Contractors accept numerous contractual obligations in construction contracts. For example, contractors generally agree to perform the work in accordance with the plans and specifications, to perform the work in a workmanlike manner, and to complete the work by an agreed-upon date. They also agree to pay their suppliers and subcontractors (to avoid liens on the property), to provide notice of needed changes to the design documents, and, in some cases, to perform the contracted work for an agreed price, even if their actual costs exceed that price. The liabilities that are created by these obligations are considered the normal risks of doing business as a contractor.
An additional type of contractual liability exposure involves the assumption of another party’s legal liability for losses in connection with its work on the project. For example, project owners typically require the general contractor to “indemnify and hold harmless” the owner for third-party liability they incur as a result of the contractor’s work for them. General contractors typically do likewise with respect to subcontractors. The notion behind this risk transfer is that the party performing the work should bear responsibility for any injury or damage that is incurred by third parties in connection with that work.
It’s important to work with an insurance agency that specializes in insurance for contractors because it can be confusing. Call our office to have a contractor insurance specialist to review your account and take the confusion out of your life.