Contractors and Liability Insurance: Why Is General Liability Important?
March, 16 2022
Risks abound on every construction job site in Ontario. Contractor’s liability insurance in Ontario covers most of the common risks in the construction industry. Nonetheless, contractors need to have a good understanding of the types of risks they face every day and how to manage them to protect against loss and ensure safety.
General liability insurance for contractors is designed for all types of businesses within the building trades industry. Moreover, commercial insurance companies can be instrumental in helping contractors identify risks and implement safety protocols as safe job sites are in everyone’s best interest.
What Is the Purpose of General Liability Insurance for Contractors?
Contractor’s liability insurance, also known as business liability insurance or general liability insurance, is a staple of commercial insurance in the building industry. General liability insurance protects you and your business against claims due to bodily injury or property damage. It is a commercial insurance policy that also covers claims against personal injury such as slander and libel.
General liability insurance for contractors covers medical expenses, the cost to replace or repair the property, and pay for legal fees and attorney fees.
Liability insurance for contractors is not all-inclusive. It does not cover employees who get injured, auto accidents, workmanship, intentional acts, or professional mistakes, although other types of commercial insurance policies will cover some of these risks.
For example, workers’ compensation insurance protects your workers, errors, and omissions insurance (E&O) covers professional mistakes, products liability insurance protects claims against workmanship, and commercial auto insurance protects against vehicle accidents. Intentional acts and punitive damages are typically excluded from commercial insurance policies.
General liability covers a wide range of professions in the building trades, including the following:
- Carpenters
- Electricians
- Plumbers
- Roofers
- Stonemasons
- Handymen
- Developers
- HVAC technicians
- Independent contractors
- Landscaping companies
- Security companies
Accidents can always happen no matter what safety protocols you have in place, and insurance is one of the primary ways to protect against risks.
What Types of Risks Do General Contractors Face?
Ontario has received high marks from the Canadian Federation of Independent Business (CFIB) for meeting regulatory accountability and regulatory burden, making it one of the safer provinces for contractors in Canada overall.
Effective project management requires managing the risks that exist in every stage of a construction project. Risks can be described as anything that creates a potential loss exposure and threatens the progress or completion of a construction project.
There are seven basic categories of risks on a construction site:
- Financial risk
- Project risk
- Safety risk
- Schedule risk
- Contractual and legal risks
- Environmental risk
- Health risk
Some of the most common risks in the industry are falling from heights, getting struck by an object, and injuries due to heavy lifting. These types of injuries can result in extraordinarily high medical bills, disabilities, and extended periods off work.
One of the most prevalent risks in recent years is health risks due to COVID on construction sites. Worksite shutdowns because of COVID have led to project delays in many incidents, costing contractors huge sums of money.
Contractors also face risks because of inclement weather, safety concerns, budgetary issues, and project delays.
Why Is Risk Management Important for General Contractors?
Contractors who fail to make risk management a priority are bound to face a host of negative consequences. Risks can lead to poor project performance, lackluster quality, and increased costs. Various risks can delay the completion of projects costing contractors even more.
