design exposures, for instances where the architect’s or engineer’s insurance limits are inadequate or exhausted.
- Pollution Liability – Contractors Pollution Liability (CPL) provides third-party coverage for bodily injury, property damage, defense, cleanup, and related defense costs as a result of pollution conditions (sudden/accidental or gradual) arising out of contracting operations performed by or on behalf of the contractor. CPL is available to any type of contractor performing operations and can be offered on a project or blanket program basis.
Each project you undertake has a different set of needs and challenges. It is important to partner with a broker who offers the breadth, depth, and know-how to help guide you through the myriad of insurance forms and coverage and offer cost-effective and comprehensive solutions.
Additional Risk Management Solutions
At Sentinel Risk Advisors we routinely offer guidance in the design and structure of your construction risk management program. In addition to insurance program review we offer:
- Risk Transfer – A contract can put your company at risk unnecessarily. Our contractual risk transfer team is available to guide you regarding subcontractor and vendor agreements and work with you to ensure proper verbiage and transfer of risk.
- Surety Bonds – Construction bonds can be requested to “guarantee” certain aspects of a contract or construction project. Bonds are a mechanism to provide financial protection against a loss due to a contractor’s failure to complete a project or failure to meet contract specifications. The Sentinel team develops the best bonding solutions to fit your firm’s distinct contract and commercial bond needs and delivers a level of service that fosters the growth and development of future opportunities.
Reach out to Sentinel Risk Advisors to learn more.
