No matter how hard you work to keep your job sites safe, accidents are bound to happen. When they do, a contractor liability insurance policy is designed to protect your company's financial interests so any immediate financial liability – or financial damages as the result of a lawsuit – can be handled expediently and efficiently without posing a significant risk to your business.
The Basics of Contractor Liability Insurance
Your contractor insurance policy can be activated via several scenarios:
- Property Damage Claims. These claims are designed to cover the costs of a lawsuit if a building or property owner claims that the work performed by your company was responsible for major property damage, or that activities or work performed by you has rendered the property unusable or uninhabitable. It's important to note that this type of coverage does not typically protect contractors who do remodeling and renovation work, so an umbrella or gap insurance policy may also be required to make sure all of your bases are covered.
- Bodily Injury Claims. Accidents happen, and it isn't always your employees who are at risk. Often its visitors and guests who are inexperienced or untrained to remain safe on a construction site, and/or who wear inappropriate attire at the job site who sustain serious injuries. An adequate insurance policy is designed to cover a range of costs that may be associated with a bodily injury claim on one of your sites, including medical expenses, funeral expenses, and court-awarded compensation if a third party's injury results in death. It also covers injury- and illness related expenses for third parties but NOT those experienced by your own employees. Those costs would need to be covered by a Workers' Compensation Policy.
- Personal and Advertising Injury Claims. Competition in this industry is tough, and it can be ruthless in heavily-populated areas, which is why original, high-quality marketing content is so important. Where do you come up with your advertising and marketing content? Hopefully, in-house or contracted staff are utilizing services, like copyscape.com, that verify the content is original. If your company is sued for copying another party's advertising or infringing on copyrights or brands, your insurance policy should cover any non-physical damages claimed by a third-party.
- Medical Expenses Claims. If an individual – such as a non-employee or non-contracted worker – is injured on your job site, a liability policy will cover their medical costs. Always remember to insist that an injured party seek medical attention immediately – even if the injury seems minor. This protects your best interests should the injury become more severe – potentially leading to a lawsuit down the road.
- Completed Products Claims. Finally, a contractor's liability insurance policy will also provide protection after the job is finished and a client or building owner complains about the completed services or the finished products your company produced. For example, if your company completed a set of stairs and one of the stairs fails, causing an injury months or years after-the-fact, your policy will cover the damages should your company or subcontractors be found liable.
Do You Have an Adequate Liability Insurance Policy?
Just like auto insurance policies, you can select the total payout values of your liability insurance policy. For this reason, it's important that you do a little bit of homework to find a reputable and respected insurance agent who can help you select the best policy type(s) and value for your company.
Your insurance policy is a complete waste of money if it doesn't cover the average settlement or pay out costs of a potential lawsuit; you will have lost the thousands of dollars you've paid for the policy all those years in addition to sacrificing the monies and assets your company will lose in order to cover the difference.
A professional insurance company should be able to run a risks analysis for you, outlining the typical risks associated with the specific types of work the company performs, including the average lawsuits and payouts in your region.
It may be pertinent to have your existing policy reviewed on an annual basis – or at least every few years – to ensure the policy still aligns with the types of products and services offered by your construction firm. A minimal investment to gain adequate insurance will be well worth it should you find yourself the defendants in a future lawsuit.
Also, look into gap or umbrella insurance policies to cover risks that may not be covered by a traditional contractor's liability insurance policy. Having adequate insurance is one of the most important things you can do to protect your company's bottom line and ensure it remains solvent well into the future.
by STEVE WRIGHT | Steve Wright works for Whirlwind Steel, a manufacturer of pre-engineered steel buildings. Whirlwind Steel metal buildings are manufactured and designed to meet the highest quality standards.