Do I need General Liability Insurance ?
Well, lets start off with "what is Liability Insurance." Comprehensive General Liability (CGL) insurance is a two-party contract with payments made to a third party. Every business has certain legal liability exposures that must be covered. A General Liability policy protects commercial insured's from those liability exposures.

Product Liability is usually covered in the General Liability policy. It covers bodily injury or property damage incurred as a consequence of some defect in the product sold or manufactured. Product Recall coverage may be added with a sub-limit for an additional premium.

Coverage is available to indemnify the insured for work performed off site. This would include installation work, construction, servicing or repair work. Completed Operations coverage would pay for bodily injury/property damage cause by negligent or faulty work by an insured. Deductibles of $1,000 and upward are commonly found on a Completed Operations policy. Most General Liability insurance policies exclude Insured's Own Work, or Property in the Care, Custody, or Control of the Insured.

Owners & Contractors Protective (OCP) liability insurance is designed to cover a party that has hired an independent contractor for claims brought against the hiring party that arise from the independent contractor's work on its behalf. Coverage for independent contractor liability is automatically provided under the Commercial General Liability (CGL) insurance policy.

As a contractor, you can usually bid work without liability insurance but most often you cannot perform the work without the liability insurance. The insurance costs vary based upon the amount of liability you go with, ie: one million, two million, three million or more (lately it seems that the minimum amount of insurance owners and/or general contractors are requiring is two million). It also varies based upon the type of work you will be doing, the gross receipts of your company and total payroll expenses.

Typically, you will pay a down payment on your insurance and then make 9 or 10 consecutive monthly payments. Your best bet here is to check out several different insurance companies through various agents, and talk to other contractors to find out which companies they are using and how that company is performing.

Also, these insurance companies have ratings just like the bond companies do: A++, A+, A, A-, B+, etc. Be sure that you find out what each company's rating is while you are obtaining quotes from various agents.

Admitted vs. Non-Admitted
Most contractors believe that it is preferable to use an insurance company which is 'admitted' in California (as opposed to non-admitted) but the truth is, it is not always necessarily better. Insurance companies which are California 'admitted' carriers are required to place a certain amount of funds in to a special account, governed by the California Insurance Guaranty Association (CIGA), to protect policy purchasers (you) if the carrier were to go out of business, and/or file bankruptcy, and/or just plain flake out.

Insurance companies which are not California 'admitted' carriers do not place funds in to this special account, therefore you are not protected by CIGA if the insurance company has problems however, sometimes new contractors with no business experience, and/or particular types of subcontractors, may find it difficult, if not impossible, to find an admitted carrier to write their general liability.

Surplus lines (or non-admitted) carriers fill this "need" for many contractors. It is the agent/broker's responsibility to offer coverage from well respected, financially stable insurance companies, whether they be admitted or non-admitted. It could be better to be insured by an A++, non-admitted company, than a B+, admitted company. If the B+, admitted company goes 'belly-up', CIGA would only pay up to $500,000 of a liability claim - with the subcontractor/ contractor left, uninsured, for any additional liability.

Certificates
For most every project you work on, you will be required to provide an original 'certificate of insurance' from your insurance agent. Some of these insurance agents excel in how quickly they supply the certificate to your customer, and other agents do not.

Many times you cannot step foot onto a project until the general contractor has that certificate of insurance from your agent. If your agent makes a mistake and does not supply the certificate soon enough, it could feasibly throw you into breach of contract with your general contractor because you are unable to man the job when you are supposed to because you have not provided the certificate of insurance. It is not unreasonable to expect that a certificate of insurance be processed on the same business day that you have made the request, provided you're not trying to "slip it in under the wire".

Some agents will automatically mail you a copy of the 'cert' (certificate of insurance) at the same time that they mail an original to your customer, but if you have a quick job you may need a copy quicker than the postal service can deliver one to you. A suggestion here is: when you request your agent to mail a 'cert' to your customer, also request that the agent fax a copy to you. The reason for this is two-fold: a) peace of mind that your request has been processed and b) in times of urgency, general contractors will usually accept a fax copy with your promise that an original is in the mail to him.

Chances are that the 'cert' is being mailed if you have received a fax copy (without the fax copy you really don't have any assurance whether or not the certificate is being processed in a reasonable amount of time, until and unless your general contractor and/or owner calls you and tells you that they have not received the certificate).

If you are in need of any information not listed here, please visit our Frequently Asked Questions page, or Contact Us and we will be happy to assist you with any information you need.

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