All commercial general liability (CGL) policies are not created equal! 

As a contractor, it’s vital to know your policy inside and out and read all forms relating to the use of subcontractors or independent contractors. You can save yourself a huge headache (and potentially a lot of money!!) by knowing where you might need to fill in gaps in coverage. 

Keep reading for some exclusions to watch out for.

1. One highly detrimental exclusion included by many CGL carriers is called the “Third-Party Action Over Exclusion.”

This exclusion is a clause in your policy that can limit coverage in cases where a third party (like a subcontractor or employee) files a lawsuit against you, seeking damages for an injury or damage they suffered while working on your project. 

Essentially, it can leave you without the protection you thought you had. And, even if workers’ compensation covers the subcontractor or employee, this doesn’t insulate you from a lawsuit! 

2. Another notable exclusion we encountered recently was the “Earth Movement” exclusion.

This exclusion limits coverage for incidents including “Bodily injury, property damage, personal and advertising injury, liability, loss, injury, damage, cost or expense,” that are caused by a broad definition of “earth movement”. 

Now what is “earth movement,” you may ask? Well…it’s many things including: “earthquake, landslide, mudflow, subsidence, sinkhole, erosion, or the sinking, settling, slipping, rising, shifting, tilting, caving in, falling away, expanding, expansion of or contracting of earth or soil or any other movement of land or earth.”

You may feel comfortable with this exclusion, but it’s up to you to make an informed decision based on what you know about activities in your industry.

3. One widely used general liability program has an exclusion for coverage based on the size of the structure.

One widely used general liability program that we often encounter, includes an exclusion for coverage based on the size of the structure. For residential projects, the policy excludes work on homes larger than 5,000 square feet. For commercial projects, it’s 20,000 square feet. 

Fortunately, the carrier does offer the option to “buy back” the exclusion and provide sub-limits on each form. However, each exclusion still turns into a $50,000 sub-limit, which creates a significant gap in coverage for general contractors.

Refrain from letting the fine print catch you off guard!

As a contractor, you should read your general liability policy and understand its exclusions. Being informed can save your business from unexpected financial burdens. 

We also suggest that you work with an experienced insurance advisor who can help you secure a policy tailored to your specific needs.

Click HERE to start a conversation with one of our experienced associates today.

Reference list: OpenAI. (2024, January). [Common gaps in contractor insurance coverage]. Retrieved from [ChatGPT.com].