General liability insurance for contractors

A commercial general liability policy answers one question: if your operations injure somebody or damage property that is not yours, who pays? It pays third parties, and it pays the lawyers who defend you — the defence cost is often the larger half in practice.

It is not property insurance for your own tools, it is not cover for the work itself, and it is emphatically not your license bond. A bond pays a claimant and then takes the money back from you; insurance pays and does not.

Limits come in pairs and the pair matters more than either number. Per occurrence is the most the policy pays for one event; the aggregate is the most it pays for the whole policy term. A busy year can exhaust an aggregate long before a single claim reaches the occurrence limit.

The completed-operations aggregate is the one contractors under-read. Most construction claims arrive after the job is signed off, and they are paid from that line — not from the general aggregate.

A CGL is a broad grant of cover with a long list of things carved back out. Four carve-outs account for most declined construction claims.

Trade-specific exclusions sit on top: roofing, excavation and anything involving heat or water frequently attract their own carve-outs or higher deductibles. Ask the broker which exclusions were added for your class, not just what the limits are.

A design or advice error is the gap a CGL leaves open; that is the subject of general vs professional liability.

A general contractor’s subcontract will normally require three things beyond the limits themselves, and every one of them is an endorsement that must actually be on the policy — not a box someone ticked on a certificate.

• Additional insured. The GC and the owner get the benefit of your policy for claims arising out of your work.
• Waiver of subrogation. Your insurer gives up its right to chase the GC after paying.
• Primary and non-contributory. Your policy pays first, and does not share with the GC’s.

Our certificate-of-insurance guide shows where each of these appears on an ACORD 25, and how to tell a real endorsement from a certificate that merely mentions one.

How the waiver differs from additional insured status after a loss is set out in waiver of subrogation vs additional insured. If you are the GC doing the asking, subcontractor insurance requirements turns these into a clause.

Premium follows payroll, receipts and class of work, in that order. Describe the work accurately: a class code that understates what you do saves money now and gives the carrier a reason to argue later. Our GL calculator shows how those three inputs move the band.

Note what GL is not: it does not replace your $25,000 license bond, and a board that asks for both is not being redundant — they answer different questions. See bond versus liability.

Whether to buy occurrence or claims-made is its own decision — see occurrence vs claims-made. Damage to the structure while it is being built is the job of builders risk, not GL: the builders risk guide explains it and the builders risk calculator prices it.