When Do You Need A Contractor General Liability?

A contractor general liability is useful for different construction businesses. But have you ever wondered when you should get this liability? This article explains it all.

Contractors in various specialties, such as masonry, carpentry, fencing, concrete, landscaping, flooring, HVAC, and electrical, are exposed to numerous general liability issues when they’re working on-site.

If employees and business owners don’t actively address contractor general liability problems, they may result in visitor or customer injuries, stolen or damaged equipment, and property damage.

Moreover, losses of any type can cause damage to your reputation with existing and potential customers and impact your business negatively when it comes to finances.

This article addresses two areas of contractor general liability, the first one being job site premises and operations, and the second one being products and completed operations. 

These lists include suggestions to help you manage hazards while working on a job site and prevent losses from liabilities. But know that these lists aren’t comprehensive and don’t include all potential hazards, so you’ll need to be diligent in securing all work sites.

Contractor General Liability Job Site Premises and Operations

The most common contractor general liability losses while working on a job site are slips, falls, trips, bodily injury, and property damage. So this list will help you to think about which of the following items can be applied to your next worksite.

  • Workers are skilled, experienced, and licensed (if applicable)
  • Newer employees are closely monitored by experienced workers
  • Good housekeeping is maintained throughout the premises at all times
  • Floors, hallways, and aisles are kept clear of debris
  • Spills are cleaned up immediately
  • Floors, sidewalks, and parking lots are well-lit, in good condition, and don’t have cracks or unanchored coverings
  • Stairways are in good condition, have proper handrails, and are well-lit
  • Tools and materials are neatly arranged and do not obstruct walkways
  • Tools are removed from the site at the end of each day and any tools left overnight are stored securely in a locked space
  • Equipment and materials left overnight are stored appropriately
  • Job sites left unattended by workers are properly secured and free from hazards
  • Exits from the premises are clearly marked and unobstructed
  • Access to the premises is limited to necessary personnel while operations are performed
  • Visitors or customers permitted to enter work areas are accompanied by a qualified employee at all times and are required to wear personal protective equipment when needed
  • Customers are prohibited from touching or holding tools or equipment, climbing ladders, and assisting in work performed by employees
  • Visitors and customers are informed of potential hazards and are aware that kids and pets are prohibited from entering the work site
  • Noise from machinery and tools is as limited as possible
  • Worksites are inspected regularly to identify and control hazards

Contractor General Liability Products and Completed Operations

Contractor general liability losses caused by products and completed operations can include anything from property damage to bodily injury. Common causes are failure to meet specifications or building codes, use of substandard materials, poor workmanship, maintenance, incorrect installation, repair operations, improper design, and faulty equipment. 

This list demonstrates actions that can reduce the potential for liability issues.

  • Component and raw material suppliers must meet strict quality standards
  • Incoming components, materials, and equipment are thoroughly inspected, and items that don’t meet the standards are refused
  • Shipping and receiving records are maintained so that any defective materials can be traced back to their original suppliers
  • Quality control measures are in place to make sure all work meets minimum levels of acceptability and is done competently
  • If guarantees or warranties are offered to customers, they’re in writing before the job starts
  • Local building regulations, codes, and ordinances are investigated before any installation procedures commence
  • Equipment installations follow all of the manufacturer’s instructions
  • Workers performing maintenance operations follow a procedural checklist to ensure no steps are missed
  • The business has methods set for inspecting work when it is completed
  • Debris, raw materials, tools, and other equipment are removed from the job site when work is completed, so nothing is left behind
  • Detailed customer records are kept that include all work completed along with maintenance and service intervals (if applicable)
  • Customers are provided information regarding the proper operation and maintenance of installed materials, equipment, and such.

Summing Up Contractor General Liability 

As a business owner, it’s best to have a contractor general liability for as many of these aforementioned scenarios as possible. Because you never know when a situation that warrants this liability arises.

Everything You Need to Know About Insurance Filing As A Motor Carrier

Have you wanted to file your insurance as a motor carrier, as a freight forwarder, or a broker but couldn’t understand how? Then this article is what you need.

Apart from applying operating authority, applicants for freight forwarder, motor carrier, and broker authorities must have specific legal processes and insurance agent documents on their files before the FMCSA issues them these authorities. 

These filings will vary, based on the registrations involved. There is a list of pre-registration forms below, and it’s followed by a description of which registrants must file those forms. 

If you’re insurance filing for the first time, then please note that first-time applicants with FMCSA need to apply using the Unified Registration System (URS) as of December 12, 2015. 

However, existing registration-holders or authority-holders may apply for authorities using the OP-series forms until a later date. The FMCSA has published a Federal Register notice on the 17th of January with more details on the suspension of the URS effectiveness date.

Furthermore, you may submit cargo insurance and liability forms directly/online through the home office of the insurance company that is furnishing the coverage. The FMCSA does not provide insurance forms’ copies.

