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IPS / Lighthouse Insurance Group Blog: contractors

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man signing contractSigning a contract is often a necessary part of obtaining work and it outlines expectations for both parties.  As a subcontractor, it is important to keep in mind that contracts are usually written by the general contractor, or an upper tier, and are intended for their protection.  Always read and understand what you are signing – BEFORE YOU SIGN because most contracts shift elements of risk from the general contractor, property owner, or others to you.  These shifts can obligate you to protect the other parties in the event your actions bring suit against them.  As stated by Chris Boggs, Executive Director of the IIABA’s Virtual University, the ideal use of contractual risk transfer is to place the financial burden on the party closest to and best able to control the chances that loss will occur. 

 

But contractual risk transfers can be misused and this is what you want to be on the alert for – BEFORE YOU SIGN.  Examples may include things like:

 

1.       Exculpatory contracts – where the general contractor (or upper tier) attempts to absolve themselves from liability by contractually forcing all of their liability onto you.  There are circumstances or where this is not permitted by law in some states because of statutory provisions, criminal penalties or sole negligence torts.  But, aside from these exemptions, if it is in the contract, courts may uphold the provisions of the contract.

 

2.       A contractual provision that violates the law may not be transferrable to you (a lower tier) if a statute or common law sets a limit on what can be contractually transferred.

 

3.       Contractual violations by either party.

 

Other instances may obligate you far beyond the scope of your insurance.  Risk transfers can appear throughout a contract but a good place to start is within a section commonly titled “Hold Harmless” or “Indemnification”.  Don’t assume that, because a contract lists minimum insurance requirements, that these limits are the cap of your responsibility!  I tend to get nervous when I see Hold Harmless clauses that include wording to the effect of: “…hold harmless and indemnify against any and all claims, actions…”.  There is no insurance that will cover “any and all”.  All insurance contains limitations and exclusions and, if you agree to such language in a contract, you are agreeing to self-insure potentially serious things that may not be covered by your insruance.

 

An important thing to remember is that you can agree to most anything with another party.  But, signing a contract does not change what insurance covers.  Before signing a contract always have it reviewed by legal counsel to be sure there are no adverse provisions and by your insurance agent so that he/she can advise how your insurance will respond to the contract.

 

For information or a quote on insurance for your Michigan contracting business, CLICK HERE or call us at 800-220-5582 today!

Source: IIABA


ContractorHave you ever wanted hire a contractor for a home project and didn't know how to go about it?  Hiring a stranger to work at your home can be scary and going to the phone book or online to look for a contractor may not be the way to go.  These few tips can help ease the tension and get the work done right.

Ask Friends or Family.  Ask people you know who have had work done in their home to recommend contractors that they have had good exprience with.  If they have had a good experience and are willing to recommend the contractor that worked for them, chances are that contractor will work well for you.  You may also want to think before hiring someone you are too familiar with as it could make for a difficult situation if a dispute were to arise.  You need to be comfortable enough with the contractor you choose that you can express expectations and disagreements openly.

Do some research. If you aren't able to obtain references you may want to start by looking on the web, but be careful. Once you find a contractor you may be interested in using, look at the Better Business Bureau, your state attorney general’s office, and Angie’s List. These websites will show you complaints, lawsuits, and customer feedback (sometimes for a small fee).  You shouldn't hire someone without checking that out.

Always get more than one bid for your work. Obtain more than one bid / quote for your project. Make certain that the work they're bidding on is identical so that you can do a proper price comparison. While price is a big concern, the quality of their should be even more important.  A lower price isn't lower if you are dissatisfied with the work or need to have something re-done in the future.  When getting bids, be sure to ask for referrals, pictures of previous jobs,  and make sure they provide a warranty. 

A good contractor will provide details. By example, if you are wanting to replace an exterior door, a quote could simply say “door replacement” with a dollar amount, or it could say door replacement, exterior trim, interior trim, insulation, and labor, each with its own price. The more details that are listed on a bid, the better you will know what you’re paying for - and, the clearer it should be for both parties on the scope of work to be done. Make sure the bid includes a time-frame as to when the work should be completed.

Certificate of insurance.  Always insist on receiving a certificate of insurance showing that the contractor has both liability and workers compensation insurance. Don't accept the fact that the contractor does not carry workers compensation insurance because all workers are subcontractors. If truly subcontractors, if one of their employees are injured while working at your home or business, you can be held responsible for the cost of the employee's medical and work loss expenses! 

Things to avoid. If you are asked to pay in cash, be skeptical. Cash payments can enable contractors to skirt around taxes, insurance and other things.  If the work requires a permit, make sure the permit is pulled in the contractor's name rather than yours.  The permit holder is the party that the community will generally hold responsible if something goes awry with the work or it doesn't meet code.

Nothing is foolproof, but doing a little homework before the project begins you can save on some of the stress that can occur with your home project. 

Click here for information or a quote on contractors' insurance.


Gavel & Law BookEvery business needs Commercial General Liability insurance!  Most likely, any business that purchases insurance has several forms of coverage including Commercial General Liability.  This may be a stand alone (mono-line) liability policy or it may be included within a commercial package policy, business owners' policy, etc.  In a nutshell, Commercial General Liability insurance protects the business for loss arising from bodily injury or property damage caused by the negligence of the insured and it protects the insured in more ways than one may think!  The typical Commercial General Liability policy shows six dollar limits:
  • General Aggregate
  • Products and Completed Operations Aggregate
  • Personal and Advertising Injury
  • Each Occurrence
  • Damage to Premises Rented to You
  • Medical Payments to Others
AGGREGATE LIMITS.  Most general liability policies have two "aggregate" limits; a "general aggregate" and a "products and completed operations aggregate".  The word "aggregate" simply means the sum total, or in the case of insurance, the maximum amount a policy will pay during the policy term.  Think of them as buckets containing the number of dollars shown on the policy.  Once all of the dollars are used, the policy has paid all that it can pay.  The products and completed operations aggregate (or bucket) only spends its dollars on claims that arise from an injury or damage caused by the product you make or sell, or as a result of work that you have done.  The general aggregate (or bucket) spends its dollars on anything else that is covered by the policy.  In limited instances, policies may have only one aggregate - usually noted by the word "included" rather than showing a dollar amount for the products and completed operations aggregate.  When this happens, the policy is, in effect, providing only half the coverage as a policy that indicates a dollar amount for each aggregate.

