Subcontractor Error Caused $100k Damage: How My GC Policy Responded (Then Subrogated!)
The Mistake I Didn’t Make, But My Insurance Paid For (At First)
We finished a beautiful kitchen remodel. Two weeks later, faulty wiring from the electrician we hired started a fire, causing $100,000 in damage. The homeowner’s contract was with me, so they sued us. Our general liability policy immediately stepped up, paying our client for the repairs to protect our reputation. But here’s the crucial part: our insurer then went after the electrician’s insurance company to recover the full amount. That’s called subrogation. Our policy protected us first, then held the responsible party accountable. It was a masterclass in how GC insurance works.
Insuring Your General Contracting Business: CGL, Workers Comp, Builder’s Risk & More
The Three-Legged Stool of Construction Insurance
As a young GC, my mentor told me to think of my insurance as a three-legged stool. The first leg is General Liability, for when your subcontractor damages a client’s property. The second is Workers’ Comp, for when your employee falls off a ladder. The third is Builder’s Risk, for when a windstorm blows down the framing of a new build before it’s finished. He said if any one of those legs is missing, your entire business is unstable and one bad day away from collapsing.
Job Site Liability: Injuries to Visitors, Damage to Adjacent Property
The Nail That Found the Neighbor’s Tire
We were framing a new house. The homeowner’s curious brother stopped by the job site for a tour. Despite our warnings, he stepped on a stray board with a nail, requiring a trip to urgent care. A week later, the next-door neighbor complained that our excavation work had cracked their driveway. Neither of these incidents involved our own employees or the house we were building. Both were covered by our Commercial General Liability (CGL) policy, which protects us from injuries to third parties and damage to property that isn’t ours.
Completed Operations Liability: Defects Appearing AFTER the Job is Done
The Deck That Collapsed a Year Later
We built a beautiful second-story deck for a client. A year after we finished the job and were paid, we got a horrifying call. The deck had collapsed during a family barbecue. An investigation showed a key support ledger had been improperly attached. Our standard liability policy wouldn’t cover it because we weren’t on site. Luckily, our policy included “Completed Operations” coverage. This crucial extension protects you from liability for property damage or injury that occurs after your work is done, covering your craftsmanship long after you’ve left the job.
Workers’ Comp for Your Employees AND Managing Subcontractor Certificates!
My Guy, My Problem. Your Guy, YOUR Problem.
My employee, Dave, fell off a scaffold and broke his leg. Our Workers’ Compensation policy immediately covered his medical bills and lost wages. No questions asked. A month later, an electrician we hired fell and tried to file a claim against our policy. We were able to stop it because we had a “Certificate of Insurance” proving he had his own workers’ comp coverage. This is why you ALWAYS get certificates from subs. If their employee gets hurt on your site and they’re uninsured, your policy could be forced to pay.
Builder’s Risk Insurance: Covering the Structure During Construction
The Night the Walls Came Down
We were three weeks into framing a custom home. The walls were up, but the roof wasn’t on yet. That weekend, a severe thunderstorm with 70-mile-per-hour winds rolled through and blew most of it down. It was a $60,000 setback. Our general liability policy wouldn’t cover it, as that’s for third-party damage. Instead, our Builder’s Risk policy saved us. This special property policy is designed to protect the structure itself during the course of construction, covering losses from fire, theft, or weather.
Commercial Auto for Your Work Trucks and Vehicles
Your Personal Policy Won’t Cut It
My first hire, a young carpenter, was driving his own pickup truck to the lumber yard to get materials for our job. He got into an accident and assumed his personal auto insurance would cover it. His insurer denied the claim, stating that since he was using the vehicle for business purposes, it wasn’t covered. It was a huge wake-up call. We immediately bought a Commercial Auto policy that covers our company truck and provides liability protection when employees use their own vehicles for work errands.
