From D.O.K. Insurance Agency
Exclusions To Your Contractor General Liability Policy
Just like with any type of insurance policy, there is no such thing as “full coverage.” Over the years, insurance companies learned the hard way that they needed to exclude certain risk especially when it comes to contractor risks. While many believe that insurance companies have deep pockets and are just trying to get away from paying claims, it is important to purchase an insurance policy that is custom tailored for the work that you perform.
It is nearly impossible for a client to understand all of the terms, conditions and exclusions that are listed in the policy (some of them are over 300 pages long). Some project owners will require specific endorsement forms (or their equivalent) to be included before offering you a project so it’s important to work with an insurance agent that is familiar with these requests.
You do not want to find yourself having paid thousands of dollars down for an insurance policy that took weeks to get only to be turned away by a project owner because your policy excludes something. Making matters worse, you find out that you cannot cancel your policy without paying earned premium and non-refundable fees.
Below is a list of common exclusions and endorsements and what they mean. We strongly recommend going over this list and comparing it to your policy. If any of these exclusions would put your business at risk, please let us know right away.
AsbestosNo Coverage for exposures to asbestos, asbestos fiber, or any material containing asbestos or asbestos products, including without limitation, the costs of asbestos removal or damage while effecting such removal. Asbestos is a very common exclusion and usually must be waived via a specific endorsement.
Contractors WarrantyThis means that if you hire sub-contractors, you must get a certificate of insurance from them. As mentioned above, if you fail to get a certificate, the amount of your contract with the sub will be added to your payroll or gross receipts and you will be charged the corresponding premium for the increase. In other words, you will be responsible for the sub-contractor’s general liability.
Designated WorkClaims arising from any classification or class code not listed on the declaration page of this policy. For example, you are a roofing contractor and you purchase a policy that states your company is classified as a painter contractor. Any claims will be denied because you were not classed correctly. It is therefore important to review your policy since some agents will try to find a cheaper policy just to earn your business.
DemolitionTo the surprise of some general contractors and even excavation contractors, some correctly classified general liability policies exclude damages that are caused by specific apparatus or any damage or adjacent properties. A sample of the exclusion language of one of the carriers can be found here. (save this file on my server)
Independent Contractors (CG2294/CG2295)Claims arising out of: The acts or omissions of independent contractors while working on behalf of any insured, or the negligent hiring or contracting, investigation, supervision, training, retention of any independent contractor for whom any insured is or ever was legally responsible and whose acts or omissions would be excluded. If you use subs, this exclusion can be a extremely detrimental to your operation.
Professional LiabilityClaims arising out of the rendering of or failure to render any professional services by you or any engineer, architect or surveyor who is either employed by you or Performing work on your behalf in such capacity.
Designated WorkProfessional services include: The preparing, approving, or failing to prepare or approve. Maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings; and Supervisory, inspection, architectural or engineering activities. For example, if you make a structural change without the architect’s approval, there is no coverage. (Very common exclusion)
Construction Management Errors* See Professional Liability
Claims In Progress* See Prior Claims
Known Losses* See Prior Claims
RoofingSome roofing exclusions are plain and simple. NO ROOFING. Some are not as strict so have to read the exclusion carefully. Some roofing exclusions say there is no coverage while the roof is under construction or repair. For example: You tore off a roof, since the weather forecast called for sunny skies you decide there is no need to cover the roof overnight. If it rains, there is no coverage. Some policies allow for incidental roofing during a remodel, for example. If you are a roofer that installs or repairs torch down type roofs, you need to make sure that your policy includes coverage for membrane (modified bitumen).
LeadClaims arising out of the actual or alleged presence or actual, alleged or threatened dispersal of lead, lead particles or products containing lead.
Earth Movement* See subsidence
Multi-Unit ResidentialAny work in connection with the pre-construction, construction, post-construction, reconstruction, exterior remodeling or repairs of any multi-unit residential building.
Apartments/Condos/ Townhouses/Tract HomesAny experienced contractor who works on these types of projects will know two facts: (1) the risk of facing a (class-action type) lawsuit and (2) the premium for their GL policy is significantly higher than for those contractors who only work on smaller, single family homes.
Employment Related LiabilityPlease refer to our Employment Practice Liability Insurance page.
Prior Claims/ Known Losses/ Claims In ProgressClaims that are in progress prior to the commencement of your current policy as well as damages and/or injuries that you were aware of when you purchased your policy.
Pesticide, Herbicide & Funicide ExclusionIf you are a landscape contractor or otherwise use these types of products, you should carry a policy that doesn’t have this exclusion.
PollutionA provision in either first-party or third-party insurance policies that excludes coverage for losses caused by “pollution,” a term usually defined to mean an irritant or contaminant, whether in solid, liquid, or gaseous form, including—when they can be regarded as an irritant or contaminant—smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste.
Prior ActsThis is a very signifcant exclusion. This says that any work you did prior to the policy date is not covered. For contractors this can be devestating as a majority of clains claims arise months or years after project is complete.
Exterior Insulation & Finish System (EIFS) (Very Common)This is another exclusion that you need to pay close attention to. Exterior insulation and Finish system means the design, manufacture, construction, fabrication, preparation, installation, application, maintenance or repair, including remodeling, service, correction, or replacement, of an exterior insulation and finish system (commonly referred to as synthetic stucco) or any part thereof, or any substantially similar system or any part, including the application or use of conditioners, primers, accessories, flashing, coatings, caulking or sealants in connection with such a system when performed by you.
X, C, UExplosion, collapses, and underground. If you are a Grading or Excavation contractor you should not see this exclusion on your policy.