Requirements for Insurance Filing

FormDescriptionAuthorities Subject to Filing
BMC-91 or BMC-91XPublic liability insurance (bodily injury/property damage/environmental restoration)Motor CarrierFreight Forwarder (Note: Non-vehicle operating freight forwarders may seek a waiver of this requirement)
Freight: $750,000 – $5,000,000, depending on commodities transported; $300,000 for non-hazardous freight moved only in vehicles weighing under 10,001 lbsPassengers: $5,000,000; $1,500,000 for registrants operating only vehicles with a seating capacity of 15 or fewer passengers.
BMC-34 or BMC-83Cargo insurance–$5,000 per vehicle$10,000 per occurrenceIn addition to BMC-91 or BMC-91XHousehold Goods Motor CarrierHousehold Goods Freight Forwarder
BMC-84 or BMC-85The Surety Bond amount is $75,000Trust Fund Agreement amount is $75,000Freight ForwarderBroker of Freight
BOC-3Service of Process AgentsAll Authorities
MCS-90Endorsement for Motor Carrier Policies of Insurance for Public Liability under Sections 29 and 30 of the Motor Carrier Act of 1980Hazmat Safety Permit Carriers

Insurance Filing and You 

You should be prepared to contact your agents to request the filing of the required forms immediately after obtaining your designated docket number. These filings must be received within 90 days after the FMCSA has published a public notice of intention to register you as an applicant (applicants will be notified by letter of their docket number and date of publication in the FMCSA Register).

Applicants are cautioned to ensure that the name and address of the business as set out in all pre-registration filings match with the same name and address provided in their application for operating authority filings. 

Any deviations will result in the rejection of the supplemental pre-registration filings.

Where Should I Go For My Insurance Filing?

Insurance companies are to file forms BMC-91, 91X, 34, and 84. While financial institutions need to file form BMC-85

Only insurers (insurance underwriters, that is), not insurance agents, and financial institutions can establish e-filer accounts to electronically file insurance forms (BMC-91,91X, 34, 84, 85, and others). These filer accounts are exclusively designated for financial institutions and insurance underwriters.

You can visit this link to see a template at the end of the page to set up your electronic filing account. It has been specifically designed to efficiently gather all necessary information required for the establishment of your account.

It’s suggested that the completed template be copied and pasted onto your company letterhead and attached as a PDF to be submitted to the Financial Responsibility Filings Division. Application documents will only be accepted via postal mail or email at FMSCAInsurance@dot.gov, using an official company e-mail address. 

Please ensure that all fields in the provided template are completed accurately and comprehensively. Failure to provide complete information may result in delays in processing your account set-up request. Once the required information is completed and gathered, you can submit e-filer applications to FMCSAInsurance@dot.gov.

Process Agent Designation and Insurance Filing

Public liability Insurance (Form BMC-91 or BMC 91X) and cargo insurance forms (Form BMC-34 or BMC83) are to be submitted electronically by a registered electronic filer (a representative of a surety company, insurance company, or a financial institution.) FMCSA does not furnish copies of these insurance forms.

This is the link to the site that has the forms for process agents and insurance.

Summing Insurance Filing Up

By following the aforementioned steps, you;ll able to get your form(s) submitted to the FMCSA in the required manner, but they’ll also be read and pursued by the FMCSA.

What is A Performance Bond?

This article explains in detail about what is a performance bond and what are the roles of all three major parties in it. 

A construction job of any kind requires a performance bond. In essence, they provide an assurance that the contractor carrying out the work will honour their contractual duties to the project’s owner or general contractor. In the end, this ensures that the work is completed according to schedule.

A performance bond involves these three parties:

  • The contractor who will do the job and furnish the bond is the principal.
  • The project owner or general contractor is the obligee.
  • And the surety: This is the business that provides the performance bond, which assures the contractor’s work.

It’s simple to mix together performance bonds and insurance. After all, surety or bond companies—also known as insurance companies—are the ones who formally issue performance bonds. 

Three Important Ways Performance Bonds and Insurance Differ

It’s simple to mix together performance bonds and insurance. After all, through insurance brokers, insurance companies—also known as surety or bond companies—issue performance bonds. Surety agents are those organizations that focus on surety.

Performance bonds and the majority of insurance products differ in three key ways:

1. There is no immediate gain for the contractor (principal) submitting the performance bond application. Rather, the principal is employed by a third party (obligee), such as an owner or general contractor, for whom the bond offers benefits.

2. Surety businesses underwrite and price performance bonds with the intention of avoiding losses in theory. Consequently, surety firms are able to complete the task.

3. Contractors are required by surety firms to compensate and cover the surety for any damages resulting from the performance bonds. When compared to the majority of insurance products, such as workers’ compensation and general liability, this is a significant difference. 