Inland Marine Insurance for Your Tools and Equipment (On/Off Site)
The Stolen Trailer
As a GC, my tools are my livelihood. I keep about $30,000 worth of equipment in a work trailer. One morning, I showed up to the job site, and the entire trailer was gone. My commercial property policy wouldn’t cover it because the trailer wasn’t at my business address. My Commercial Auto policy wouldn’t cover it because it only protected the truck. Luckily, I had an Inland Marine policy. This type of insurance is specifically designed to protect your tools and equipment when they are in transit or at a job site.
Comparing GC Insurance Packages: Getting the Right Limits and Coverages
The Cheaper Policy That Would Have Bankrupted Me
When I started my business, I got two insurance quotes. One was $2,000 cheaper but had a $1 million liability limit. The other had a $2 million limit. I almost took the cheaper one. Then, my first big client, a commercial developer, sent me their contract. It required me to have a $2 million limit. If I had bought the cheaper policy, I would have lost the biggest job of my career. It taught me to buy the insurance for the jobs you want, not just the jobs you have.
Subcontractor Default Risk: Can Insurance Help? (Surety Bonds Are Key)
When Your Plumber Vanishes
We were in the middle of a huge commercial project when our plumbing subcontractor, who we had already paid $50,000, declared bankruptcy and vanished. The project ground to a halt. We were facing massive delays and the cost of hiring a new, more expensive plumber. This isn’t an insurance claim. It’s a performance risk. This is why, on big jobs, clients require us to get “Surety Bonds” on our major subs. The bond is a guarantee from a third party that if the sub defaults, the bonding company will step in to pay to finish the job.
Filing a Claim for Job Site Damage or Injury: Incident Reporting is Crucial
The Photo That Saved Us Thousands
A delivery truck driver scraped the side of a client’s garage while dropping off drywall. It was minor damage, maybe $500. My site supervisor took photos, filled out our company incident report, and had the driver sign it, all within 10 minutes. A month later, the driver’s company tried to claim we had caused $5,000 of pre-existing damage to their truck. We sent our insurer the time-stamped photos and signed report. They shut the claim down immediately. Diligent, immediate reporting is your best weapon.
My Experience Hiring a GC: Checking Their Insurance Was Priority #1!
The Bid I Threw in the Trash
My wife and I were getting bids for a kitchen remodel. One GC came in with a bid that was $5,000 cheaper than the others. It was tempting. But when I asked for his insurance certificate, he hesitated. The other two GCs had provided theirs upfront. I realized the cheaper bid was likely because he was skimping on proper insurance. I thought, “If his employee gets hurt, am I going to get sued?” I threw his bid in the trash. I was willing to pay more for the peace of mind.
Contractual Risk Transfer: Using Contracts AND Insurance to Protect Your GC Business
The “Additional Insured” Endorsement That Saved Me
We hired a roofing subcontractor for a large project. Our contract required him to list our GC business as an “additional insured” on his liability policy. Six months later, his faulty work led to a massive roof leak, causing $75,000 in water damage. The client sued us. Instead of filing a claim on our own policy, our lawyer immediately tendered the claim to the roofer’s insurance company. Because we were an “additional insured,” his policy had to defend us and pay the claim. It never even hit our insurance record.
Pollution Liability Concerns for General Contractors (Disturbing Contaminants?)
The Dirt That Wasn’t Just Dirt
We were excavating a foundation for a home addition in an old neighborhood. We didn’t know the site was a former industrial property. Our digging disturbed soil contaminated with lead and chemicals, which then washed into the neighbor’s yard during a heavy rain. The neighbor sued us for cleanup costs. Our standard CGL policy specifically excludes pollution. Luckily, we had a separate Contractor’s Pollution Liability policy. It paid for the expensive environmental cleanup, protecting us from a risk we didn’t even know existed.
General Contractor Insurance: Building a Foundation of Protection
Your Most Important Tool
As a General Contractor, you build things. You pour foundations, frame walls, and create homes and businesses. But before you do any of that, you must build a foundation of protection for your own company. A comprehensive insurance program—with liability, workers’ comp, and builder’s risk—is your most important tool. It’s more critical than your hammer or your saw. It’s the framework that allows your business to withstand the inevitable storms of property damage, employee injuries, and lawsuits, ensuring that what you’ve built doesn’t come crashing down.