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 30 years in insurance and risk management and a focus on the construction industry, Shelli is a wealth of knowledge, due both to her extensive experience and customer-driven approach. 

In this episode, Shelli goes deeper into understanding contractor liability insurance exclusions, including what they are, how to identify them, and why it’s crucial to be aware of them before you choose a policy to ensure your business is protected. 

This episode builds off points discussed in this series’ previous episodes, particularly How To Read Your Contractor Liability Insurance Policy. If you haven’t watched them yet, we suggest catching up before continuing this episode.  

  1. Contractor Insurance Liability Series Introduction
  2. What is Contractor Liability Insurance?
  3. How To Read Your Contractor Liability Insurance Policy
  4. Why Consulting a Risk Management Specialist Makes Sense

Once you’ve done that, watch our discussion in the video above or keep reading to get the highlights.

Common contractor liability insurance policy exclusions and how they can affect your business 

There are many built-in exceptions in a general liability policy, such as exceptions around automobiles, pollution, and workers’ compensation. There will also be specific policy exclusions depending on your scope of work and desired coverage. These should be based on the questionnaire you complete when requesting a quote that defines what type of work you do or don’t do. 

Sometimes, the exceptions can help you save on costs. For instance, if you only build standalone tract housing, you don’t need to be insured for work on condo renovations, or vice versa. 

However, it’s crucial that the exclusions cover the exact work that you do and don’t negate it. It sounds obvious, but Shelli gives an example of a risk management client of hers who was building a 14-unit townhome project and requesting insurance bids. On a received bid, the insurance agent had listed “townhomes” as the project, but when Shelli requested the forms list, she discovered that townhomes were excluded from the policy coverage, making the policy completely useless for her client. 

Some common exclusions to keep an eye out for include limitations around tract homes (which go by many different terms), condos, or attached multi-family units. Action over exclusions are important to be aware of, especially for contractors in Washington state. According to Washington’s Safety and Workplace Act, a project’s general manager is responsible for the safety of a workplace. Responsibility and liability can get a little sticky between subcontractors and general contractors if there’s a lawsuit. Shelli talks more about this in the video starting at 4:06.

Action over exclusions can be found in different parts of the policy, so it’s important to look everything over closely and have someone who understands the language to look for. Shelli notes that you’ll want to go to your policy definitions and look to see what’s listed under “insured contract.” There should be subpoints marked as A through F. If there isn’t an F subpoint, then you don’t have contractual liability, or tort liability.    

How to identify and evaluate policy language to limit your exposure

First, look at your forms list that comes with your quote; it’s often found right behind the decks page. It should clearly list what’s excluded from your policy. However, if you’re going through a surplus lines company that isn’t regulated, “common policy exclusions” are too vague, so you'll want to see it. 

As you’re reading through your exclusions, keep the policy definitions list on hand to make sure you correctly understand the terms the policy uses. It could define something slightly differently than what you expect or are used to, which could have serious effects on coverage for your business.  

While it’s important to carefully go through and understand your policy yourself, you also need to work closely with your agent or risk management specialist, relying on them to fully understand your business and needs, and be watching out for your best interests.

Looking for more help understanding contractor liability insurance policies, particularly in Washington state? Check back soon for the next installment in the series. You can also find more industry tips and tutorials here