A contractor using those items is exempt from having to pay back the insurance company for a covered loss. That would negate the insurance’s purpose. That’s not the case with surety, which functions more like a banking credit extension. 

How to Apply for and What Are the Requirements for Performance Bonds

Surety firms will examine various financial records and features of your business expertise in order to grant a performance bond. The size of the performance bonds you require and the total number of bonds you will have outstanding at any given moment will determine the requirements.

Bonds under $750k: These are frequently available with a straightforward one- or two-page application, depending on the company’s excellent credit history and prior completion of projects of a comparable scale.

Bonds worth more than $750K to $2 million will need to provide financial accounts for both the business and the owners. If the financials are accurate and in order, they are typically acceptable when first created.

Where to Get a Performance Surety Bond for a Contractor

Choosing a performance bond provider can be one of the most significant decisions a contractor makes. Construction performance bond providers are numerous, but their levels of experience and capacity to assist contractors in reaching their objectives for bonding capacity and business expansion differ significantly: 

A Representative for Insurance

Remember that insurance agents aren’t surety experts, even if they can seem like a suitable alternative if you need a performance bond—especially if you’ve worked with an agent in the past. 

Since they don’t handle bonds exclusively, they don’t have the same calibre of relationships or access to surety businesses, nor do they have the knowledge or experience with California surety bonds that would facilitate a smoother bonding procedure. 

They may lack the means to generate prospects or the knowledge necessary to pair a contractor with the ideal assurance provider because they don’t have these industry relationships. 

An Expert in Surety

An specialist who focuses only on surety bonds is known as a surety agent. Regardless of your company’s stage, they may use their expertise to make the bonding process far more seamless by anticipating future developments. 

Surety agents get access to exclusive programs and business connections because they exclusively deal with surety bonds. Additionally, they establish strong bonds with surety suppliers, which better enables them to match your requirements with the ideal assurance firm. 

Their knowledge extends beyond the bonding procedure; they also understand how to properly organize your money to expand your company’s bonding capacity.  

Summing Performance Bonds Up

In conclusion, performance bonds are a crucial tool in the construction and contracting industries, providing a financial safeguard that ensures projects are completed as per the agreed terms. By reducing the risk of non-performance and financial loss, they protect project owners and investors, creating trust and stability in contractual relationships.

What is A Contractor’s Liability Insurance?

A contractor’s liability insurance is a safety net for people who work in construction. It is a specialized form of insurance against different risks and liabilities that contractors face, like property damage, bodily injury, and even legal fees arising from lawsuits. This article explains it in detail.

What is This Insurance About and What Does it Do?

A contractor’s liability insurance (CLI) covers building professionals and contractors in case of construction errors. It is purchased by contractors who design and build construction projects. 

It covers both mistakes made by the contractor and third parties hired by the contractor. These third parties may be needed in case of specialized work, like drywalling, electric work, plumbing, and such.

Not all contractors provide all kinds of construction-related services. Usually, only larger contractors offer them in-house. Yet they’re also exposed to more risks, which this insurance protects them from. 

Why is A Contractor’s Liability Insurance Needed?

It covers risks that aren’t covered by a General Commercial Liability insurance (CGL). A CGL doesn’t include professional liability exclusions, which is why a contractor’s liability insurance can come in handy. 

What is Covered Under A CLI?

Many construction-related activities can be included in a list that’s in the policy documentation. Or it may be tailored to the needs of the contractor purchasing it. Some policies include a list of undertakings that aren’t a part of coverage. 

Contractors can buy a standing contractor’s liability insurance that covers everything that the contractor does. They may also choose to purchase a policy that covers particular projects with detailed time frames.

CLI vs Builders’ Risk Coverage

Both of these types of insurance cover a similar set of conditions, entities involved, and types of loss in a building project. Although, the CLU is usually taken out by the contractor. While builders’ risk is taken out by the project’s owner.

Also, the CLI can be taken out for building improvement projects, yet it may not be available for a new project without any existing structure. Simultaneously, builders’ risk coverage can secure projects that don’t have an existing structure. 

Summing Up Contractor’s Liability Insurance

Contractors liability insurance provides coverage for both third-party hires and contractors, like designers, architects, and engineers. It helps in case of errors and mistakes made on the job, and other losses incurred during a building project.

Subcontractor’s Warranty Endorsement

Those who are contractors, construction companies, maintenance companies, or other companies that use subcontractors may encounter “Subcontractors’ Warranty Endorsement” on their Commercial General Liability policies. This endorsement requires contractors to obtain additional insured status on the CGL policy of their subcontractors and to make their policies secondary to their subcontractor’s. In addition, contractors may face significant consequences if they do not meet the endorsement’s requirements.

