General contractor speaking to construction foremen and machine operator

7 Limits of General Contractors Insurance Coverage

Mar 29 2021

As a contractor, being aware of industry-related risks and understanding the need for a fitting insurance plan is the first step towards a successful and secure future.

General contractors insurance is the best foundational insurance policy that you can have to manage risks for your contracting business. This broad insurance policy, just by itself, can protect your business from lawsuits related to third-party injuries, third-party property damage, and even reputational/advertising injuries. However, it has its limitations as well.

In this article, we will explore what general contractors insurance covers as well as important contractors insurance limitations that you need to know about. We will also touch on the recommended additional coverages that you can have to address such limitations.

Let’s get started!

 Two individuals look over a general contractors insurance policy

What General Contractors Insurance Covers

1. Bodily Injury to a Third Party

Third-party individuals are the general public, the client, suppliers, and so on. Since most contracting jobs occur in close proximity to some or all of these individuals, there is the risk of operations leading to their injury within your business premises, at the project site, or even after project completion. 

A few examples include:

  • Falling debris or tools from a high construction site injure a person passing by
  • Tools or sharp debris are left lying around during home renovation and injures the client
  • A constructed roof caves in and parts of it falls on the people below
  • A falling ceiling panel at your office injures a customer who is in the office
  • Poorly lit stairs at your office leads to an elderly client experiencing a fall and getting seriously injured

General contractors insurance provides coverage in the form of legal and/or medical fees in ALL of the above scenarios. 

2. Third-Party Property Damage

Another common risk that all contracting businesses face is property damage. This can be towards nearby property or towards the existing property where the project is being done. These incidents can happen while the project is ongoing or even after project completion. 

A few examples include:

  • An accidental hammer swing smashes a high-value antique in the home 
  • Poorly installed pipes lead to flooding and water damage
  • Faulty electrical wiring causes a fire

General contractors insurance provides coverage in the form of legal and/or repair/replacement fees in ALL of the above scenarios. 

3. Reputational/Advertising Injuries

Finally, one of the most useful coverages of general contractor insurance is for reputational damage or advertising injuries. These can arise from slander, libel, copyright infringement, violation of privacy, and so on.

Though this may seem less grave than the first two coverage points of general contractors insurance, lawsuits like these count as one of the most common lawsuits that businesses face.

A contractor speaks to the foreman about their contractors insurance limitations

Alt text: A contractor speaks to the foreman about their contractors insurance limitations

General Contractors Insurance Limitations

1. Worker Injuries, Illnesses, or Deaths

In Ontario alone, the average number of deaths in construction sites is around 20 per year. Though this may look like a small number, one death is already one too many for any business.

General contractors insurance, by itself, does not cover:

  • Medical costs for workers who become ill or injured on the job
  • Lost wages when a worker needs time to recover
  • Workers’ disability or death benefits

In order to have coverage for the above, you would need the additional coverage of Commercial Auto Insurance.

2. Commercial Vehicle Accidents, Theft, and Vandalism

Owning and operating commercial vehicles exposes you to specific risks that are not covered by general contractors insurance alone. These risks include:

  • Medical, repair, replacement, or legal costs resulting from commercial vehicle accidents that lead to injury and property damage
  • Repair or replacement costs from cases of vehicle vandalism or theft

In order to have coverage for the above, you would need the additional coverage of Commercial Auto Insurance.

3. Damage to Your Own Property and the Resulting Business Interruption

Coverage for your own property in the face of unforeseen damage is one of the contractors insurance limitations. The following instances are not covered:

  • Property repair costs from unforeseen events such as extreme weather, fires, and other natural disasters
  • Repair and/or replacement costs from vandalism or theft towards the workplace or the equipment, tools, documents, and other property inside 
  • Lost income incurred from business interruption due to the above points

In order to have coverage for the above, you would need the additional coverage of Builder’s Risk Insurance.

4. Damage to the Building Being Constructed and the Tools Therein

Structures that are still under construction are exposed to various risks that are not covered by general contractors insurance, these include:

  • Costs and losses from damage to the structure due to external forces (e.g. high-speed winds, bad weather, fire) and the resulting costs
  • Repair and/or replacement costs from theft and vandalism towards the structure and the tools inside 

In order to have coverage for the above, you would need the additional coverage of Builder’s Risk Insurance

5. Damage to Uninstalled Fixtures or Appliances (Floaters)

If you are not constructing a building but are simply tasked with an installation, general contractors insurance still has limitations when it comes to protecting you from the related risks, such as:

  • The cost of replacement/repair to damaged materials/fixtures before installation 
  • The cost of replacing stolen materials/fixtures before installation

In order to have coverage for the above, you would need the additional coverage of Installation and Tool Floater Insurance.

6. Gradual or Sudden Pollution Caused By Your Business Operations

General contractors insurance does not provide coverage for risks related to pollution liability. These include:

  • The legal fees, cleanup costs, and/or emergency response costs of sudden/gradual pollution
  • Environmental claims resulting from the release and/or cultivation of mould or Legionella

In order to have coverage for the above, you would need the additional coverage of Pollution Liability Insurance.

7. Errors & Omissions

Project accidents causing damaged property and/or injury are covered by general contractors insurance – but what about cases of errors and omissions that do not have such results? 

 

The following are risks related to errors and omissions that are not covered by general contractors insurance:

  • Legal fees and costs stemming from claims of negligent acts as well as faulty design, workmanship, and materials used (with the additional qualifier of NO property damage or injury has occured)
  • The value of the work done in the event that it is damaged due to faulty workmanship

In order to have protection for the above, you would need the additional coverage of Errors and Omissions Insurance.

All Your Insurance Needs in One Customized Contractors Insurance Plan

KASE Insurance is a trusted and award-winning insurance brokerage based in Toronto. We have helped numerous contracting businesses, as well as businesses from other industries with their insurance needs. Whether you are an independent contractor, an owner of a small contracting business, or a business leader of a larger contracting firm, we are at your service!

Our experienced team of professional insurance brokers can put together an insurance plan that addresses the major risks of your business while also fitting your budget needs. With our dedicated and transparent service, you will be empowered to bring your business to a more secure and successful future.

Contact us today or get started with a quick quote!

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