Common Exclusions
Completed Operations – Once you have left a job site, completed a substantial portion of your work, or the completed project is put to its intended use, many policies will cease coverage for you the contractor. You must verify that you are obtaining coverage that includes completed operations. Many reputable insurance carriers make this type of coverage an option that the agents must specifically request in order for you to have coverage. Also note that most claims in construction are the result of something that happens long after you left the job site.
Residential Exclusion – Many good carriers that like insuring contractors HATE insuring residential contractors. This may be for a variety of reasons, but the important thing to note here is that they do. You need to look at your policy for any extra pages that say anything like “Residential Exclusion” or “Excluded Operations” to determine if you are OK. If you only perform 100% commercial work, then you may be alright with this exclusion in place. Also note that most insurance companies consider apartments and condominiums to be residential
Excluded Operations – May policies will exclude specific operations like these:
- Roofing
- Demolition
- Work over 3 stories
- Residential
- Condominium, townhomes, apartments
- Blasting or other work with explosives
If your work involves any of these types of operations, be sure to carefully go over this information with your agent.
Your Work – For the longer explanation, start here. Almost ALL insurance policies exclude “your work”. The common reply is “What am I buying this for then?!” Your General Liability policy is a “liability” policy. In English this means it is meant to pay other people for something you may be liable for. This means if you build a wall and the wall falls down, the policy will pay for any injury or damages caused by the walls collapse. It does not pay you to rebuild the wall. If the collapse of the wall was caused by another party such as another subcontractors truck hitting the wall, then you should be able to collect money from their insurance to pay for the repairs. Some insurance carriers will include a limited amount of “rework” coverage, but this is usually rare and in very small amounts. Here is even more information on this exclusion. Click on this link here for a detailed analysis on this exclusion by the Insurance Risk Management Institute (IRMI).
Subcontracted Work Exclusion – Although you expect your subcontractors to have their own coverage in place, your policy will usually step in to cover a claim if your subcontractor exhausts his policy limits, or if his carrier denies the claim…that is of course unless you policy excludes subcontracted work. Auto Owners excludes the work in their actually General Liability policy in a way you will never find it. Most other carries exclude the coverage via an endorsement that is usually numbered CG 22 94. Is this even important? If you are a trade contractor who rarely hires subs or self performs 100% of your work, then probably not. If you are a general contractor, then YES! This is CRITICAL!!!
Site Specific Exclusions – Sometimes policies will limit your liability to only the address of your business, its building, and anything within 100’. This is not common but it can be found on polices written by inexperienced agents. Many times the premium will be very low, making it appear to be a great deal. Beware – as usually a cute rate quote means something is missing.
Pollution – Insurance companies define pollution as “an irritant or contaminant, whether in solid, liquid, or gaseous form, including—when they can be regarded as an irritant or contaminant—smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” This means almost anything on a job site is a pollutant. We have seen sewage, dust, and even orange juice be declared as a pollutant, resulting in a denied claim. The best way to protect yourself as a contractor is to purchase a special pollution policy. As long as you are not hauling toxic waste regularly, they can be purchased for as little as $1400. Click here for a more detailed analysis from IRMI.
Intentional and Illegal Acts – Believe it or not, if you shoot yourself with a nail gun intentionally, you cannot collect workers comp. If you commit an illegal act knowingly, then you will probably find your insurance carrier will deny any claims related to it as well.
Employee Theft – When a criminal breaks in and steals from you, your property policy should (depending on your coverage) pay some or all of the claim. If you employee steals from you, this is usually excluded. This can be insured via a specific crime policy. These are usually inexpensive to obtain.
Navigable Waterways – If you work near any water, you need to have special work comp coverage called USL&H. If you work on boats – you need something called Jones Act coverage. This will require speaking with an agent and discussing at great length the size and scope of your project.