Contractor Liability Insurance: A Plain Guide to What You Are Buying
Contractor general liability is the most-required and least-read document in construction. Five endorsements and five exclusions determine whether it works, and none of them are on the certificate.
- $1M per occurrence / $2M aggregate is the near-universal contract standard, not a risk assessment.
- It covers damage your work causes to other property — never the cost of redoing your own defective work.
- Products-completed operations is the coverage that responds after you leave the job; verify it is at full aggregate.
- The exclusions that gut contractor policies: residential construction, action-over, height limits, subcontractor warranty, EIFS.
- Costs range from about $900 for light trades to $12,000+ for roofing on the same limits.
What it covers
Bodily injury to someone who is not your employee. Property damage to something that is not yours. And personal and advertising injury — libel, slander, copyright infringement in advertising.
A homeowner trips over your extension cord: covered. You put a ladder through a window: covered. A pipe you installed fails and destroys the ceiling below: the ceiling is covered.
The cost of replacing the pipe you installed badly is not covered, under any general liability policy. That is the "your work" exclusion, and understanding it is the difference between correct expectations and an angry phone call.
The endorsements contracts require
When a general contractor or owner reviews your certificate, they are looking for five things. A policy without them fails review no matter how high the limit.
The exclusions that gut a contractor policy
Residential construction exclusion. Common on contractor policies and fatal if you do any residential work. Read for it specifically.
Action-over exclusion. Removes coverage for an employee injury claim brought against a general contractor that comes back to you. On New York construction work in particular, an action-over exclusion makes the policy close to worthless for the most likely serious claim.
Height or story limitation. Coverage restricted to work below a stated height. Roofers and exterior trades get caught by this.
Subcontractor warranty condition. Requires your subs to carry equal limits and name you as additional insured. Non-compliance can exclude a claim arising from their work.
EIFS and exterior insulation exclusion, and in some markets a stucco or window installation exclusion.
Also check: hot work restrictions, mold and fungus exclusions, and any classification limitation restricting coverage to the described operations only.
What contractors need beyond general liability
General liability is one policy in a set. On any real commercial job you will be asked for more.
What it costs
Class code drives everything. Same limits, wildly different prices by trade.
How to compare two quotes properly
Put the declarations pages side by side. Compare limits, the products-completed operations aggregate, the deductible, the endorsement list and the exclusion list. Price comes sixth.
Then ask three questions: is this admitted or surplus lines, what is the carrier’s AM Best rating, and how fast do certificates issue. A carrier that takes three days to issue an additional insured certificate will cost you a job, and that cost never appears in the premium comparison.
Finally, describe your operations accurately on the application — trade mix, percentage residential versus commercial, maximum height, whether you use subs, and your largest job value. A policy issued on an inaccurate application is a policy the carrier can contest exactly when you need it.