Does my Premises Liability policy extend coverage to hired workers that are hired to work at my property and get hurt? What if their negligence causes harm to others? These are some of the common questions among investors. No Premises Liability policy that is available to investors (to cover their investment properties) extends coverage to anyone hired or paid to complete work at the property. It’s also important to know that this exclusion of liability coverage extends to your tenant if, (in exchange for a decreased or waived rent amount) you ask them to complete work at your property and they get injured in the process.
Where it can be both difficult and expensive, you should only hire licensed general contractors to complete work at your property. Hiring the unlicensed “handymen” to complete any work onsite, is an exposure to both you and your business that you should avoid. Try and think about it from the perspective of the insurance company – in their eyes, who is more likely to cause a loss or get injured on a job: a licensed professional, or an unlicensed handyman? The unlicensed handyman is often times considered uninsurable by the industry, and many carriers even go as far as to say they would be “buying claims” if they extended their coverage form to include the exposure of unlicensed handymen.
Any reputable general contractor is going to carry a liability policy that covers their business operations, and you can make their liability policy extend coverage to you. When a general contractor visits your property to bid on a job, you should require they provide two documents: proof of liability coverage that covers their business operations and their proof of Workers Compensation coverage if they have employees.
In addition, you should require they add your purchasing entity as Additional Insured on their liability policy for the duration of the time they are hired by you. The carriers that specialize in Contractor’s Liability coverage understand the transaction nature of this line of business, and will add your entity for minimal cost (usually $50 or less), and some will do it free of charge. Being listed as Additional Insured on their liability policy will extend their coverage to you, in the event your general contractor does something negligent at your property that injures someone and you are named in the lawsuit by the injured party. If utilized correctly in the above scenario, your Premises Liability coverage would extend defense duties to you (as this is one of the benefits you pay for when you sign into your annual contract with your liability insurance carrier). The negligent party’s liability policy would be the one ultimately responsible for settling the loss, this would include the portion of which you are named in.
Another reason to be listed as Additional Insured on Contractor’s Liability policy is the ability to get notified prior to their policy cancelling for non-payment of premium or another underwriting reason.
These Contractor’s Liability policies can be purchased by paying 1-3 months of premium at the inception of the policy, yet the proof of coverage is issued for a full year. So, what happens month four when your general contractor doesn’t pay his insurance premium and his policy cancels? Unless you are listed as an Additional Insured on their policy, you will need to invest a significant amount of your time monthly confirming their coverage is in good standing.
A good piece of advice is: if you are unsure where your coverage ends, ask your agent before something happens that can jeopardize your business. If your general contractor has been unable to obtain liability coverage for their business, National Real Estate Insurance Group can help. NREIG has designed a specialized GC Liability policy that complements our Premises Liability coverage very well. It was designed with our clients in mind, to minimize their exposure during the renovation at one of their