What Subcontractors Need to Know About Builder’s Risk vs General Liability

General contractors often hire subcontractors to help them with work they cannot do but are ultimately responsible for completing. For example, a general contractor may hire a subcontractor to do the wiring and electrical or the plumbing for a home. Subcontractors need to know when certain events require them to use their own general liability insurance to cover claims versus when they can rely on their general contractor’s builder’s risk policy.

Why is this important? Knowing which damages fall under the scope of which policy can help subcontractors avoid making unnecessary claims against their own policy. If subcontractors make claims too often, they can see an increase in their insurance premiums.

Which Policy Covers What Damages?

General contractors purchase builder’s risk insurance to protect the structure, materials, and equipment they use to build. Policies vary, but they often cover damage related to:

  • Certain weather events
  • Fires
  • Vandalism

Most builder’s risk policies provide coverages for damages related to outside events rather than issues related to the construction work itself. However, some policies are all-risk. This means the policy covers a wide variety of damages except those clearly omitted—this means the policy can cover damage caused by subcontractors.

General contractors require their subcontractors to have general liability insurance as well. This acts as a safety net for general contractors because they are responsible for their subcontractor’s work. General liability policies provide coverage for:

  • Property damage
  • Injuries
  • Slander, libel, etc.

General liability policies kick in when the claim occurred in a covered location such as the worksite and the subcontractor is obligated by law to cover the damages. This policy can also provide coverage for legal fees as well in the event that the claim goes to court.

The ambiguity derives from the fact that both policies can technically cover damages caused by the subcontractor. The Reilly Company can help subcontractors untangle the subtle nuances between these types of policies. Contact us today to learn more about builder’s risk and general liability policies.

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