All contractors carry general liability insurance, right? But, what does it really cover
The problem I see more often than not is that contractors assume that their general liability insurance covers screw ups on the project. But, most general liability policies specifically exclude losses resulting from “your work, your product or impaired property” when the problem stems from your work.
For example, if you pick up the wrong carpet and install it at the owner’s business, are you covered for the expense of replacing the carpet? If you apply the wrong chemical at a corporate office park, are you covered for the expense of replacing the sod? If you misread the plans and install a fence on the neighbor’s property, are you covered for replacing the fence?
Chances are that you are not covered under you general liability insurance. The mistake clearly resulted from your work and unless you have very unique general liability insurance, the exclusion will apply and you will not be covered.
But, there is coverage for these types of mishaps. Jeff Siedlik, owner of Commercial Solutions Insurance, recommends Errors and Omissions (E&O) coverage to his construction clients because it covers those very situations where someone messes up on a job. But, he notes “newer construction companies may find that the premiums are pretty high until you have enough years of experience to show the insurer that you know what you are doing.”
If you are relying on your general liability insurance to cover those mishaps that do happen, you should review your insurance policy to see if it contains a “your work” exclusion. If it does, perhaps you should look into errors and omissions coverage.
There is a disturbing trend towards CGL policies covering less and less for contractors – as if there wasn’t too much risk already involved in the construction business!!!