Does my Premises Liability policy extend coverage to 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 for investment properties extends coverage to anyone paid to complete work at the property.
Importantly, your liability coverage excludes injuries to your tenant if they happen while completing work at your property in exchange for a decreased or waived rent amount.
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. Is a licensed professional or an unlicensed handyman more likely to cause a loss or get injured on a job? The insurance industry often considers an unlicensed handyman to be uninsurable, 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, require them to provide two documents:
- proof of liability coverage that covers their business operations, and
- proof of Workers Compensation coverage if they have employees
Require they add your purchasing entity as Additional Insured on their liability policy for the time you employ them.
Carriers that specialize in Contractor’s Liability coverage understand the transactional nature of this line of business. They 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. This is critical if your GC’s negligence at your property injures someone, and you are named in a lawsuit by the injured party. If utilized correctly in the above scenario, your Premises Liability coverage would extend defense duties to you. This is one of the benefits you pay for when you sign into your contract with your liability insurance carrier. But the negligent party’s liability policy would be the one ultimately responsible for settling the injury loss.
Another reason to be listed as Additional Insured on Contractor’s Liability policy is to get notified if their policy is in danger of cancelling for non-payment of premium or another underwriting reason.
Contractors can purchase a Liability policy by paying 1-3 months of premium at the inception of the policy. Yet, insurers issue proof of coverage for a full year. So, what happens month four when your general contractor doesn’t pay his insurance premium and his policy cancels? Unless listed on their policy, you will invest significant time confirming their coverage is in good standing every month.
A good piece of advice is: if you are unsure where your coverage ends, ask your agent before something happens. If your general contractor has been unable to obtain liability coverage for their business, we can help. NREIG has designed a specialized GC Liability policy that complements our Premises Liability coverage very well. We designed it with our clients in mind, to minimize their exposure during the renovation at one of their properties.