YOU ASK:

What is the difference between contractors general liability coverage, contractors professional liability and builders risk coverage?

WE ANSWER:

These three actually cover different areas of the contractor's business. And each of these policies excludes cover for the others, unless the insurance company can work out the cover for one of these products to be included in one policy.

Builder's risk insurance covers the contractor's materials, equipment and property related to the building being constructed. This insurance protects the contractor's interest in the equipment, the value of the property and the materials while they are in transit or being used in the construction. The coverage will continue until the project is completed and signed off on by the owner.

This insurance protects against risk such as theft, earthquake, government action, weather or water damage or mechanical breakdown. The coverage may be extended to protect temporary structures such as scaffolding or to cover for debris removal costs or charges made by the fire department service.

Contractor's general liability will cover risks with regards to any bodily injuries or property damage. It does not cover the contractor's property or equipment. Instead, it protects against possible accidents and the liability that may arise from these.

A contractor's general liability insurance is designed towards a contractor's specific liability coverage needs. For damage coverage, the policy may protect against fire, explosion, underground work or collapse that may be connected with the construction project.

Contractor's professional liability will cover mistakes (whether my commission or omission) made by the contractor and his employees, which can include mistakes made with the design and how it's executed or mistakes with site assessments.  This may be needed if the contractor sub-contract the design work or has an in-house design staff.

The differences between contractors' general liability (CGL) and contractor's professional liability (CPL) in this case are:

  • CPL has a limit for the total payment, including defense costs. CGL usually has no limit for defense cost claims.
  • However, CPL will have very high deductibles per claim (such as $20,000 or more) while CGL usually requires a relatively lower deductible.
  • The ways claims are made also are different between the two. CPL is usually claims-made while CGL is occurrence-based. This means that CPL will pay for all claims during the policy's effective date while CGL is limited to any events that happen while the policy is effective (even if the claim is made past the policy's effective date.
  • CGL will cover bodily injury and property damage while CPL will cover costs related to delays, to fixing the design or construction mistake or for any acceleration costs.
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