The construction industry is fraught with various risks. As a contractor, whether working independently or as part of a company, you bear significant responsibilities and are expected to deliver work that meets high standards. To safeguard your business interests, it is crucial to obtain a comprehensive insurance policy that can provide coverage against potential financial losses or legal actions.
What is Contractor Liability Insurance?
Contractor liability insurance protects general contractors against lawsuits or claims arising from property damage or bodily injury that might occur on a construction job.
What Does Contractor Insurance Cover?
This type of coverage is designed to help protect against various situations that may occur on the job site, including:
- If a suit is brought against you, and you are found to be negligent, your policy will respond
- Bodily injury including slips and falls (if you’re found to be negligent)
- Product liability (if that coverage is purchased)
- Property damage
Types of Contractor Liability Insurance
General Liability Insurance
General liability insurance protects your business against property damage, bodily injury, products, and completed operations usual to your business. Your commercial general liability insurance policy would cover the cost of any medical bills, property repair, or replacement costs if any of those common risks occur.
Commercial Auto Insurance
Commercial auto insurance can cover company-owned vehicles with attached equipment from damage due to motor vehicle accidents, theft, and vandalism. Accidents can become expensive quickly, especially if someone is injured, but this can help with medical bills, legal expenses, and property damage.
Contractor Equipment Coverage
Contractor equipment coverage is a critical coverage for contractors that will protect all their equipment, including tools. Typically, equipment is mobile and not attached to a vehicle, so you need coverage specifically for all equipment such as backhoes, generators, and power tools.
Workers' Compensation Coverage
Workers’ compensation insurance protects contractors against losses caused by work-related accidents or illnesses and provides the employee with benefits to compensate for lost work and wages. This industry is very demanding with a high risk of injury. If you don’t have workers’ compensation insurance, you can be held responsible for medical bills and lost wages in the event that a situation occurs.
Builder's Risk Insurance
If damage is done to a building or structure while it’s still under construction, the builder’s risk insurance can help cover the costs of that damage. The damage could be caused by things such as fire, weather, or vandalism. Most insurance policies for contractors protect equipment and people, but builder’s risk insurance protects the unfinished structure, so your business isn’t stuck paying for damaged or ruined building materials prior to completion.
Who Needs Contractor Liability Insurance
Here are some examples of contracting businesses that should be protected:
- Handypersons or general contractors
- Roofing contractors
- Home renovation contractors
- Residential painters
- Residential electricians
- HVAC contractors (commercial)
- Finish carpenters
- Cleaning services (commercial)
Why You Need It
This specific type of policy is required by law for any contractor operating in Ontario. You cannot legally operate without it. If mistakes are made on the job or accidents occur that lead to property damage or bodily injury, this type of insurance can protect you.
Situations that may arise include:
- You could get sued for an incomplete or inferior job
- Workplace injuries
- Property damage that you cause while on a site
- Product liability if you also sell products under your operations
- Contractors are often required to provide proof of liability insurance before being awarded a job
Discussing all your risk exposures with your broker is best to understand the amount of contractor’s insurance you should have to be fully protected.
Common Claims Against Contractor Insurance
Claims Scenario 1: Job Site Injury
A homeowner hires a contractor to renovate his kitchen. During the project, the owner tours the construction area and a ladder falls, knocking him to the ground. The homeowner’s arm is broken and he sues the contractor. Fortunately, the contractor is able to cover the cost of any medical expenses and legal fees through his insurance.
Claims Scenario 2: Stolen Tools and Equipment
During a construction project, a contractor leaves her tools at the job site over the weekend. When she returns the next week, she discovers that nearly $5,000 worth of her tools and equipment have been stolen. Since she has an insurance policy, these expenses are covered, and her business operations are able to continue uninterrupted.
Claims Scenario 3: Property Damages
A trades professional is working on a construction site when he accidentally hammers a nail into a plumbing line. Not only does this cause water damage to the site but it also creates additional work for the project as a whole. The trades professional is being sued for damages. With his insurance policy, he is covered for this potentially costly mistake.
Claims Scenario 4: Professional Negligence
An electrician completes a project for a residential building. Soon after, an electrical fire starts, damaging many of the building’s units. Since the fire can be traced back to the electrician’s work, the property owner sues the electrician. Her insurance is able to help her cover the expenses of this claim which otherwise would have set her back thousands of dollars.
Claims Scenario 5: Property Damages
A plumber completes maintenance work on a washing machine. He accidentally forgets to ensure that he’s secured all lines before he leaves the job. The next time the client runs her machine, it floods her laundry room. The client is suing the plumber but luckily, he can cover the damage cost through his trades and contractor’s insurance.
Claims Scenario 6: Faulty Work
A client hires a mason to update the exterior of her home. Despite having completed this type of project many times in the past, the façade detaches from the house. As a result, the client is extremely unhappy and sues the mason. Fortunately, the mason can cover the cost of the repair expenses and legal fees through his insurance.
Youngs Insurance Brokers can customize a commercial insurance policy to meet all of your commercial insurance needs as we offer insurance for retail stores, small businesses, sports, pet services, fitness and yoga studios, special events, vacant properties, salons, spas, wholesalers, wineries, and more! Contact us today to find the best commercial insurance policy for your business.
Disclaimer: The information provided on this blog is for educational purposes only and is not intended as professional insurance advice. The coverage, terms, and conditions of each insurance policy are unique and subject to individual circumstances. The information provided does not guarantee the availability or suitability of any insurance policy for your specific needs. You should not rely on the information in the blog as an alternative to professional advice from your insurance broker or insurance company. If you have any specific questions about any insurance matter, please consult a licensed insurance broker for personalized advice and guidance.