Chapter 2: Understanding Construction & Contracting Insurance Policies
Part 2.1: Business Insurance Basics: General Liability Insurance
General Liability Insurance (GL) is perhaps the most important component of your business protection plan. This policy offers a spectrum of liability coverage against third-party claims — the kinds that are hard to prevent and costly to face. A "third-party claim" is a lawsuit or a demand for compensation brought against your business by anyone who doesn't work for you.
GL Insurance can protect your business from claims over:
- Bodily injuries that happen on your premises or at your jobsite.
- Bodily injuries caused by your completed work.
- Damage to someone else's property while carrying out your work.
- Advertising and non-physical damages.
If your construction or contracting company is sued for a General Liability Insurance claim, your policy can cover attorney's fees, settlements or court-ordered compensation, docket fees, and other legal costs (up to your policy limits). Let's take a closer look at common types of General Liability coverage.
If someone is injured on your property or worksite, they can sue your business for "premises liability." Let's say you are a HVAC contractor that offers retail sales out of your commercial space. There's the possibility that customers might slip, fall, or trip on your property. These kinds of accidents happen all the time. According to the National Safety Council's estimates [PDF], slips, trips, and falls are the reason for approximately 8.9 million visits to the emergency room each year.
Though your office may not allow public access, you have other premises liability exposures to contend with. Depending on your jobsite, your tools, power cords, and scrap can pose trip hazards to clients or the general public. For example, if you accidentally drop materials or tools from a height, you could accidentally injure a passerby.
For all of these potential injuries, your business could be sued for medical damages. When that happens, you'll be happy to have your GL coverage at the ready.
Completed Operations Liability
If the services you've completed or the products you've produced cause someone bodily harm or property damage, your business could be sued for "completed operations liability."
For example, say you've installed a heating unit that malfunctions, and the homeowner is (non-fatally) poisoned by the buildup of carbon monoxide. The homeowner brings in a specialist that determines the malfunction is due to faulty installation. If that homeowner decides to pursue your HVAC contracting company in court, your GL Insurance policy can cover the claim.
If you're a general contractor, completed operations exposures are high. The quality of materials and the construction details can make the difference between a successful project and a serious lawsuit.
And because it's your duty to maintain quality control and ensure full compliance with all construction, material, and design specifications, that loss can fall squarely on your shoulders. That's why you need a strong General Liability Insurance policy to protect you.
Though construction denotes repair and improvement, sometimes things are destroyed (intentionally and unintentionally) in the process. If you accidentally damage someone's property while completing your work, they could sue for compensation.
For example, let's say you're a residential roofing contractor. During operations, roofing materials or tools and equipment drop on someone's car windshield. Or, let's say wind damaged the interior of a home during the installation process. For both these instances, you'll want your GL Insurance policy to protect you if the situation escalates into a lawsuit.
If you use social media to promote your painting business, you could face privacy invasion or copyright infringement suits if you post someone else's words or photos, respectively, on your pages. These types of non-physical injuries are called "advertising injuries," and they are enough to prompt a lawsuit.
General Liability Insurance also covers claims of defamation, such as slander and libel. Like privacy invasion and infringement, these types of claims often stem from social media. If you or an employee posts something negative about a competitor, they can claim your words caused them a loss and sue your business.
As you can see, General Liability Insurance offers versatile protection that could come in handy throughout the life of your business. You can learn by checking out our blog posts on advertising injuries.
Next: Property Insurance
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