General contractors have a pretty high-stakes job.
A general contractor oversees and is responsible for every single element and worker involved in a construction project. Be it new construction or a renovation, the general contractor is in charge from the clearing and excavation of the land to the final finishes of the building. He or she must also be responsible for complying with all state and local codes, ordinances, and zoning laws.
Managing all these factors isn’t easy and carries some serious risks. In order to avoid disaster, a general contractor needs several types of insurance coverage, depending on the project.
Let’s take a closer look at different types of exposures contractors may face on the job site and the insurance coverages recommended for these exposures.
Property Exposures. Exposures at the office site are typically limited to storage for equipment, vehicles, and materials. But if the contractor is directly involved with masonry or framing, the bricks or lumber might be stored onsite, which increases the exposure to theft, vandalism, fire, or weather.
Inland Marine Exposures. These types of exposure can include many variables, such as builders’ risk, contractors’ equipment, accounts receivable, valuable papers/records, goods in transit, and installation floater. While a subcontractor may bring their own equipment, often times the bigger equipment, such as a crane, must be rented. The contracts for these rentals determine who is responsible for damage to the equipment, such as water damage, drops or falls, or collisions with other equipment.
Builders’ Risk coverage is essential for most general contractors. General contractors must also coordinate their subcontractors’ coverages. Exposures will vary depending on the project so each project’s possible exposures should be evaluated before construction begins.
Surety Bond Exposures. Many projects are required to have financial guarantees for the completion and payment of supplies and labor. If the contractor can’t qualify for these bonds due to prior incidents, it may be an indicator of moral risk.
Premises Liability Exposures. At the job site, the general contractor is responsible for any and all injuries or accidents that occur during construction, even incidents that may arise from actions by subcontractors. Heavy machinery, welding, tools, power cords, dangerous heights, falling materials, ladders, scaffolding, and blasting materials all present significant hazards to workers, the site, and/or the general vicinity or neighborhood. Vandalism is also a significant risk, as failure to protect rented equipment, building materials, or property can lead to serious loss. All premises liabilities can increase in the general contractor’s absence.
Contractual Liability Exposures. Contractual language might be the most important exposure a general contractor faces, outside of physical hazards. Failure to verify a subcontractor’s insurance can lead to catastrophic financial losses or expensive litigation. The general contractor and the project owner should both be included as insureds on all subcontractor policies. Specific terms can dictate who pays for a loss when a loss occurs.
Completed Operations Exposures. This one is a biggie. A completed project must meet many different quality standards and compliances. The designer, the engineer, the quality of materials, and the details of construction are all critical elements that must be satisfied. Failure to satisfy all these elements could spell out serious loss for the project and, ultimately, the general contractor.
Auto Exposures. If the general contractor is directly involved with construction activities, then supplies, equipment, and workers will likely be transported to and from the job site. The hazards vary depending on the type of vehicle and the areas of operation. Some vehicles are specifically equipped with lifts or hoists. Larger items may need to be tied down to the vehicle and handled in a certain way. The general contractor needs to consider the age, experience, training, and driving records of workers who are transporting materials. The age and condition of the vehicles themselves should also be considered.
Workers’ Compensation Exposures. Every job is different and the specific exposures for each job must be considered fully. Remember, the general contractor is responsible for controlling the jobsite and may be held responsible for any accidents or injuries onsite, including subcontractors. Workers’ compensation combined with strict safety protocols is key to protecting your project and your workers.
Minimum recommended coverage:
Personal Property, Business, Builders’ Risk, Employee Dishonesty, Surety Bonds, Employee Benefits Liability, Umbrella Liability, Automobile Liability and Physical Damage, Hired and Nonownership Auto Liability, General Liability, Workers’ Compensation
Other coverages to consider:
Accounts Receivable, Building, Computers, Business Income with Extra Expense, Contractors’ Equipment, Installation Floater, Goods in Transit, Tool Floater, Employment Related Practices Liability, Valuable Papers and Records, Stop Gap Liability, Environmental Impairment, Liability
To learn more about how to better protect your construction project, call ERM Insurance Brokers in Irvine, CA today! (949) 222 – 0444.