General Liability exclusions could be a contractor’s worst nightmare!

General liability insurance is a foundational coverage and an essential policy for any business, especially contractors.

It’s the first policy that most businesses purchase and it can provide the foundation for several other types of policies, such as workers’ compensation, commercial auto, and inland marine coverage.

However, it doesn’t provide comprehensive protection. It does not cover all claims and contractors should be aware of the exclusions in the policy.

There are numerous limitations as well as exclusions in a general liability insurance policy.

Therefore, it’s essential that contractors understand what general liability does and does not cover. This way, other coverages can be added to meet the specific needs of your business.

 

What General Liability Covers

 

General liability protects not just your business, but also your clients and other third parties. If a client is injured or suffers property damage as a result of your operation, the client will likely demand compensation from your business. The purpose of general liability coverage is to protect against such costs.

The commercial general liability policy provides coverage for bodily injury and property damage caused by an occurrence.

Coverage A, the first part, provides liability coverage for bodily injury caused by a covered occurrence. Coverage B, the second part, provides liability coverage for all intentional torts, such as libel and slander, giving rise to personal injury or advertising injury liability.

Coverage A is generally described as providing insurance coverage for premises and operations liability and products-completed operations liability.

 

General Liability Coverage Exclusions and Limitations

 

Exclusions and limitations are what define the boundaries of liability insurance. They are a common part of a policy, designed to protect you against losses that may not be covered by other types of insurance.

Most general liability exclusions, however, require coverage for situations that are more appropriately covered by other policies. A simple reminder is: your general liability policy typically does not provide coverage that another policy will provide.

Contractors should consider general liability as a foundation for a package of coverages that will be needed to successfully mitigate the risk of being in the contractor industry.

Here are the most common exclusions and limitations contractors should be aware of:

 

Auto:

 

All contractors use automobiles in some fashion. Certainly, some contractors use them more than others depending on the business operation. Some use trucks or vans to deliver products to the job site, some use them to deliver tools and equipment, and others do both.

Either way, contractors should carry commercial auto insurance to cover their auto liability and physical damage exposure since this exposure is generally excluded under the general liability policy.

 

Injuries to Employees:

 

Although general liability insurance protects your business against liability lawsuits from customers or other third parties, it doesn’t cover injuries to employees or subcontractors.

If an injury occurs on the job, that is covered by workers’ compensation insurance, not your general liability policy.

Workers’ compensation laws vary from state to state, but most allow employees injured on the job the right to be compensated for medical bills and lost income. Contactors can mitigate this risk by purchasing workers’ compensation whether the state requires this coverage or not.

Moreover, never expect your liability coverage to defend your business or pay penalties if your business does not have proof of workers’ comp coverage in a state that requires it places a penalty on your business.

 

Professional Liability

 

Contractors who offer professional services such as architectural design or other unique professional services should be aware that the general liability policy will exclude liability coverage for these services.

Contractors who offer professional services should purchase Errors and Omissions coverage in the event an action is brought against them for damages resulting from professional services. Your general liability insurance will not defend you from the action or pay any damages awarded by the court.

 

Employment Practices Liability

 

Business owners today are experiencing claims for employment practices such as wrongful termination, harassment, and discrimination by employees seeking compensation through the courts.

Employment Practices Liability claims are not covered under your general liability policy since these claims rarely involve bodily injury, an employee is not a third party, and these types of claims are generally expected or intended.

Contractors who have one or more employees should consider mitigating employment practices risks by purchasing Employment Practices Liability Insurance (EPLI).

If your contracting business has BOP coverage (Business Owner’s Policy), EPLI coverage can usually be endorsed onto the policy.

 

Other Exclusions and Limitations

 

Other risks that are generally excluded under your contractors’ general liability coverage are:

• Pollution clean up
• Liquor Liability (company events, celebrations, etc.)
• Damage to your product, equipment, or tools
• Liability associated with watercraft, mobile equipment, or aircraft owned by the business
• Contractual Liability assumed by your business

 

In Conclusion

 

A simple and useful way of knowing what is excluded from coverage from a contractors general liability policy is to remember these three things:

1. If it’s intentional
2. If it’s expected
3. If it’s covered by another policy

It’s likely not covered under your general liability coverage.

 

At Fairbanks Insurance Brokers, we have experienced and reputable insurance professionals who will help you transfer all the risks associated with your business no matter which industry you operate in.

We encourage business owners large or small to contact us at (949) 595-0284 during normal business hours or contact us through our website 24/7. All quotes are offered free of charge and there’s no obligation to buy.

 

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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