The language of the “Subcontractors’ Warranty Endorsement” can differ among insurance providers, but the main terms of an endorsement mostly remain the same. A subcontractor’s policy must list the contractor as an additional insured and as a requirement for coverage for any insured under this policy the insured must ensure that all subcontractors maintain Commercial General Liability insurance from a company with a “A” rating and minimum liability limits of  $1,000,000 per occurrence and $2,000,000 general aggregate and  $2,000,000 products and completed operations aggregate. Additionally, the insured must be listed as an additional insured on all such subcontractors’ commercial general liability policies.

The endorsement may also require the contractor to secure an indemnity agreement from the subcontractor in addition to having additional insured status on the subcontractor’s policy.

Mandatory Workers’ Compensation Insurance for Contractors in California

The California Contractors State License Board (CSLB) has announced that starting January 1, 2023, certain licensed contractors must carry workers’ compensation insurance, regardless of whether they have employees. These contractors include those in the concrete (C-8), HVAC (C-20), asbestos abatement (C-22), and tree service (D-49) sectors. This new requirement is the result of Senate Bill 216, which was signed into law by Governor Gavin Newsom on September 30, 2022. Additionally, the bill mandates that all contractors, including those without employees, must have workers’ compensation insurance by January 1, 2026. This type of insurance is required only for C-39 Roofing contractors, regardless of their employee count. The CSLB works to safeguard consumers and ensure fairness for contractors by requiring more of them to carry workers’ compensation insurance. Consumers can verify a contractor’s license status and insurance information on the CSLB website.

Link: https://www.cslb.ca.gov/Resources/PressReleases/2022/Workers_comp_release_10_11.pdf

Loss Exposure of Contractors

Contractors are subject to some unique loss exposures. When a prospective client needs certain types of construction work done, contractors either bid for the job or negotiate a contract. Due to this, the customer specifies what should be done in the job specification. It is common for contracting businesses to have multiple locations. There are frequent changes to the job site. There may be a contractor who controls one job site while the employees or subcontractors control other job sites simultaneously or sequentially. As a contractor, you are exposed to a unique range of loss exposures. It is imperative for any contractor to evaluate and analyze their risks before obtaining contractors insurance.  

Insurance Loss Runs: How Do They Work?

An insurance loss run is a report that lists all claims made on a particular insurance policy over a specified period of time. Loss runs are typically requested by insurance underwriters when evaluating an insurance application or renewal, and they can also be used by policyholders to help identify trends or potential issues with their insurance coverage. Loss runs typically include information about the date and type of loss, the amount of the claim, and the status of the claim (e.g., open, closed, pending). They may also include details about the policyholder’s insurance coverage.

Depending on the number and type of open claims on your report, there will be a section with a reserve fund. An insurance company sets aside a certain amount to cover claims. Nevertheless, the final cost of a claim can vary from the set aside amount.

Insurance Premium Audit

Your insurer conducts a premium audit to become sure you have paid the proper premiums over the period of the policy for the insurance coverage you need.

By analyzing your company’s financial records, an insurance premium audit determines your actual risk exposure. Every year, your insurance company conducts an audit of your policy.  

Typically, when you start a new insurance policy, you estimate your business costs, payroll, and income.  Audits are performed by insurers or independent auditors at the end of policy periods to determine gross revenue and payroll data for individuals or businesses.

 Auditing an insurance policy should follow several best practices:

To ensure a successful audit, it is crucial to plan ahead and collect all the necessary documentation in advance. Organize your records and documents so the auditor can easily access them. Despite the possibility of higher premiums, be honest about the business’ operations and risk management practices. You should ask the auditor questions if you have any concerns or if something is unclear.

As a general rule, an insurance audit is conducted to ensure that the insurer has the right insurance premiums in place to protect against potential risks. In order to ensure a smooth and efficient audit, businesses should follow these best practices.

Sunset Clause aka Sunset Provision

A sunset clause on a liability policy is an endorsement that limits the coverage provided by the policy to a specific period of time, and can limit the reporting period of a claim. This means that if a policyholder is insured under a policy with a sunset clause and a claim is made for a loss that occurred during the policy period, but the claim is not reported until after the “sunset” date, the policy will not provide coverage for that claim.

For contractors, a sunset clause on a liability policy can be particularly problematic as construction projects can be complex and claims may not be discovered until long after the project is completed. For example, a defect in the construction work may not be discovered until several months or even years after the project is completed.

Therefore, contractors should approach a policy with a sunset clause with caution, and consider the potential risks and liabilities of the project before purchasing a policy. They should also consider purchasing an extended reporting period (ERP) or “tail coverage” option to provide coverage for claims that may arise after the policy period but were not reported during the policy period.

It’s important for contractors to discuss the sunset clause and ERP options with their insurance professional to ensure that they have the right coverage for their business. They should also carefully review the terms, conditions and exclusions of their insurance policy to understand the scope of coverage and any limitations.