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.
Insurance policies can be complicated—and even appear contradictory with the way they’re written and laid out—and many contractors don’t take the time to thoroughly review them. While they may seem confusing at first, it’s important to have a clear understanding of what your policy covers and how it’s laid out on paper. This way, you can make sure you’re getting the level of coverage and risk management necessary to protect yourself and your business as well as be able to refer back to your policy when needed.
In this episode, Shelli takes us step by step through the different parts of a base policy and then explains how to read and understand your contract liability policy.
Watch our discussion in the video above, or keep reading to get the highlights.
Understanding different sections of your contractor liability insurance policy
First things first, your contractor liability insurance policy is a contract. It’s a form of risk management where you have agreed to pay a premium to transfer a monetary amount of your risk to the insurance carrier. The policy is formatted around a base policy (learn more about these in our previous episode here). Because the base policy is the same one used for various businesses, not everything listed in it will be relevant to your business. The forms following the base policy modify it, hence why you may see clauses in different sections that seem to contradict each other.
Start by understanding the different sections of the policy, which include:
Declarations
This is the first page of the policy covering who is insured, the premium cost, and the policy term length.
Insuring agreements
Next, the insuring agreements section covers what the insurance carrier agrees to do, defend, and cover for you.
Conditions
Then, the conditions section covers the role and expectations of the insured and insurer, including the insurance carrier’s right to audit your business or examine your books and duties in the event of loss. Note: Understanding your duties in the event of loss is particularly important since you could unintentionally nullify your coverage if you don’t follow the rules carefully.
Exclusions
Next, the exclusions section covers exclusions built into the base general liability policy, including auto liability, workers’ compensation, pollution, and builder’s risk. These are types of specialty insurance that you’ll purchase separately. This section also covers specific stipulations for your situation and policy where areas of coverage have either been removed or added back in.
Definitions
Finally, the definitions section is located at the end of your policy and is one of the most important sections for you to read and understand. It’s a glossary that defines what all the different terms and phrases throughout the policy mean in relation to your business and coverage, like what counts as contractual liability and what is considered an occurrence. This section helps you understand your policy—don’t skip it!
How to read your contractor liability insurance policy
Typically, your base insurance policy will be about 16 pages and include the above sections. Attached to the base policy will be additional forms, which outline conditions and exclusions that contradict the base policy. Each form takes precedence over the previous one, so the forms towards the end are what actually detail your policy.
With that in mind, the most effective way to read and analyze a contractor liability insurance policy is by starting at the very end of your attached forms and working backward, reading all the modifications, exclusions, and additions while marking up the base insurance policy (those first 16 pages) as necessary to match. Watch the video above starting at 4:30 to see Shelli explain it.
Your insurance agent should be able to discuss and diagnose your business needs, prepare a personalized policy, and fully explain it to you. That said, there isn’t a set code of ethics or responsibilities agents follow, and they can have varying degrees of experience in or understanding of your business. For the best support, take your time to carefully vet and select your insurance agent.
New here? Catch up by watching our first two discussions in this series—sharing more about Shelli’s background and expertise and breaking down what contractor’s liability insurance is—or check out one of our other contractor-focused series, such as our Cabinet Series.
