When a newly purchased hot tar kettle, valued at about $4,000, was stolen off one of his jobsites during the night, Don Strobel filed a claim with his general liability insurance carrier to cover the loss. He had assumed that while his company's property was on the jobsite it would be covered under his policy. Not so, said his general liability carrier.
“When I put in the claim, I was told that if you have tools on the jobsite, [to cover them] you must have an inland marine policy,” says Strobel, of Strobel Design Build, in St. Petersburg, Fla.
Because responsibility for understanding the policy ultimately falls on the remodeler, Strobel, filing his first commercial insurance claim after six years in business, became a victim of his own inexperience. “No one ever told me, and I didn't think to ask,” he says in hindsight. “If you don't know the right questions, you won't get the answers. The time to find out is not when something happens.”
Unfortunately, Strobel's case is not uncommon in the industry. Many remodelers do not entirely understand what is covered — or, perhaps more importantly, what isn't covered — under their general liability policy.
“Most remodelers don't speak the same language as insurance adjusters, and that's a real problem,” says Tom Messier, vice president of Construction Industry Services at Mason & Mason Insurance Agency, in Whitman, Mass.
For the majority of remodelers, general liability insurance is considered a necessary evil. It's complicated, it's stressful, and it's often expensive. Navigating the laundry list of amendments to a policy's coverage (called exclusions) is no easy task for someone unfamiliar with insurance jargon. For those in search of clarity, it makes sense to begin with the basics.
DEFINING COVERAGE General liability insurance essentially provides two-pronged coverage to the insured party. “It is designed to pay for bodily injury and property damage that the [policyholder] is responsible for,” says Scott Simmonds, an independent insurance consultant in Saco, Maine.
Bodily injury coverage applies only to third-party injuries — those that occur to someone other than the business owner or an employee. (Jobsite injuries to employees would be covered by a workers' compensation policy.) Similarly, coverage for property damage applies to property other than the work the contractor has performed. In other words, if a contractor is building an addition to a home when an electrical malfunction burns down both the house and the addition, the house would be covered under the general liability policy, while the addition would not.
The technical term for the first of these two broad types of liability coverage is premises exposures, a type of exposure common to nearly all businesses. It includes coverage for any injuries that occur on property owned by or under construction by the policyholder. An example, Simmonds says, is a neighbor walking on a jobsite who happens to slip and hurt himself. The injury is covered under premises liability.
The second type of coverage is called products liability/completed operations. This part of the policy covers any injuries or damages that are caused by goods or services sold by the contractor.