Virtually every contractor has found itself staring at its own commercial general liability (CGL) insurance policy—perhaps with the same feeling one might have staring at a technical manual written in a foreign language. Such a contractor might think its experience with some of the practical aspects of placing insurance or reviewing and approving additional insured endorsements, as just a couple of examples, might give them a sense of confidence when confronted with a more technical coverage question.
But, all too often, such a sense of confidence is misplaced—the proverbial “devil in the detail” being something in that insurance policy that reads like a technical manual written in a foreign language. In some cases, this misplaced sense of confidence can lead one down a road that may make a difficult situation worse. As such, when confronted with a loss or claim, especially one that appears to be potentially significant, it is always best to first retain an insurance expert who can help guide your company around the potential insurance coverage landmines that might be unexpectedly lurking around each step in the claim process.
With that in mind, as the new year gets underway, it’s a good opportunity to take a few moments to remember to think about the details. What you know and what you should know regarding your insurance coverage can often be very different things, so we wanted to provide a few reminders about some of the most important things that contractors need to consider regarding their insurance coverage.
Understand The Types of Insurance Coverage You Need
CGL insurance policies basically provide coverage to a business for (1) property damage or bodily injury to third parties arising out of the company’s operations, and (2) personal and advertising injury, which is a defined term to include certain enumerated offenses. However, the scope of these coverages can vary significantly. And, perhaps more importantly, each business and, indeed, each contractor, has its own set of liability exposures that depend partially on what you do and how you do it.
An electrical contractor and a concrete contractor both need CGL coverage. But they do not necessarily need the same things from that CGL coverage. A concrete contractor, for example, especially one that does foundation work, will be concerned about whether the CGL policy includes any subsidence or other earth movement exclusions. An electrical contractor is less likely to be concerned about such an exclusion.
How your company operates is also important. For example, some general contractors self-perform little or no work (often called paper contractors). These contractors are going to be very concerned about whether their policy includes broad form completed operations property damage coverage (very generally speaking, this is a coverage enhancement that affords coverage for property damage to, or arising out of, subcontracted work.). A contractor that self-performs all their work might be less concerned about this.
The important thing here is that each contractor must understand the liability exposures associated with their operations. Then, the contractor must understand what coverages are required—how its CGL coverage should be structured—to try to maximize the potential for insurance coverage for those expected liabilities. On this last point, the assistance of an insurance expert could be key.
Timely notice is important!
We know – this seems obvious. You probably are thinking to yourself, “of course I am going to report any incidents to my insurer as soon as possible” But guess what? This isn’t as clear-cut as it seems. There are countless court cases across the country that get into “what is timely notice” and whether a contractor complied with these provisions in an insurance policy.
So how can you protect your company and its assets? When something happens that potentially could lead to a claim, especially one that might be more significant, report it as soon as possible. Why? Because even seemingly insignificant delays could have negative consequences on your company’s right to insurance coverage and, in a worse-case scenario, even causing your company’s entire coverage claim to be rejected. Be thorough, be prompt, and be ready to report the situation to your insurer as quickly as practicable.
Know What Changes Are Being Made to Your Policy When You Are Renewing It
CGL policy language is ever-changing. What was covered today may not be covered in a new policy tomorrow. Insurance companies are constantly trying to minimize their potential responsibilities with respect to future claims and may attempt to narrow coverage—even at renewal when it might be least expected. Being aware of this at the time you obtain insurance coverage (and especially when you renew coverage) is essential – because even inconspicuous changes can have extremely significant consequences down the road.
In short, it is important to understand what your policies cover, especially as it pertains to your business’s operations—different trades have different risk exposures, different ways of doing business and different concerns or needs with respect to their insurance program—and to understand what changes are being made to your insurance program at time of renewal, even when you are sticking with the same insurance company.
Our Team Can Help
A careful review of your insurance program by an expert can help identify any gaps in coverage, or the consequences of changed policy language at renewal, thus allowing your company to adjust protect your company. We can help you determine the coverages you need, and help you understand the type of cover you have under those policies. We have an in-depth knowledge of CGL insurance policies.
We’ve worked with practically every trade and sub-trade. Our team can provide you with a clear assessment of your situation, whether with respect to re-evaluating your company’s insurance program (or other risk transfer needs) or with respect to a given loss or incident that might lead to a claim against the company. We want to help you avoid finding yourself surprised, whether by discovering after a loss occurs about a gap in your insurance program or by claims by the insurance company that you waited too long to report the matter. To get started, reach out to our firm today.