Homeowners and Contractors - General Liability Insurance

Posted by Edward C. IpMar 25, 2022

Accidents happen, and obtaining general liability insurance is a simple, yet crucial precautionary step you can take to protect yourself from being liable for large sums of money. When a property owner hires a contractor for work on their property, there is a lot of risk involved for both parties. Thus, it is important for the Owner and Contractor to have a contract protecting both their interests, which may save both parties from future headaches, time and expenses.  

General Liability Insurance generally covers damages to the Owner's property during a construction project, workers' injuries while on site, and negligent or defective work performed on Owner's property. It does not, however, cover the quality of work provided by the contractor. In California, contractors are required to fill out an Acord 25 policy form and obtain a “Certificate of Liability Insurance” from the California Contractors Insurance Services. When reviewing the certificate, it's important to make note of all named individuals which can include, but are not limited to, the: 

  • Producer (Insurance Company); 
  • Insured (Contractor); 
  • Certificate Holder (Owners). 

Typically, the Certificate Holder is also referred to as a party who is the “Additional Insured”. In order for the Additional Insured party to have any rights to submit claims under the insurance policy, Owner's and Contractor's Agreement MUST state that Contractor is to name Owner as “Additional Insured” or as “Certificate Holder” of the general liability insurance policy. Without this inclusion in the contract, under California law, Owner will not be able to assert rights as an “Additional Insured.”

As a rule of thumb, Contractors should carry “occurrence coverage” rather than “claims-made” coverage. Simply because the latter only covers claims made within the period covered by the policy, while occurrence coverage spans beyond the policy period. Occurrences are accidents that happen or have happened during or after the completion of the project, followed by a claim filed by the Owner. The statute of limitations for filing a claim in California is 10 years, however policies may include a provision called the “sunset clause”, limiting this to a predetermined deadline to file any claims after the end of the policy period. 

General liability insurance is an absolute must when entering into any contractual agreement for construction. In order to avoid costly lawsuits and paying hefty sums in damages, get an experienced construction attorney to review your contract. The Law Offices of Edward C. Ip & Associates is here to help you go over your contracts, so please don't hesitate to call us at (626) 228-0638 today! 

**The information provided on this post does not, and is not intended to, constitute legal advice; rather, all information, content, and material on this post are for informational purposes only.**