Insurance rates for many AGC general contractors have been cut in half over the past five years. As such, neophyte insurance salesmen are touting their ability to reduce premiums. In the real world, most of these hucksters have no idea how complicated it is to correctly provide coverage for a California contractor. Many do not understand a general liability policy or its very critical exclusionary endorsements and limitations.

In today’s competitive environment many carriers are willing to sweeten their coverage while slashing their price. Your agent has to understand which exclusions can be eliminated or made less onerous. These exclusions include:

• Subsidence or Earth Movement – A major problem exists when this exclusion isused, including elimination of coverage for a trench collapse or removing coverage for any injury or damage arising out of an earthquake or sinkhole collapse.
• Prior Work – Use of this exclusion is unacceptable unless the entity being insured is newly formed.
• Action Over – This exclusion can be added in many forms; only a good broker will recognize. Coverage is eliminated for indemnity actions tendered by a general contractor arising out of an injury to an employee of a sub. The sub must still indemnify the GC, but will have no insurance to cover the loss.
• Contractual Limitation - ISO form CG21 39 eliminates contractual liability coverage for almost all contracts.
• Engineering Exclusion ISO Form CG 22 43– This exclusion can be used to deny coverage for supervisory related claims. The carriers will generally use CG 22 79 if asked. The CG22 79 Form provides coverage for bodily injury and property damage claims arising from means and methods of construction. The CG 22 80 form is even better as it also provides bodily injury and property damage cover arising out of design work you sub out.
• Construction Management (CM) Exclusion – This exclusion is unacceptable if performing CM services, as this eliminates all coverage.
• Independent Contractor Limitations– This limitation should only allow the carrier to charge premium if subs fail to meet your GL policy requirements. Other versions of this limitation preclude coverage for liability arising out of all acts of subs.
• Minimum and Deposit Considerations- Many carriers no longer require 100% minimum premium, so always ask for 80% or less. This removes the temptation to lowball exposures to reduce deposit premiums. Remember the higher the deposit premium the lower the rate.
• Residential Limitations – It is important to ensure the following operations are allowed: apartments; dormitories; military housing; hotels; hospitals; and assisted living facilities. I also recommend you try to get coverage for repair work on condominium developments. 

Most GL policies today will be loaded with a number of additional exclusions, many of which are not relevant. Some, however, are relevant and difficult to remove unless you pay a very high premium and/or carry a high self-insured retention. These include:

• Employment Practices – Buy Employment Practices Liability coverage for discrimination, wrongful termination, sexual harassment, etc.
• Lead, Asbestos, Biological/Mold –Buy pollution coverage.
• Terrorism – Coverage is available at a reasonable cost. Ensure all high profile work is covered.
• Blanket Wrap-up CG 21-54 – No coverage is provided for any current or past wrap projects.
• Limitation of Coverage to Specified Work (generally applies to subs) – Ensure all your operations are covered.
• Condo or Townhouse – All new condo work should be done under a wrapup policy. 

Work with your attorney to ensure you both are aware of the coverage limitations reflected above. Counsel can help you interpret your policy and steer you to brokers who know what they are doing. Counsel can also assist you in implementing a self insured retention plan, which allows you to handle all of your own claims up to a defense and indemnity limit of $25,000 or higher. This leads to further premium savings and better control of your claims. You will need to hire a claims adjustment company if you do implement a self insured retention plan.

For questions on any of the issues covered in this article, please don’t hesitate to contact me