A Lesson in General Liability 101 for Contractors


As a contractor, there are many hazards at both your business location and on job sites. Risk is an inherent part of the construction industry. General Liability insurance is designed to respond to the various exposures you face. Here's a rundown of how this insurance policy protects your business.

A CGL policy covering third party claims. It is neither first party coverage nor a surety bond. "First party" coverage is for losses suffered directly by the insured. "Third party" coverage is for losses suffered by other persons for which the insured may be legally responsible. In the usual first party policy, the insurer promises to pay money to the insured upon the happening of an event, the risk of which has been insured against. In the typical third-party liability policy, the carrier assumes a contractual duty to pay judgments the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by the insured. However, an insurance policy is a contract and governed by those principals. The insuring agreement sets out the covered perils, assumed risks and nature of coverage that the insurance company is providing to its insured in exchange for the premiums paid. Thus, the terms and conditions of the policy will dictate whether coverage exits and the nature of any potential benefits.

However, an insurance policy is a contract and is governed by those principles under the contract. The insuring agreement sets out the covered perils, assumed risks, and nature of coverage that the insurance company provides to the insured in exchange for premiums paid. Therefore, the terms and conditions of the policy will dictate whether coverage exists and the nature of any potential benefits.

At Your Business Location

You may own or lease a building where prospects and clients meet with you to discuss projects and where you may receive supplies and materials if someone (other than you or your employees) gets hurt while at your office, a General Liability policy will cover the costs associated with a claim if you are found responsible. This could include medical payments and, if you are sued for negligence, the cost to defend a lawsuit and any settlement or jury award up to the policy limit.

On a Job Site 

Now let's say you are doing a home renovation and you leave your toolbox in the middle of the kitchen floor while going out to your vehicle to get something. Your client's son runs into the kitchen, trips over the toolbox, lands face forward, and suffers a severe head injury. General Liability insurance will step in to pay for medical expenses. It will also cover you if the family sues you. Again, coverage is designed for third-party claims, not for you or your employees on the job.

To land a project, contractors are typically asked to provide proof of Liability insurance.

Products and Completed Operations

It's important that you make sure you have Products and Completed Operations Liability as part of your General Liability insurance. This will cover your construction business if your finished work causes bodily injury or property damage. (It does not cover financial loss due to negligence - that's what Professional Liability insurance is for.)

General Liability insurance also covers your operation for copyright infringement and defamation (libel and slander).

A General Liability policy protects your assets in the event of third-party bodily injury and property damage liability claims. Generally speaking, policies come with limits of $1 million per occurrence and $2 million in aggregate. An Excess Liability policy is available to provide supplemental limits beyond what's available with General Liability insurance. Pollution Liability insurance is also available to cover the costs for cleanup, bodily injury, property damage, and legal defense costs associated with a qualifying environmental incident.

With the right program, you can continue to expand your business confidently.