Construction Insurance

General Commercial Liability Policies

The nature of construction work is such that buildings, equipment, personal property, and even people are hurt or damaged—sometimes despite caution, competence, and safety procedures; and sometimes due to a lack of thereof. Among the most common types of insurance policies affecting construction work are general commercial liability policies (GCLs or GLs), which generally are intended to cover damages caused to people or property during the course of construction.

What to Look For in a Contractor’s Insurance Policy

Some featured items to look out for when reviewing your own or another contractor’s insurance policy:

• Don’t rely on the one-page Certificate of Insurance to figure out what a policy does—it can be inaccurate or incomplete.
• Make sure the policy covers the risk intended—there are roofers out there with policies that don’t cover roofs.
• Make sure the deductible is reasonable—there are policies out there where relatively small contractors have a $1,000,000 deductible that will only ever protect anyone in the event of the very rare disaster, and only if the insured can afford the deductible.
• Know if there is an exclusion or exemption for the “work of others.” GCLs don’t cover defective work, only actual damage to property (which may be caused by defective work). The classic example is that a GCL won’t pay to fix the leaking pipes, but will (or rather, may) pay to fix the damage caused by the water that leaked from the pipes. An exception to this in Florida is that by default GCLs cover the defective work of others, typically subcontractors. Unless the policy explicitly excludes that type of coverage, a general contractor’s policy may, given our previous example, pay to fix the leaking pipes furnished by a subcontractor.

General commercial liability policies vary on an individual basis, and there are many other types of insurance policies that affect construction projects. Construction professionals are advised to thoroughly review and understand such policies before purchasing or relying on them.