“Win-win contractor controls containing clear responsibilities are key to protecting your business and everyone involved.”
At Dunn Solutions, we’re dedicated to providing trusted information and advice to support trade contractors and craftspeople throughout the greater Seattle area. While we often share insight on quality materials and building techniques, we also understand that there are countless other facets of your business required to keep things running smoothly—like insurance.
From the basics of what contractor liability insurance is and how to read your policy to understanding policy exclusions and Washington laws that impact contractor liability insurance, there are a lot of factors to consider for your business. That’s why, for our Contractor Liability Insurance Series, we’re speaking to Shelli Lucus-Kennedy, owner and senior risk manager of Insurance Risk Services. With more than 40 years in insurance and risk management and a focus on the construction industry, Shelli is a wealth of knowledge due to her extensive experience and customer-driven approach.
The key to protecting yourself and your business from legal action is found in the controls—or contracts. Contractor and subcontractor controls are important to understand whether you own a business or are looking to join a project. In this episode, Shelli explains the value of having win-win contractor controls—and issues that can arise when you don’t.
Watch our discussion in the video above, or keep reading to get the highlights.
What happens if you don’t have the proper controls in place?
Before starting a project, it’s important to thoroughly review your contractor and subcontractor controls to ensure you’re completely covered. In the event of a lawsuit, having the right controls in place will help safeguard your business and lead to a quicker resolution.
While paperwork can be difficult to understand and tempting to skip over, thorough and updated language helps clarify who’s responsible for what and avoids escalation. Without proper controls in place, you find yourself in a lengthy, costly legal battle. Washington state is consumer-friendly and will likely side with the claimant.
Just as you vet the contractors or subcontractors you work with, do your due diligence and protect your business from the start.
What is a certificate of insurance, and why do you need one?
A certificate of insurance (COI) is evidence of an insurance policy and carries no value without the insured forms as proof of coverage. The insured forms that contracts require you to submit are:
- Proof of insurance naming you as a primary and noncontributory additional insured with coverage for both during construction and post-construction (two separate forms)
- Outline of the limits of insurance
If all contract requirements are followed, the COI and contract should align in coverage details to be valid. For example, if the contract requires a subcontractor to have both auto and excess liability but the subcontractor only has a general liability policy, the requirements have not been met—and when a claim is filed, you’d lose against it and be liable for damages.
Having a risk manager or a third-party service to review the process provides peace of mind and usually gets you a credit on your insurance.
How will missing deadlines impact your coverage?
Before starting a project, all contract requirements must be fulfilled by the deadlines to ensure proper coverage. Remember, contractor and subcontractor controls are agreements you’re entering to receive price considerations. Missing a deadline results in a penalty, likely meaning no coverage or your deductible could increase.
Shelli recommends sending your contract to your agent to review your insurance section and see if there are any deficiencies. This provides an extra layer of protection and puts the responsibility on a professional who knows what they’re looking for. Your agent should compare certificates received from a subcontractor to ensure that all proof of coverage required is accounted for.
Why is auto liability required?
Auto liability is crucial because operating vehicles is a natural part of any project, big or small. As the general contractor, you are liable for what happens on a project site, including accidents or injuries caused while operating vehicles, so auto liability insurance is a must.
If you operate vehicles you do not own, you will need to have non-owned auto liability to cover those vehicles. As a precaution, even if you work primarily with vehicles you own, it’s best practice to work with your agent to include non-owned auto liability for added protection.
Interested in other ways to protect your business? Don’t miss the other helpful episodes in our Contractor Liability Insurance Series, covering topics like how to read a contractor liability insurance policy and why consulting a risk management specialist.