PERSONAL AND ADVERTISING INJURY.  This is Coverage B within the policy and provides protection for injury arising from the following causes of loss, and is automatically included in the commercial general liability policy:
  • False arrest, detention, imprisonment
  • Malicious prosecution
  • Wrongful eviction
  • Libel, slander
  • Violation of a person's right to privacy
  • Use of another's advertising idea
  • Infringement of copyright, trade dress or slogan in your advertisement

EACH OCCURRENCE.  This is not a coverage, per se, rather it sets the maximum limit that the policy will pay for any single occurrence. The policy's overall limit is that aggregate described above. For example, if a commercial general liability policy has an occurrence limit of $300,000 and aggregate limits of $600,000, this means that the policy would pay no more than $300,000 for any one loss, and the policy could cover no more than two $300,000 losses during the policy term.  

DAMAGE TO PREMISES RENTED TO YOU.  This is the amount of insurance the policy allows for damage caused to the premises rented to the insured.  True, the landlord should always have insurance in place to cover the building being rented to you.  But if damage to the landlord's building is caused by the insured's negligence, the landlord's insurance company can subrogate or come to you for reimbursement of their repair expenses.  If damage occurs to a portion of the building that is not rented to you, the coverage would come from the "Each Occurrence" limit.  A common limit for Damage to Premises Rented to You in commercial general liability policies is $100,000 and this limit can be increased.  

MEDICAL PAYMENTS.  This is intended to pay for certain medical expenses arising from an accidental bodily injury on your premises or because of your operations.  A common limit found in the commercial general liability policy is $5,000 and it is available for first aid or other immediate costs like X-rays to the injured person.  Sometimes, offering to pay these expenses can help avoid a lawsuit.  Medical Payments does not apply to employees, workers or to the insured.

For more information on Commercial General Liability insurance contact us at 800-220-5582, visit the GENERAL LIABILITY page on our website, or contact us  online.

 

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Image Source: hywards / freedigitalphotos.net

Small ToolsTools and equipment are key to the success of contractors of all types.  Whether you work in construction, service and repair, lawn maintenance or pest control, you could quickly be out of business if you were suddenly without the tools that enable you to do your work.  Should you suffer a loss, proper insurance covering your tools and equipment can mean the difference between being back in business quickly and being forced to close your business.

Insurance for contractor's tools and equipment is easy to obtain.  Most often, it is added to a commercial package policy along with the contractor's other lines of insurance, but it can be purchased on a stand-alone policy as well.  This type of coverage falls under a broad category of insurance called Inland Marine.  Most types of inland marine insurance are intended to provide coverage for items that move from place to place - it doesn't restrict coverage to a specified location like other forms of property insurance.  This means that tools and equipment covered by this type of insurance will be covered whether at your place of business, while traveling in a vehicle, at a job site, or most anywhere else subject, of course, to territorial limitations in the policy.

Tools and equipment can be covered as scheduled or unscheduled.  

The unscheduled form is generally for smaller items valued up to $1,000 per item.  A limit of insurance is chosen to cover all of these items on a blanket basis without the need to list everything.  Depending on the type of policy, the limit of insurance needs to be high enough to REPLACE all of your small tools, or to completely cover their ACTUAL CASH VALUE.  

The scheduled form is generally for larger items valued at $1,000 or more per item, such as generators, riding mowers, excavators, bulldozers, and the like.  Scheduling these items simply means that the policy will individually list each covered item on a schedule describing the item and the value it is insured for.  

A single policy may include both scheduled and unscheduled items. Most insurance companies have a minimum deductible of $500 and most policies stipulate that coverage for theft does not apply if items are stolen from an unlocked, unattended vehicle.  In other words, items must be locked and protected at all times in order for insurance to apply.

Important things to keep in mind when it comes to your tools and equipment: 

  • Don't rely on homeowner's insurance to cover business property.  At best, most homeowner policies offer only a small amount of coverage for property owned or used by a business and it is often limited to loss that occurs on the home premises.
  • Keep good records of all items.  Any time a claim is made for loss to property, the insured person or business must substantiate the fact (prove) that the items existed.  Receipts are best the best proof, but manuals, photos or other documents can be very helpful as well.
  • Make a police report right away if you suspect your loss is caused by a crime (vandalism, theft, etc.).

    For more information on insurance for Contractor's Tools and Equipment Contact us at 800-220-5582, visit the CONTRACTORS INSURANCE page on our website, or contact us online.
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    Free Contractors QuoteA 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.

     

    Other Considerations

    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.


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    Lighthouse Group Main Office in Grand Rapids, MI
    Mailing Address | P.O. Box 530009, Livonia, MI 48153

    Phone: 734.421.9900 | Toll Free: 800.220.5582 | Fax: 734.421.9911

    Also serving these Detroit area communities in Michigan: Livonia, Farmington Hills, Ann Arbor, Southfield, Plymouth, Canton, Westland, Northville, Novi, Dearborn, South Lyon & Walled Lake