General Contractors are always asking for specific insurance language from their subcontractors’ policies. In order to get the bid and keep their employees working, the subcontractor contacts their agent just to get it done. They don’t truly understand what rights and privileges they are giving the General Contractor.
Below are some common insurance terms requested by General Contractors:
1. Additional Insured - Extends coverage to a General Contractor. In the event of a suit against a General Contractor for an accident of the Subcontractor, the Subcontractor’s insurance policy will defend the General Contractor as well as the Subcontractor.
2. Certificate Holder - Simply is used as proof of insurance. If the policy is canceled, the insurance company will attempt to notify the Certificate Holder that coverage has expired.
3. Primary and Non-Contributory - The subcontractor’s policy becomes the first to pay any claims. The GC’s policy won’t contribute to any liability expenses until the limits of the subcontractor’s policy have been exhausted.
4. Waiver of Subrogation - When an insurance carrier pays a large claim on behalf of their client, they are entitled to go after the party who was responsible for the loss and collect money. That is subrogation. When an insurance policy has a waiver of subrogation the insurance company isn’t allowed to go after the responsible party to recoup the costs of the claim. This type of waiver makes it riskier for the insurance company and will usually come with a higher premium.
5. Additional Insured Ongoing Operations - This endorsement will extend coverage to whoever is named as the Additional Insured (AI) only while the construction project is ongoing. After the project is completed the AI will no longer be covered by the subcontractor’s insurance policy.
6. Additional Insured Completed Operations - Extends coverage for the party named as Additional Insured after the project has been completed. This is to protect from suits related to construction defect claims. This will usually last as long as building owners are allowed to sue for faulty construction. In Colorado, it’s seven years.
All of these terms certainly seem to only favor the General Contractor. As with a lot of things in business, whoever holds the money gets to make all the rules. This might help the subcontractor understand why his insurance company refuses to add some of this language to their policy.
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