Misinformation and misunderstanding often lead the charge to disaster. Small trade contractors cannot afford to make careless assumptions about liability insurance, yet many do. While liability insurance is an effective protection, it is not and never will be a catch-all dumpster that magically contains every liability exposure that small trade contractors encounter.

The following basket of basics applies to Comprehensive General Liability (CGL) insurance*:

1. 1. CGL insurance is a liability policy only, designed to protect against third-party liability claims.
   2. The third-party liability claims must stem from accidental injuries or damage that occurs during or after the work is completed.
   3. Legal defense and court costs are covered, regardless of whether or not a lawsuit has merit.
   4. Non-physical personal and advertising injury claims are covered. A sub-limit applies, and any payout under this section of the CGL policy erodes the general aggregate limit.
   5. Medical payment coverage for minor injuries (standard limit up to $5,000) to a third party that occur on the job site and do not involve a formal lawsuit or finding of fault.

Next, let's apply some (not all-inclusive) relevant context to the basket of basics*:

(For ease of presentation, "you" refers to trade contractors in general, including small trade contractors.)

• • CGL insurance does not cover intentional acts or deliberate harm. It is intended to address accidents, mistakes, and negligence that you are liable for to third parties.

    For example, a child breaks an arm due to tripping over an electric cord plugged in outside that is being used to operate your electric saw. Coverage applies to the child's resulting medical bills and hospital stay due to this injury.

    Contrast the broken arm injury with a minor injury in which the child steps on a nail at your work site that penetrates the foot. An urgent care facility safely and at much less cost treats this injury. The medical payments section of the CGL policy applies.

  • CGL insurance does not provide any coverage for liability claims arising out of the operation or use of automobile(s) for your trade contracting business. A separate automobile liability policy is required.
  • Completed operations vs. faulty workmanship. Completed operations coverage is built into the standard CGL policy. The coverage trigger is third-party injury or damage to other property caused by your work after you have completed the job and left the job site. Your faulty work is not covered, but the resultant damage to others is.

    For example, a roofer did not use the correct sealant for flashing around an Ohio home chimney in August. The first big snow hit in November, followed by melting a week later. Coverage applies to the homeowner's damaged interior ceilings and walls, as a result of the melting snow damage caused by the roofer's work. The roofer's cost to tear off the shingles, buy new flashing, and reseal the area correctly is not covered.

  • Personal and advertising injury does not cover you for breach of contract, false performance claims, or cyber liability exposures. Contact your insurance professional regarding special liability insurance policies and bonds.
  • The Care, Custody, or Control (CCC) exclusion in the standard CGL policy creates a unique problem for trade contractors. I recommend to all of our trade contractor clients that they "buy back" CCC coverage for a minimum additional premium.

    Consider an electrician, whose job is to hang a chandelier. The electrician accidentally drops the chandelier, and it shatters. The CCC buyback would cover the replacement chandelier.

    Be aware that a sub-limit, typically in the range of $5,000 to $25,000, applies to the CCC buyback. For higher CCC buyback limit options, contact your insurance professional.

  • Defense costs are a huge benefit of the standard CGL policy. You, the insured, pay $0 out-of-pocket legal expenses.

Understand, don't assume, the protection afforded by your CGL insurance policy.

*This blog is intended for informational purposes only. The content is limited to the basics of CGL insurance. Actual policy terms, conditions, and limits always apply. Additionally, the fact set applicable to individual claims may result in unexpected outcomes.

Richey-Barrett Insurance is a Trusted Choice Independent Insurance Agency for trade contractors.