Due to the nature of the business, most contractors will find themselves in situations on a daily basis where they need the protection of liability insurance. Because there is so much potential for liability, serious thought should be given when deciding what type of liability insurance is needed. There are many types of liability policies and different levels of coverage available to provide maximum protection to the contractor.
Contractors need general liability coverage to protect them in the event they cause injury to another person while performing their job or for a person other than an employee who is injured at the jobsite due to the contractor’s negligence. This coverage is usually a per occurrence limit, and an aggregate limit applies. The occurrence limit is the maximum amount the insurer will pay for any one occurrence regardless of the number of persons making a claim. The aggregate limit is the maximum that the insurer will pay in the policy period regardless of the number of claims.
Property Damage Liability
Property damage liability is included in a general liability policy and covers property damage caused by the contractor while performing their work. For example, if the contractor accidentally breaks a customer’s window while placing a ladder against a wall, this would be covered by property damage liability. This coverage is not a guarantee of the contractor’s work. If the contractor installs a roof and the roof begins to leak, the policy is not going to cover replacement or repair of the roof. That would be the contractor’s responsibility. However, if the leak was due to a faulty installation or negligence on the part of the contractor, the policy would probably pay for the damage caused to the customer’s property as a result of the leaking roof.
This coverage pays for medical expenses incurred by an individual who is not an employee of the contractor, who is injured at the jobsite or as a result of the contractor’s negligence. For example, if a child steps on a rusty nail left by the contractor and needs medical treatment for their injury, medical payments coverage would pay for the medical treatment, up to the coverage limit.
Commercial Auto Liability
If a contractor owns autos that are used in the business, they should be covered on a commercial auto policy rather than a personal auto policy. Just like a personal auto policy, commercial auto liability provides liability coverage for persons injured in an auto accident caused by the insured vehicle. A commercial auto policy would also provide medical payments coverage for persons who are injured while riding in the insured vehicle, regardless of who is at fault. If the contractor does not use the vehicle for the business but just drives it to the jobsite, then a commercial auto policy is probably not needed unless it is titled in the name of the business.