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The term general contractor can encompass many different many different types of work, but, a general contractor is usually defined as anyone who plans and builds something. Given this broad definition the term general contractor can include roofing, siding, electrical, flooring, and heating and cooling contractors, just to name a few.
Many contractors can also fall into the broad category of single-family home contractors which are those who are hired to plan and build homes.
Of course, managing a home-building project comes with a lot of responsibility so it’s vital to have the right insurance coverage in place. Not only will commercial insurance protect your business, but it’s likely your clients will require insurance coverage as a part of any contract you sign. So save yourself time and money by having it in place from the start.
So, what are the main insurance requirements for new single-family housing contractors? Well, it will vary from contract to contract but several requirements are pretty standard in any construction agreement. Insurance companies usually do a great job of having a lot of these coverage requirements on the policy as a blanket basis, which means as long as there is a signed, written, contract or agreement in place the coverage will be triggered. It is important to note that if the contract is not executed or signed then the coverage is invalid. Additionally, if there are some coverage requirements in the contract you have that you think are unreasonable, negotiate with the company who hired you and be sure to have it marked properly on the contract. And, as always, have an attorney work with you on any contracts you sign. Here are some standard requirements we see in the marketplace with new single-family housing construction contracts.
General Liability with Products-Completed Operations – The first coverage that is always required by any construction agreement with a general contractor is General Liability with Products-Completed Operations coverage. This is going to cover you for third-party claims of bodily injury and property damage and the Products-Completed coverage part will cover you even when the job is complete. For example, if you put siding on and miss securing it properly and it blows off and injures someone, you can find coverage for that claim here.
Primary and Non-Contributory – Often seen in contracts with contractors is Primary and Non-Contributory requirements. If this is required it means that your policy will be primary in the event of a claim, and it will not seek contribution from any other policies, like from the company that hired you. Because you are the one on the jobsite doing the work, they want you to be responsible for whatever happens, regardless of who may have been negligent.
Additional Insured – You will definitely see a requirement for additional insured status with almost any contract you sign as a new single-family home contractor. The company with whom you have entered into a contract wants to be an additional insured on your policy. If there is a claim and their company is named in the lawsuit as well, your policy will respond first with coverage if there are any limits left after your portion is paid. If there are no limits available, or only a portion, then they would have to seek the rest of the coverage from their own policy.
Workers Compensation – Often a company that hires a general contractor to do any kind of work will require that you have Workers Compensation to cover your employees while they are working for you. Sometimes they will require statutory limits, and other times they will require higher limits. They may even require you to have Workers Compensation if you have no employees, which then may be a case where you would want to try to negotiate that it be removed from the contract. You can purchase Workers Compensation insurance if you don't have employees though if you do end up needing it.
Commercial Auto – While we don't see this in every contract involving general contractors and new single-family home construction, it is there often. The company that hires you to plan and build the single-family home very well may require you to carry Commercial Auto insurance since you most likely have a work truck to transport tools and materials. Driving for work increases your risk of liability since you are on the road with other people, and the other party to the contract wants to make sure you have the proper protection. Usually, if the party requires you to have Commercial Auto insurance, they may ask to be additional insured on this policy as well. Make sure you read your whole contract and can determine the different requirements for each insurance section.
Waiver of Subrogation – Sometimes claims can happen where a third party (often the company who hired you) involved was negligent. This is a very unfortunate circumstance but it is a risk of doing business with another party and in public. Often, the party to the contract with you will require that you have a waiver of subrogation on all your policies. A waiver of subrogation is waiving the rights of the insurance company to seek reimbursement for claims where that third party was negligent. For example, let's say the company who hired you came out to check on the status of the job and left a ladder where someone walking by could get hurt by it. They sue, and you know the company who hired you was negligent, but because you have the waiver of subrogation on the policy for them, your policy will pay and the claim will be done. Your insurance company will not be able to seek contribution or reimbursement from their insurance company.
Subcontractors – If you hire subcontractors to help with the job for the new single-family home construction, almost every contract you sign will require that they have the same insurance requirements that you agreed to. While it may be difficult, it is critical that you ensure that they follow the same contract requirements, because otherwise, you may end up being in breach of contract, which could ultimately cause you to not get paid for the job.
While there may be some other requirements for new single-family housing general contractors, the above list is pretty standard. The list does not mean that is all you need as a general contractor, however. Even if there are no requirements and it is just a standard contract saying you will do whatever work you agreed to, you want to make sure you are protected from any unforeseen circumstances. So, in addition to the above, you should consider the following insurance policies as well.
Professional Liability/Contractors E&O – If you are designing the new single-family home, or any part of it you should consider Professional Liability also known as Contractors Errors & Omissions, or E&O. Because you are in the business of designing and you end up making a mistake, which is possible since you are human, you would need Contractors E&O to provide coverage for claims alleging financial loss for the company you agreed to design the home for. Whether you make an error, an omission, or are negligent this policy will provide coverage and the best part is it pays for defense costs regardless of fault. Attorney fees and court costs can add up quickly so for that reason alone a Professional Liability insurance policy is worth the investment.
Umbrella/Excess – An extra layer of liability protection is always a good idea. And Umbrella or Excess Liability policy will give you an extra limit of coverage over all of your liability policies. This included General Liability, Commercial Auto, EPLI, and even Professional if available. So, if you have a claim on one of these policies and your limit of liability is exhausted, you can seek coverage on your Umbrella policy. It also sometimes provides coverage where the underlying policies may not.
Builders' Risk – Covering the new single-family home while it is under construction is also a great idea if it is not required in a contract. Commercial Property insurance will not pay for claims while a home is under renovation or being built, while Builders' Risk will cover it for physical damage while it is. A very important coverage for any general contractor that is building or renovating a structure.
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