Commercial General-Liability Insurance
This is expressly designed to serve contractors by providing insurance that will pay for bodily injuries and property damage suffered by third parties if the contractor is legally liable, but the policy will also serve by defending the interests of the contractor in court. Sometimes the litigation involves amount of damage; but frequently, the contractor being sued is not legally liable for the injuries or damage.
It is fundamental, therefore, that a policy be obtained at substantial limits for both bodily injuries and property damage, that the policy cover all existing exposures and also provide for protection against exposures that may not exist or be contemplated on the inception date of the policy. The scope of operations conducted by most contractors is such that it is frequently difficult to visualize all the hazards that may exist or come about simply by being in the construction business.
The commercial general-liability policy that covers all liability of the insured, except that resulting from the use of automobiles, is a standard form available in all states at rates regulated by law. This policy protects the contractor under one insuring clause and with one limit against claims. Blanket coverage is provided at a premium based on actual exposures disclosed by an audit at the end of the policy term. As required by this policy, every contractor must maintain accurate records of payrolls, value of sublet work, dollar amount of sales, and other factors that will be important at the time an audit is made.
Under the bodily injury liability clause of this policy the insurance company agrees to pay on behalf of the insured all sums that the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person and caused by an occurrence. This is a very broad insuring clause. It obviously includes the entire business operations of the insured.
Property-damage liability is also covered. Additionally, the policy provides Independent Contractors Contingent Public Liability and Property Damage protection, which insures the general contractor against subcontractors negligence.
There are certain exclusions in the policy that should be noted. The policy does not include:
1. Ownership, maintenance, or use (including loading or unloading) of water craft away from premises owned, rented, or controlled by the insured; automobiles while away from the premises or the ways immediately adjoining; and aircraft under any condition. However, this exclusion does not apply to operations performed by independent contractors or to liability assumed by any contract covered by the policy.
2. Bodily injury sustained by employees while engaged in the employment of the insured.
3. Liability for damage to property occupied, owned, or rented to the insured or in the insureds care, custody, or control.
Contractors should be familiar with the provision of the commercial generalliability policy pertaining to contractual liability. The policy automatically provides coverage for the following written contracts: lease of premises; easement agreement, except in connection with construction or demolition operations on or adjacent to a railroad; undertaking to indemnify a municipality; side-track agreement; or elevator maintenance agreement. A premium is charged for such agreements as may be disclosed by audit.
There is no protection for the liability assumed in some very common types of agreements that include service, delivery, and work contracts. Many of these contracts are signed without full realization of the liability assumed. Each such agreement should be submitted to the insurance company at the time the policy is written in order that a premium charge may be computed and the agreement covered under the policy.
The most important contractual liability that may be assumed by the contractor is the so-called hold-harmless clause. A common type of hold-harmless clause as written by a general contractor to a subcontractor is illustrated in the subcontract rider in Fig. 17.7, Paragraph 32a. A similar clause written by the owner for inclusion in the general contract would be slightly modified and would substitute in appropriate places the word Contractor for subcontractor and the word Owner for Contractor.
Hold-harmless clauses can be automatically included in a general contractors commercial general-liability policy. However, the general contractor should include the previously mentioned subcontractor hold-harmless clause in each subcontract.
Subcontractors will probably be required by their insurance companies to pay an additional premium for this coverage.
The commercial general-liability policy includes complete and automatic products- liability insurance, including completed-operations protection. The one exception to this complete coverage is that the policy does not include liability for damage to the work or to the goods themselves, such as the obligation of the contractor to repair or replace if there are defects. While the policy provides coverage, it is in fact an optional protection, which may be deleted. However, every contractor should take advantage of this coverage.
Most building contractors use elevators or hoists during construction. The policy automatically covers elevators, hoists, and other such hazards. Escalators may be covered for an additional premium.
The breadth of public-liability protection available, the numerous hazards to which a contractor may be exposed, both known and unknown, and the necessity for having complete coverage at all times indicate the need for the advice of trained insurance representatives.
