1. 1 Paul Z Martin, CPCU Insuring Small Contractors

2.  Property Exposures including installation floater and leased equipment  General Liability including contractual liability  Business Auto, including classification  Workers Compensation issues

3. Equipment & Tools  Values at job sites  Values in/on vehicles  Employee tools?  Values at storage location/office/home

4. Covered Property means:  Your contractor’s equipment  Similar property of others in your care custody and control Property Not Covered  Equipment Loaned or leased to others  Employee Tools

5. “You agree that we are not liable or responsible for any damage to the equipment… You agree to keep insurance on the equipment insuring against all risks of property damage, casualty or loss in an amount at least equal to the replacement cost.”

6. The unendorsed Builders Risk provides no coverage for the subcontractor: Covered Property means:  Your building materials and supplies  Fixtures and machinery… Coverage for fixtures & machinery limited to legal liability for similar property belonging to others

7. Covered Property means: Property situated as specified in the Declarations for installation at any described premises Property Not Covered  Property Accepted by Purchaser  Property in which your interest has ceased

8. Separate Limits  At any job site  At any location other than a job site  In Transit Optional Coverages  Earthquake  Soft Costs  Water Damage – Deletes water exclusion

9. Where do you store your equipment? What is the value of your equipment? Do you ever have material or equipment at job sites? Do you ever purchase items to be installed on jobs? What is the value of those items? Do your employees provide their own tools?

10. Classification – Payroll  Include 1/3 of the cost to lease mobile equipment with an operator  Limit sole proprietor or executive officers  Exclude payroll of clerical office employees  Exclude amount of overtime IF records show overtime separately

11. Dangerous for Contractors  Contractors will take on almost any job if times are slow  Contractors may joint bid a project which could negatively affect coverage  Common in Surplus Lines where a lot of small contractors are written

12.  Method of Transferring Liabililty Three Types of liability assumptions:  Limited – Your Fault  Intermediate – Our Fault  Broad – My Fault  Construction contracts may include assumptions of liability that are not insurable

13.  Lease of Premises  Sidetrack Agreement  Easement  Municipal Agreement  Elevator Maintenance Agreement  Any business contract where the insured assumes the tort liability of another party

14. Beware of the CG 21 39 which eliminates the tort liability assumption as part of the definition Beware of the CG 24 26 which adds the following: …provided the “bodily injury” or “property damage” is caused in whole or in part by you or those acting on your behalf

15. Small Contractor Injured Party General Contractor Insured Contract Liability Suit

16. Dilution of Limits  Your insured has a $1 million limit  The General Contractor is added as an additional insured  A jury finds you equally responsible and awards $2 million Your insured only has $500,000 coverage because his limit is shared with the GC

17.  Many companies will readily attach  However, coverage only applies if there is a written contract Many small contractors will take on additional work for an existing customer without an additional contract

18.  Care Custody & Control  “Your Work”  Impaired Property  Electronic Data (Service Contractors) use CG 04 37

19.  Exclude payroll and receipts from the insured’s GL policy  Attach CG 21 31- Limited Exclusion This exclusion does not apply if the consolidated (wrap-up) insurance program covering your operations described in the Schedule no longer applies for reasons other than the exhaustion of all available limits… You must advise us of such cancellation, nonrenewal or termination as soon as practicable.

20. Pollution  Only from mobile equipment  Only if brought into a building  Already on Premises  Smoke from a Hostile Fire Employment Practices Liability  No formal HR department  Little knowledge of employment law Professional Liability – Design & Build

21.  Mobile Equipment subject to Financial Responsibility Laws  Check the law in your state  Classification – Service Use Automobiles used for transporting the insured’s tools, equipment, and incidental supplies to or from a job location

22. Secondary classes apply to (other than dump trucks):  Commercial building  Residential building  Electrical, plumbing, masonry & plastering  Excavating  Street & Road construction  All Other  A.05 credit is currently applicable to these classes

23. Restrictive Use Policies  Often requested by underwriters  Trap for the Employee  Trap for the Employer  There are limits to “restrictive use” even without a policy

24. Leased Vehicles  An additional vehicle is leased or a job  A larger vehicle is leased to transport materials for a specific job Hired Car Physical Damage

25. Radius Limitations  Common in Surplus Lines Auto  Sample wording: This insurance does not apply to any vehicle that regularly operates beyond the radius shown in the Schedule of Vehicles”

26. Symbol 7 …If symbol 7 is entered…an “auto” you acquire will be a covered “auto” for that coverage only if: a. We already cover all “autos that you own for that coverage or it replaces an “auto” that had that coverage and b. You tell us within 30 days…

27. Symbol 7 – Potential Coverage Gaps  The insured carries collision on all units except an old pickup. The pickup is traded in on a newer vehicle  The insured carries comprehensive on some vehicles, but not all. One of the vehicles without the coverage is traded in on a newer model

28. Symbol 7 – Solution: CA 99 54 Sample Wording Symbol 10 = Any newly acquired autos for $100 deductible comprehensive and $500 deductible collision provided you tell us within 30 days after you acquire it that you want us to cover it for that coverage

29.  Classes are assigned based upon each employees actual duties  Employees with more than one responsibility will be rated in the highest rated class  Subcontractors without proof of insurance will be treated like employees

30.  Covered automatically until expiration of the policy  If operations continue beyond expiration, the state must be listed (30 days)  Does not mean that your customer automatically is in compliance with the other states laws

31.  Small contractors rarely advise the agent of insurance requirements in a contract  Some general contractors will not release the “hold back” until a certificate is received after the job is completed  This puts the agent in an impossible position

32. If the policy is endorsed:  Additional insured  Notice of Cancellation  Waiver of Subrogation Also acceptable  Limits and Effective Dates  Form numbers  Deductibles  Reference to any Limitation Endorsement

33. Do Not Include:  Statements that affirm coverage for a specific contract or agreement  Any statement that guarantees unimpaired aggregate limit or unimpaired aggregates  Any indication that damages beyond bodily injury or property damage are covered by the policies. Remember: Personal Injury means something entirely different to the general public

34. 34 Paul Z Martin, CPCU Insuring Small Contractors