The Importance of a Solid Insurance Program

In industries with a high level of risk, which is certainly the case in the construction services field, the importance of a well-rounded, solid insurance program cannot be overstated.

When undertaking any type of major building envelope renovation or re-roofing project, owners are well-served to verify in writing that the contractor selected to do the work has satisfactory levels of insurance in place.

The primary coverages that any contractor should have in place are:

  • Workers’ Compensation Insurance: provides wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue their employer for the tort of negligence.
  • General Liability Insurance: covers the cost of repairing property damage or bodily injury caused by a contractor during the course of its work on an owner’s property. General Liability insurance also covers the cost of lawsuits brought by parties in the contract, or third parties, for the property damage or bodily injury caused by the contractor.
  • Automobile Liability Insurance: covers property damage, bodily injury and medical expenses if the contractor is at fault for an accident where property damage and/or bodily injury to another party are caused. Also, the auto coverage pays for the damage caused by the at-fault party.
  • Excess Coverage Insurance: is a type of policy that provides limits that exceed the underlying liability policy. For example, if the actual cost of damage or bodily injury covered under a General Liability policy exceeds the dollar limits of that policy, the Excess policy will cover the additional costs which exceed the contractor’s General Liability limit, assuming the policy limits of the Excess policy are sufficient to cover the gap.

Before undertaking any renovation work, owners should confirm that the contractor selected to do the work has sufficient levels of each of the policies listed above in place. In addition, owners should require at least 30 days written notice before any policy of the contractor is canceled by the carrier prior to project completion.

Owners must remember: the construction insurance program is not only intended to protect the contractor but to also protect the owner’s property, personnel and affected third parties.

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