General Liability for Contractors: What it Is and What it Isn’t
As a contractor, you are no stranger to danger. Not only do you work with hazardous equipment and machinery every day, but you also conduct your business at third-party locations alongside clients, vendors, subcontractors, etc. Risk is inherent to any business, especially construction and contracting. Given the costly nature of accidents — the way in which one small mistake can cripple an uninsured business — general liability insurance is crucial for contractors and is often the first kind of coverage purchased. Further, certain Arizona municipalities, such as Phoenix, and larger clients go so far as to require proof of insurance before you can even begin work.
Alternatively referred to as business liability insurance, general liability protects you and your business from a variety of claims that may arise from day-to-day business operations, including third-party property damage, third-party injury, and personal/advertising injury.
- Third-Party Property Damage: Defined as unintentional destruction or damage to someone else’s property, this may look like an accidentally broken window, damaged furniture from a remodel, or a leftover oily rag that catches fire in someone’s garage. With a general liability policy, the legal, medical, repair, and replacement costs associated with these incidents would be covered.
- Third-Party Injury: This can occur on job sites or, if applicable, in your office or storefront. If a customer trips on a piece of equipment while you are renovating their kitchen or a vendor falls on the way into your office to sign a contract, your general liability policy would kick in and pay for the associated expenses.
- Personal/Advertising Injury: Consider this a more abstract third-party injury. If you inadvertently copy another company’s slogan or use a copyrighted song in promotional material, the original owners of the slogan and sign may choose to sue you. General liability insurance would protect you in these instances and, more generally, in the case of slander, libel, defamation, copyright violations, and other accidental advertising injuries.
In terms of when incidents are covered, general liability can be either an occurrence or claims-made policy. The former means that so long as an incident happened while a policy was active, your insurance will cover it (even if your policy is no longer active), and is more expensive than the latter. Claims-made policies, on the other hand, only provide coverage for claims filed during the policy period.
What Isn’t Covered?
Most notably, general liability does not cover injuries and illnesses sustained by employees. Though employees are not considered to be a third-party, vendors and subcontractors typically are. Other incidents that do not fall under the scope of general liability insurance protection include damage to your property, theft, and wrongful acts of professional error. These claims all require separate coverages, such as workers’ compensation insurance, commercial property insurance, and professional liability insurance.
The Bottom Line
General liability, though essential, is not a panacea and insurance is not one size fits all. To ensure your company is adequately protected, you often need to obtain a specialized blend of coverages. While finding what meets your business’s needs can be tricky, the insurance experts at Go Bonds are here to help. Help us help you find some peace of mind.