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business is being sued

What to Do if Your Contracting Business is Being Sued

Recently, a general contractor (GC) in Texas was suing one of its subcontractors for $27 million because of project delays. As reported by Construction Dive, the GC was alleging the subcontractor’s actions caused construction on a $350 million hotel project to fall behind schedule.

Missed deadlines are a typical dilemma in the construction world. That’s mainly because so many aspects are beyond your control, such as:

  • Multiple workdays with bad weather.
  • Late deliveries from vendors and suppliers.
  • Malfunctioning or stolen equipment.
  • Employees and subs missing work

When you give the general contractor a heads-up that you will probably miss a deadline it can go a long way with easing tensions. Nevertheless, the general contractor may still file a lawsuit against you. Here’s what you need to do if you believe a lawsuit is coming your way.

Call Your Insurance Company and Your Agent

It’s always a very good practice to give your insurer and your agent a heads up if you think a complaint may become a full-blown lawsuit from your general contractor. Some insurance policies request you to notify the insurance company at the first indication of issues. Failing to make notification allows the carrier to claim you breached your insurance contract. Furthermore, documenting the episode with your insurer and agent when it occurs will usually make the claims process much easier.

Review Your Liability Insurance Policy

Examine your construction liability policies, and in particular your General Liability Insurance. Most contractor and subcontractor general liability policies include coverage for “completed products and operations.” This coverage can help pay claims related to specialized work you’ve completed or products you’ve manufactured.

In lots of cases, liability insurance policies also specify that a lawyer will be available for your defense. If you aren’t certain if your policy includes legal representation, be sure to speak to your agent.

Locate Your Records and put Them to Use

Anything you obtained in writing pertaining to the project will need to be handed over to your lawyer. Doing this will provide them with a recorded timeline for the construction project and will help them defend your case.

Additional tip: Don’t conceal any records because you think they might make you look bad. Your lawyer needs the complete story to present an effective defense.

Trust Your Lawyer and Follow Directions

Getting sued can be a nerve-racking and aggravating experience. Your lawyer is available to help you, so do your very best to remain calm even when they ask you to:

  • Provide records pertaining to the project
  • Attend all scheduled depositions
  • Answer a lot of questions.
  • Be involved with negotiating a settlement.

Once again, your attorney is the person who’s the most prepared to help you navigate the legal system. Take their advice very seriously. And remember, even though your insurance policy will cover you for a claim, your cost of insurance will be affected when your renewal is presented.


Cover all Your Bases


The contractor industry is risky. Knowing this, it’s incumbent on you to protect your business and yourself from everyday risks. The experts at Fairbanks Insurance Brokers can show you how to affordably transfer those risks to a highly-rated commercial insurance company.

Here is What We Recommend

General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.

Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.

Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.

Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.

Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.

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