Within the next 10 years, 40% of businesses will likely be faced with a general liability claim or a third-party lawsuit. These potential uninsured claims and resulting lawsuit losses are easily a business owner’s worst nightmare.
Third-party lawsuits occur due to the following:
- Accidental property damage wherein the business is held legally responsible
- Accidental bodily injury to a third-person (e.g. customers, member of the general public, suppliers) wherein the business is held legally responsible
- Injury occurring within business premises (i.e. the office) wherein the business is found responsible for the injury
- Reputational injury to a third-party individual relating to slander, libel, or violation of privacy
- Advertising injury to another business relating to product disparagement, copyright infringement, and/or intellectual property infringement
General contractors liability insurance can provide the coverage you need when faced with the above scenarios. Legal costs, medical costs, and/or repair costs are covered up to your chosen coverage limit.
In this article, we will further explore the details of how general contractors liability insurance can protect your business from potential lawsuit losses. This is a valuable resource for any business owner who wants to be prepared to handle such unforeseen events, which can happen at any time.
Let’s get started!
Who Needs General Contractors Liability Insurance?
All businesses are faced with risks relating to general liability. For example, nearly all businesses exert marketing efforts and publish public messages regularly. One careless statement or insensitive marketing material could turn into a lawsuit resulting in a reputational or advertising injury. These are, in fact, identified as one of the most common lawsuits that Canadian businesses face.
However, bodily injuries are just as probable, not just for contracting businesses, but for various industries as well. Restaurants could be sued for food poisoning, manufacturers for faulty products that cause harm, and even boutiques can get sued if a customer suffers an injury due to poorly lit stairs.
Contracting businesses and tradespeople are exposed to even more risks regarding physical injury, as well as property damage, due to the inherent hazards of the industry. After all, many contractors have the following elements in their day-to-day tasks:
- Working with high-powered tools
- Handling heavy/hazardous materials
- Making changes that can alter the structural integrity of an existing property
- Working within close proximity to the general public and other properties
- Working on or amidst exposed electrical elements
- Working from heights
This is why independent contractors, small contracting companies, and even larger contracting firms need to have general contractors liability insurance in place. Each day presents a number of risks and having the right insurance policy will not only give you peace of mind, but can also potentially save your business from the grinding halt caused by lawsuit losses.
Does General Contractors Liability Insurance Cover All Third-Party Lawsuits?
Not all lawsuits from a third-party are covered by general contractors liability insurance, however, this type of insurance gives a broad coverage, making it the best foundational type of insurance for contracting businesses.
If you want to know if a lawsuit is covered by general contractor’s liability insurance, consider this matrix below. This insurance type has three main coverage points with a set of qualifiers. We’ve also added notes regarding related incidents that are actually NOT covered by the typical contractor’s general liability insurance alone, but can be covered through additional coverage such as worker’s compensation insurance, commercial auto insurance, builder’s risk insurance, and so on.
|Covered by Contractor’s General Liability Insurance||Would need additional coverage if...|
|1. Physical Injury||
|2. Property Damage||
|3. Advertising Injury/Reputational Injury||
At any point, through any channel
Here are some situational examples as to how general contractors liability insurance can protect you from lawsuit losses:
- Mishandling of a power tool shatters a window during renovation work
- While working on a home’s basement, an existing crack is aggravated causing structural risks to the home
- During home renovation, a part of the scaffolding falls and injures a nearby third-party individual
- An excavation site wasn’t properly fenced around and a third-party individual falls in and gets injured
- A roof you constructed caves in or parts of it falls off and causes injury to third-party individuals who are beneath it Poorly installed pipes leak and cause flooding and/or water damage to the property
- Through your publications, your business gets sued for violating privacy
- Another business sues you for copying their advertising idea
- Another business sues you for disparaging their image through your marketing messages
The Fundamental Steps to Avoiding Lawsuit Losses With General Contractors Liability Insurance
The very first thing you need to do when a lawsuit is presented against your business is to contact an experienced business attorney to review the case carefully. You would also need to preserve all data, records, or information you have stored related to the case.
At this stage, it would not be advisable to contact the plaintiff; this rule extends to employees as well. All communications need to go through the attorney alone.
The next step is to inform your insurance provider about the lawsuit as soon as possible. If the lawsuit falls under your contractor’s general liability insurance (or any additional coverages), then insurance will cover the following:
- Attorney fees
- Witness fees
- Judgements or settlements (which can include medical costs and/or repair costs)
Then, you would need to respond to the complaint with the help of your attorney and move forward from there.
As you can see, general contractors liability insurance can save you a large amount of money – potentially hundreds of thousands to even millions of dollars in lawsuit losses. Furthermore, because such monetary matters are already taken care of, you can focus fully on settling the case while also keeping your business alive and thriving even during such a challenging time.
Personalized Contractor’s General Liability Insurance for Your Business
As an award-winning commercial insurance brokerage in Toronto, KASE Insurance makes it a priority to create personalized insurance plans for the businesses we serve. This process involves getting to know the unique needs of the business first and then give recommendations from there.
We can easily set up a personalized general contractors liability insurance policy that will fit your needs as well as your long-term budget. We can also recommend additional coverages based on the top risks faced by your contracting business.
Our team of dedicated, transparent, and experienced insurance brokers can help propel your business to a more secure and successful future free from any potential lawsuit losses.