Contractor Liability Insurance
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Contractor liability insurance is the financial protection that building contractors everywhere need in the face of a million different things going wrong on a small or large job. And in the reality of a society that has gone litigiously "sue happy" in the past twenty years, this indemnity protection isn't just a luxury but a flat out necessity. In fact, contractor liability insurance is required for most major projects by the lending corporations funding the efforts. But whether a person is a cabinet installer, remodeler or major general contractor liability insurance is one of the ways to keep from worrying each day about that inevitable accident. So what does make you worry? Jesus said, "Therefore I say unto you, take not thought for your life, what ye shall eat or what ye shall drink: nor yet for your body, what ye shall put on. Is not life more than meat and the body than raiment? But seek ye first the kingdom of God and his righteousness; and all these things shall be added unto you." (Matthew 6:25, 34)
One of the new liability issues that contractors face today is the specter of creating pollution hazards contrary to EPA or local regulations. Since the heart and soul of liability suits lay in the concept of negligence, it is the deliberate or even accidental overlooking of proper disposal methods that may later come back to haunt a contractor. Accidentally hitting an underground pipeline filled with gas or oil can be an extremely costly accident and environmentally dangerous. The expense of cleaning up such an event can be astronomical but contractor liability insurance can help mitigate, at least to some extent, the cost. When a contractor has a general liability policy, it may or may not cover such environment related issues, so special care should be taken when seeking covering from a carrier to make sure this scenario is addressed.
For the very small contractor, general, "one size fits all" contractor liability insurance coverage is standard fare. HVAC, drywall, painting, wall paper hanging, electrical, carpentry and other construction fields can all be covered under a general policy. The deductibles and ceiling amounts will vary from company to company and will also depend on how much coverage the contractor actually wants to have. Much of the issue surrounding whether or not a contractor can even get coverage is how much control he has over those working for him. Very small one or two person companies can receive a more favorable rate than those with more employees, all due to the control and accountability factor.
Many contractor liability insurance policies cover damage that happens up to ten years after the installation occurred. For example, nine years and eleven months after a water main was installed, it explodes causing a basement to flood and a foundation to crumble. Under many policies, a contractor would have liability coverage to stave off major expense. But nothing should be taken for granted and one's agent should be consulted for full coverage information. There are some things of which to be aware when purchasing indemnity protection however.
Since cost of insurance is a number priority for most contractors, shopping around for available carriers and their prices will provide a wide range of possible costs. The problem will come in comparing the same coverage. Deductibles for some contractor liability insurance policies may be quite high, lowering premiums, while other may not have as high a per incident allowable ceiling as another. And some policies may include some clauses to drive down costs that insurance experts warn will come back and bite many contractors right in the rear pocket later on. For example the inclusion of a sunset clause, which says the insurer will only pay for losses before a future predetermined date, limits the policy issuer's exposure to a long term liability problem such as the one mentioned in the previous paragraph.
The other provision in a liability insurance policy that must be avoided is a manifestation provision in the policy. Suppose a plumber takes out an indemnity policy for a very low price and does a job on a number of houses but then gets very sick and must end his business in order to concentrate on getting well. The contractor liability insurance policy lapses and nothing else is thought of until five years later some plumbing parts used in these houses were proven to be defective and began failing, causing plumbing set in concrete pads in those various houses to begin leaking. The cost for repair is going to be enormous, but the presence of a manifestation clause means the problem would have to have manifested itself during the time the policy was in force. The poor plumber not only has to beat cancer but now must pay tens of thousands of dollars for repairing these houses he had worked on years before.
There is a reason some insurance is cheaper than others and it is not always a bargain. A contractor, big or small must figure that something that can go wrong will eventually do so and it is better to have paid a little more for better coverage than to rue the day one ever became a roofer or drywaller or...., you get the picture. If you aren't sure about certain provisions in your liability insurance, have an attorney check it out. It will be worth the peace of mind to know one's coverage will be helpful and not an obstacle to business growth. And remember your family can be grossly affected by all this if you don't do the right thing.
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