A major construction project is a complex process that starts on the drawing board and finishes when the keys are handed over to the new owner. However, the process of construction is fraught with hazards and potential for loss, making it vital that the entire project is covered by a watertight program of insurance. A properly insured project will be covered against a range of issues including accidents, injury and delays.
Will a General Liability Policy Be Sufficient?
In a word, no. A general liability policy is a great place to start, and it will usually suffice during the design stages, but it will only apply if the named person or people on the policy are liable. If an earthquake or storm causes damage or injury, there is no one to blame, and the loss will be uninsured. There is also the matter of the exclusions that are usually listed in a general liability policy. Liability will usually include bodily injury and property damage, but it probably won’t cover the costs of delays, poor workmanship and various other contingencies.
The Builder’s Risk Policy
A builder’s risk policy should be in place before the ground has even been broken. Often referred to as a ‘course of construction’ policy, this type of coverage will provide first-party protection against delays and mistakes for the entire project. And because there is no need to prove liability, payouts can be expedited in a timely fashion. However, liability insurance is still essential, and should be purchased as a separate policy. Builder’s risk policies don’t cover problems after the construction phase, and they also will not cover the costs associated with litigation because of bodily injury.
Options for Liability Coverage
Liability coverage for a construction project is absolutely essential, and there are two main ways to achieve it. The construction manager has the option of insisting that every contractor on the project carry their own coverage that meets specified, minimum criteria. However, this can lead to confusion in the event of a liability claim, as more than one contractor could be at fault. An owner-controlled insurance program (OCIP), however, will ensure that every contractor and worker associated with a project is included in one liability policy.
There are also matters of worker’s compensation insurance to be dealt with, but they will often be included in OCIP insurance. However, large-scale building projects will also need to make provisions for environmental damage and professional liability. A detailed insurance policy should be devised during the planning stages of the project to ensure that all aspects of the work will be covered by adequate insurance.
If you are about to start a major construction project, or you have questions on an existing one, give us a call at 800.220.5582, and one of our advisers will be happy to help you with a Michigan contractors insurance quote.