Mistakes happen, even to the most experienced contractors. People trip and fall, equipment breaks, designs aren’t always perfect. But a mistake can have a huge financial impact. Even if the incident wasn’t your fault, someone still needs to cover damages, lawsuits, or any other costs that arise. That’s why it’s important to know how well your contractor insurance covers your mistakes.
Luckily, there are two contractor insurance policies that are designed to cover many different types of accidents: general liability insurance and builders risk.
Here’s how these policies cover your mistakes.
Not All Mistakes Are Created Equally
First, let’s clarify what we mean by a mistake.
Your contractor insurance is designed to cover accidents. Because of this, many insurance policies have exclusions for incidents that result from negligence.
So, which mistakes are accidents? It depends on whether or not you’re found to be at fault.
Leave your equipment out and a fire catches or it gets rained on? These incidents are out of your control, so you’re probably covered under your builders risk policy. A third party trips on your equipment and injures themselves? General liability insurance can typically cover accidents like this.
There was an error in your plans that made it to the final construction and caused a collapse? Many policies include a faulty workmanship exclusion. So if you’re found to be at fault, your insurance might not cover it.
Because policies can vary, it’s important to read yours carefully to understand your policy’s exclusions. Let’s look at two common contractor insurance policies to see when they would cover a mistake, and in what cases they may not.
A Tale of Two Contractor Insurance Policies
General Liability Insurance
General liability insurance is designed to protect you from third-party lawsuits and similar claims. This includes many different accidents, like:
- Injury
- Property damage
- Reputation damage
So, how can general liability insurance cover your mistakes?
General liability insurance covers accidents damaging a third party. Say you run an ad, only to discover that it has offended your competitors and they’re suing you for advertising injury. Your general liability coverage may be able to cover it. Maybe someone trips or is injured using your equipment or product. General liability coverage has your back.
It’s important to know that while general liability covers you from a lot of different mistakes and accidents, this policy comes with exclusions, too.
Check your policy for a faulty workmanship exclusion. If you see this exclusion, it means your policy doesn’t cover the flawed quality of a finished product, or a flawed processes.
Builders Risk Insurance
Builders risk insurance covers a property in the course of construction. It covers:
- Materials
- Fixtures
- Other equipment.
It also guards against incidents like:
So how does builders risk insurance cover your mistakes?
Many builders risk policies are written as “all-peril” policies. That means anything not specifically excluded is covered. Because of this, it can cover many different mistakes that could occur on a jobsite.
If you leave something out and it’s stolen or vandalized, your builders risk policy can help cover it. If you accidentally run a forklift into a wall, this policy might be able to help.
You don’t even need to be the policy owner to get help from a project’s builders risk policy. If you’re a subcontractor working on a property with builders risk coverage, check to make sure you’re listed as an “additional insured” on the project’s construction contract.
But make sure you note what your builders risk policy excludes.
Just like with general liability, exclusions vary from policy to policy. Builders risk excludes intentional damages caused by an insured party, and often excludes faulty workmanship as well. Other possible exclusions include defective design and faulty materials.
Here’s the bottom line:
While faulty workmanship and intentional error may be excluded, your insurance can protect you from accidents. Mistakes happen. With the right insurance coverage in place, you don’t have to worry about mistakes that are out of your control. That’s what your contractor insurance is there for.