Public Liability Companies

Laws Governing Contractor Liability Insurance

Companies that hire contractors to do their construction work must be very particular in their selection. They must mandatorily ensure that their contractors have valid licenses. Furthermore, they must ensure that the contractor liability insurance policies that the contractors hold are valid not only throughout the entire lives of the projects, but additionally at least up to 10 years after their scheduled completions. Also, developers must ensure that all the subcontractors of these contractors mandatorily meet these requirements. Development companies must make sure that the liabilities of the contractors must in no case be less than that of the companies themselves. The same applies between contractors and their respective subcontractors. This Article will take a closer look at contractor liability insurance and laws governing it in the United States.

Companies developing construction projects must ensure all these requirements are met before they actually sign agreements with contractors. Otherwise, they are liable to bring financial loss upon themselves if something goes wrong - in extreme cases it can end in bankruptcy for them. The same conditions apply to contractors when the contractors sign similar agreements with their subcontractors.

Contractor regulations stipulates that adequate compensation be made at all costs by contractors to third parties who have suffered injuries or property damage. This is only applicable when the proven negligence of contractors or that of their workmen is the cause of the accident. In case the negligent action is due to subcontractors or their workmen, the compensation is to be made by the negligent subcontractors.

The law further binds the negligent actions of the workmen directly to the subcontractors or the contractors as may be applicable. What this means is that the compensation is to be directly paid by the subcontractors and not by the workmen. In case the negligence is by the workmen of the contractors, the compensation is to be made by the contractors themselves. This is because the contractors/subcontractors have engaged the services of these respective workmen.

The law applies this principle of fixing responsibility for the negligent actions of persons/entities further up the chain to the actual development company itself. In other words, the contractors are responsible for the negligent actions of the subcontractors engaged by them. Moreover, the project development company is also responsible for the negligent actions of the contractors engaged by them.

The law further provides provisions such that the contractors pay the compensation in lieu of their negligent subcontractors. This would apply when these subcontractors, on whom the responsibility of compensation has been affixed by courts, are not in a position to pay it. In case the contractors are unable to meet the financial obligations of the claim, the development company themselves must foot the bill.

This is where and why owning current contractor liability insurance policies become very important for contractors and their subcontractors. As far as the  development companies are concerned, they need to mandatorily have current comprehensive general liability (CGL) insurance policies.

Companies must further sign surety bonds with all their contractors and contractors with all their subcontractors. The companies and the contractors are obligated by law to deposit the bond money with the state Construction Contractors Board (CCB).

Finally, the above contractor liability insurance and CGL policies should cover all important aspects and options of a commercial business. Roofing, demolition, lead abatement, difficult construction, pollution and other environmental issues are some of the options that can be covered in contractor policies. Insurance agents and brokers can provide necessary information, answer questions and provide online quotes and rates on a given policy. It is critical for all parties involved in a construction project to fully understand their obligations regarding this necessary form of liability insurance.

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