California Contractors Insurance Update 2006
We have put together the following to give you some insight into Commercial General Liability Insurance for Contractors:
The Hard Market of the past few year appears to be over. We are know in a softer market however insurance for residential new construction is always more difficult in California.
2. Strategies for purchasing general liability insurance.
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Work with a broker that specializes in construction insurance: It’s just common sense, if your broker has not been involved in this particular market segment he is not able to advise you in how best to negotiate coverage that is appropriate for your operations for the best possible price.
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Admitted Vs. Non Admitted Carriers: There is nothing wrong with insuring with a non admitted carrier as long as you are comfortable with the financial strength of the company. The insurance Companies A.M. best rating is the most helpful tool in gauging financial strength. Your broker should have this information readily available. Click this link to check your company’s rating. A.M. best
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Exclusions: There are coverage exclusions written into all general liability policies that are particularly critical for the contractor. There are many exclusions, at minimum your should be disclosed to the following:
1. How does your policy treat coverage for sub contractors? Be very cautious here, many policies will exclude coverage if you are not named as an additional insured.
2. Is coverage for events occurring prior to your policies inception covered?
3. How does your policy treat multi unit residential work? (condo, tract homes, town homes, apartment houses)
4. Does your policy have a sunset clause?
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Premium basis: Usually your payroll will become the basis for liability premium (some carriers do use gross receipts). In addition, but to a much smaller degree is your sub contracted cost. )
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Audits: Most General Liability policies are audited at the end of the year. Keep in mind with most carriers audits are closed even, or they charge additional premium. (no premium is returned if you overestimate your premium basis) In other words, its important to be cautious when estimating payroll. You don't wont to overpay for your insurance!
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Operations: Be very specific on all operations that involve New residential Construction, especially when it involves Condo, Town Home & Tract Home work. Remodeling work for a single homeowner is usually ok, however, New (original) construction, or working for the Homeowners association will usually be excluded from coverage.
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Scope Of Operations: This is very important, we see this all the time! Many contractors exaggerate the scope of their operations to try to keep their options open. Let's face it, your contractors and you don't always know what your next job will be, but stating on a application that you might do something that you don't typically do (Example. Don't put down that you do hillside work that requires engineering when you haven't done it in the past or actually have a job that you plan on doing.) may get you in trouble. If you built 1 spec home 15 years ago but 99% of your work now consists of Commercial TI work, it's no longer relevant to your scope of operations. Keep it simple!
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Prior Carrier Info: Be prepared to provide prior carrier information (including policy number and loss history for the last 5 years). The more precise the information you provide, the better the quote you will get.