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What You Should Ask Your Contractor About Insurance Coverage

Your contractor is charging you 2-5% of your construction project for insurance. On a 1-5MM project this adds up quickly. But what are you really buying? Here are three key questions you should ask the firm BEFORE you sign that AIA contract:

Send me your loss runs for the last 3 years.

If any client makes this request, the contractor will immediately know the client is a knowledgeable, serious counterparty. Accidents and claims happen and this shouldn’t automatically disqualify your contractor candidate if it has losses against the firm. However, if there is any hesitancy or reluctance on the part of the contractor to provide you this, you should strongly consider another firm.  Loss runs will show you what accidents, claims or insurance events the contractor has had against the firm. It is a good track record of safety and loss prevention. Ask for it.  You are entitled to see it. 

Send me your full General Liability policy and more specifically do you have an Action Over exclusion in your policy? What other exclusions do you have in your policy?

If the contractor isn’t sure or in fact has this exclusion, walk away immediately as you are putting yourself at great personal financial risk in the event of a job site accident. Action over exclusion can disable you, as an owner, from transferring loss to the negligent party aka your contractor. In summary, if an employee of the contractor is injured, per NY labor law 240 and 241, the employee can not sue his or her employer (your contractor) but he or she can sue YOU the building owner. New York is the only state in the nation that allows this and if your contractor’s insurance policy will not cover the claim, it will rest entirely on you.  Check on the policy in Section I Coverages, 2. Exclusion, e. Employer’s Liability:

“Bodily Injury” to:

  1. An “employee” of the insured arising out of an in the course of:

  2. employment by the insured; or

  3. Performance duties related to the conduct of the insured’s business; 

Any exclusion that reads like the above and you know immediately to consider another contractor.  

What is your per occurrence deductible and per claim deductible?

In simple terms, an occurrence in commercial general liability terms is an accident event or loss from something that happened once. However, it can trigger claims from multiple parties. Imagine that there is a pipe that bursts during your construction project (occurrence) and 4 downstairs neighbors each make one claim. If your contractor has a high deductible for either occurrences or more importantly, claims, it could trigger a liquidity event/bankruptcy in the event of an accident leaving you exposed.

New York is the most complex, expensive insurance market in the nation which is a major cost driver for clients.  Know what you are getting and what coverage you have before you sign that contract. 

Please call or email us to speak to our in house insurance expert if you have any questions about your project’s insurance.

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