We see it on the side of contractors’ trucks and vans all the time. But what does it mean to be fully insured, and why do contractor’s market this as a badge of honor? The dangers of allowing an uninsured or improperly insured sub-contractor to perform work on, or on behalf of, your operation can lead to devastating outcomes if a loss occurs. Among the many considerations when hiring a contractor to perform work, it is important to ask for proof of the following:
General Liability. This is in place to respond to a claim resulting from bodily injury or property damage to a third party. If the contractor, during the course of his or her work, causes damage to property or injures someone they can access their insurance coverage to pay for the damages. If appropriately endorsed with you as an Additional Insured, it will offer protection to you as well.
General Liability policies can vary dramatically. It is important to have the appropriate risk transfer agreement in place and executed prior to any work. These contracts should be vetted by an experienced attorney.
Installation Floater. These are put in place for the contractor to insure the property of others, while in transit, temporary storage, or at installation. Construction projects include a significant purchase of materials. Property like lumber, sheetrock, mechanicals, flooring, etc., are not considered part of the building prior to the completed installation. This property would also be excluded from the damages on the contractor’s General Liability due to the Care, Custody and Control Exclusion. It is important to seek an Installation Floater covering a limit of at least as much as your material costs for the project.
A more advanced project or new construction may require a more sophisticated solution in the form of a Builders Risk policy.
Workers Compensation. This is put in place to protect employees if injured while on the job. This is a state regulated coverage and required, by law, for all employers to carry for their employees. Often a contractor will use casual or temporary labor to assist during busy months. If an uninsured worker is injured while conducting work, you can be brought into a claim and potentially implicated in medical expenses and potential lawsuits.
Also, Insurance Carriers have the right to audit Employer’s books and can charge additional premium if your sub-contractor did not provide proof of this coverage.
These coverages, along with a number of very important endorsements and coverage limits, should be clearly outlined in an executed contract prior to any work commencing. New York State has very strict and costly laws that hold General Contractors and property owners liable for certain types of claims.
For more information on your specific project, or if you are a contractor trying to navigate the insurance procurement process, please contact Ten Eyck Group today for a more detailed and personal review.