Insurance coverage and a contractor’s obligations to their customers has been more closely scrutinized over the past several years. To understand all of it, let’s start with a review of basic insurance coverages.
First, we must understand that all insurance coverage is private industry, meaning insurance companies are in this game to remain profitable. They look to underwrite a risk, collect premium and pay out on claims as little as possible.
Even contractors with no insurance claims (standard review is five years of losses) are still charged a premium for “expected losses,” plus administration costs, and also some profit.
Workers’ compensation is somewhat government-regulated as it is required coverage for all workers immediately when payroll starts.
This coverage provides medical attention to employees involved in work-related accidents. It also allows the employee to receive a portion of their normal pay until they recover from the accident.
In New York State, the base rates are determined by the Workers’ Comp Board for each classification (i.e. electrical, concrete, plumbing, etc.); private insurance carriers file for slight deviations from those rates.
Insurance carriers also file for various credits and debits applied to premiums.
Premiums are based on estimated payrolls and policies are audited at year-end on actual payrolls.
General liability coverage provides coverage to a contractor for “bodily injury and/or property damage to third parties.”
General liability is required to obtain permits from NYC Department of Buildings. It is also required by most general contractors and property owners to do work for them.
You will need to list these entities as “additional insureds” on your coverage, which means your policy will defend the additional insureds for claims arising from your work and operations.
For example, a property owner is sued by a pedestrian who tripped over a 2×4 on the sidewalk. The 2×4 belonged to the carpenter, whose insurance policy would defend the building owner accordingly and move the claim to the carpenter.
This coverage is fairly easy to understand as most of us have personal auto insurance.
Coverage is provided here for work vehicles: cars, trucks and even mobile equipment (i.e. forklifts that have license plates on them if they operate in public roadways, even just to unload).
Liability coverage is required by New York state’s compulsory law, but physical damage to the vehicle itself is optional to the buyer.
There are other ancillary coverages — such as personal injury protection — on all coverages that should be reviewed by the purchaser to understand what they are.
Property coverage is considered most “measurable” in the insurance industry.
Property (versus liability) has a limit attributable to it — $500,000 for the building, $200,000 for the contents and $100,000 for business income If there were a total loss, these are the maximum limits that will apply (subject to terms, conditions, deductibles of the policy).
There are other property-related coverages available, such as contractor’s equipment and builders risk. (Builder’s risk covers a structure while it is being developed.)
Sometimes these coverages are overlooked, as they are not mandatory, but should be considered from a risk-management standpoint.
There are many other insurance coverages available in the industry, but these are the main four coverages in the contracting world. If there is an exposure to risk, there is an insurance product out there to cover that risk.
It should be taken into account, again, that insurance is private industry.
Your operations will be scrutinized by any insurance company willing to put their money (limits) on the line to accept your risk (premium), so your risk management and safety program is a very important part of your operations as a contractor.
CMC Network is here to help all of their members understand insurance and risk management processes.
We are available to help our members develop a rolling program to satisfy their contractual requirements and maintain safe operations for profit and longevity.