Nikki Johnson No Comments

Contractors – Another Liability Exposure

By:  Dan Reith  BA(Hons) CAIB

        Principal Broker

        Reith & Associates Insurance and Financial Services Limited

As a contractor, you work hard to create a quality product and satisfy customer expectations while building a profitable business. However, no matter how careful you and your employees are during the course of business, mistakes can happen it’s a fact.  In today’s business environment, small disputes with customers over projects can quickly escalate into costly legal disputes.

Almost every contractor carries some form of general liability coverage. While these policies provide much-needed protection for bodily injury and property damage claims that occur as the result of a contractor’s work, they typically don’t account for all forms of negligence.

That’s where errors and omissions (E&O) insurance designed for contractors comes into play. Below, we provide a brief overview of E&O insurance and why it is a critical component to a contractor’s overall risk management program.

Why E&O?

Simply put, general liability policies are not adequate to protect against E&O claims, necessitating additional coverage. In fact, most general liability policies exclude claims related your work, your products and impaired property, creating significant insurance gaps.

Making E&O insurance even more crucial, contractors are particularly vulnerable to claims of negligence following unintentional damage to an insured party, impairment of property, damage to products or similar incidents that can occur without warning during a project. Even simple complaints have the potential to escalate into costly legal disputes.

What’s more, courts often rule against contractors in claims related to errors and omissions and, without the proper protection, general contractors would have to cover the damages out of pocket.

E&O policies can help contractors close gaps in their insurance coverages, providing coverage for claims related to the following:

  • Failing to complete projects according to specifications
  • Negligence in providing professional services
  • Poor, incorrect or incomplete work
  • Errors and oversights

Strong E&O policies can protect you and your business following a claim, helping you cover expenses related to court costs, lawyer fees and settlements. It should be noted that E&O insurance may not extend to your subcontractors, and you should encourage them to secure their own policies.

Sample Claim

To further understand the benefits of E&O insurance consider the following example. A window and doors contractor was hired by a developer to install all of the windows on a new apartment complex. While most of the work was completed to specification, the contractor incorrectly measured some of the windows. Accordingly, the windows in many of the units did not lock properly. The windows in these units had to be removed and reinstalled.

With E&O coverage, the contractor would not have to pay for those expenses out of pocket. What’s more, had the client sued the contractor over this work, the contractor’s E&O insurance would have covered awarded damages and defense costs within the limit of the policy.

Securing the Policy That’s Right for You

As a contractor, there are a variety of insurance products to consider. To ensure you are accounting for all of your unique risks—and to secure a policy that is tailored to meet your specific business needs—it’s important to work with a qualified insurance broker.

Contact Reith & Associates Insurance and Financial Services Limited today to learn more.

Nikki Johnson No Comments

Contractors & Pollution Liability – The Risk Is Real

By:  Dan Reith  BA(Hons) CAIB

        Principal Broker

        Reith & Associates Insurance and Financial Services Limited

Contractors, no matter what industry they work in, face environmental risks stemming from operations on a daily basis. For most contractors, a single pollution incident or loss can seriously damage their operations, balance sheet and even reputation. Making matters worse, pollution incidents can be sudden or occur gradually over time. The reality, however, is most contractors do not appreciate the reality of the risk and chose not to protect themselves or their customers.

While many contractors assume that environmental claims will be covered under their commercial general liability (CGL) policy, the unfortunate reality is the most CGLs contain pollution exclusions that leave contractors uninsured in the event of a pollution incident.

The solution: contractors pollution liability (CPL) insurance to ensure they have the right coverage in place to remain secure and profitable.

CPL Coverage Basics

CPL policies provide contractor-based insurance for third-party coverage for bodily injury, property damage, defence, and cleanup as a result of sudden and gradual pollution incidents arising from contracting operations performed by or on behalf of the contractor. CPL insurance is intended to provide coverage to all types of contracting operations, including contractors who are involved in building construction and environmental firms that remediate polluted sites.

CPL policies are offered on either a claims-made or occurrence basis. What’s more, CPL policies are non-standard, meaning each policy is different and can be modified to cover the various needs of the contractor purchasing the policy. Policies can be offered on a project or blanket program basis.

In some instances, CPL policies can also be used to cover losses from civil fines, penalties and punitive damages.

Covered Pollution Incidents

Contractors should keep in mind that CPL insurance policies differ in regard to the types of pollution incidents that are covered. Two important considerations when evaluating CPL insurance policies are:

  • Whether or not the policy will respond to gradual releases of pollutants, as opposed to sudden and accidental releases; and
  • The types of substances that are considered “pollutants” under the terms of the policy.

Generally, policies that cover both gradual and sudden releases of pollutants provide contractors with a broader scope of coverage. In addition, policies that provide a broad definition of pollutants are considered superior to those that contain a narrow definition. Accordingly, it is important that contractors work with their broker to find a CPL policy that is tailored to their needs.

CGL Pollution Exclusions

A primary reason why contractors obtain a CPL policy is due to the various pollution exclusions contained in most CGL policies. The pollution exclusions found in most CGL policies take one of two forms, either “absolute” or “total.”

CGL policies with an absolute pollution exclusion remove coverage for most pollution events that would occur in the course of an insured’s business operations. However, despite its name, an absolute pollution exclusion may preserve coverage for certain incidental pollution damages, products and completed operations liability, and certain off-premises work.

However, more commonly, CGL policies include a more restrictive “total pollution exclusion.” This type of exclusion effectively removes coverage for any event the insurer characterizes as a pollution incident.

Contractual Requirements

Contractual requirements serve as another motivating factor that lead many contractors to obtain a CPL policy. In many instances, project owners and general contractors will require contractors to obtain pollution insurance that meets certain, predetermined standards. From this perspective, having a CPL insurance policy in place can serve as an upfront sales tool during the bidding process that enables contractors to qualify for opportunities when such coverage is required.

Finding the Right Policy

Regardless of specialty, all contractors should be mindful of the pollution risks associated with their work. A CPL insurance policy can provide much-needed security in the event of a pollution incident, even in the most unlikely of circumstances.

CPL insurance is not only good for business, but it also provides peace of mind in industries that are full of surprises and risks. Reith & Associates is available to work with your organization to find the CPL coverage that is right for you.