Construction projects are risky in nature, and accidents or other unforeseen events can result in significant losses and liabilities. Contractors routinely to turn to insurance policies to protect themselves against such risk.
While businesses know that insurance is a must have in the construction industry, at times it may be unclear what risks are covered by the various types of insurance. There are many types of coverage a contractor needs. Nearly all construction contracts require businesses participating in a job to carry contractor’s commercial general liability (CGL) insurance.
Commercial General Liability Insurance
The primary purpose of CGL insurance is to protect the insured party if a job site accident causes property damage, bodily injury or personal injury to a third party. In the event of a claim, CGL insurance covers the insured party’s legal obligation to pay compensatory damages to third parties.
For example, if a worker drops a piece of equipment, injuring a bystander or damaging a bystander’s property, the business’s CGL policy would protect the business from getting sued for resultant third party injury or property damage. It should be noted that as a liability policy, CGL insurance will not cover damage to the insured’s own products, property and work.
CGL & Subcontractors
Another risk issue in the construction industry is subcontractors. You should be able to count on your broker to advise you on how to handle that relationship to best protect yourself.
For instance, you may be sued for mistakes made by a subcontractor. So, in addition to including an indemnity clause in your contract, you may want to require the subcontractor to add you to their commercial general liability policy as an additional insured. The subcontractor’s insurance broker should be able to provide a certificate of insurance for your records so you have proof of the subcontractor’s insurance on file. A good broker will assist you in handling any claims that arise due to a subcontractor’s mistake, which can potentially be messy and confusing.
A simple professional letter is a hassle-free approach in obtaining proof and helps cover all your bases when hiring subcontrators. We just happen to have one you can use: Subcontractor CGL Agreement
Of course we’re always around if you would like more information on insurance and risk management for your construction project. Give us a call today 604-585-4445.