In the case of contractors and those who are involved in construction businesses, a general liability insurance policy covers the cost of lawsuits that are filed by third parties over bodily damage or property injury caused by their business or any of their employees.
It means, if your construction business is sued, you would have to pay legal fees, damages, and settlement costs, regardless of whether you’re found liable or not. General liability insurance, also known as contractor’s liability insurance, can assist in protecting contractors or individuals engaged in construction businesses. It covers the expenses of lawsuits filed against them.
A general liability insurance company would also give compensation to the third party on your behalf. In case injured party incurs any medical expenditure as well, your general liability insurance company will cover that as well.
It is essential to note, general liability insurance would not cover every lawsuit, but it would help by covering most of the common and costly lawsuits. As per your business requirement, you can expand your general liability cover and includes vendor endorsement, oral & written contractual liability, damages to premises rented to you, etc.; by paying an additional premium.
Usually, general liability insurance offers cover for contractors with respect to third-party lawsuits over-
- Damages caused to property
- Third-party and client injuries, for instance, your client trips over a wet floor in your office or falls over a power cord and breaks his leg
- Reputational injuries, for instance, your competitor alleges that you have tarnished their reputation through your advertisement.
- Problems arise due to your construction activity or installation of products
Further, there are some instances when general liability insurance will not offer coverage. In case of intended injury, war, personal and advertising injury, etc.; you will not get any coverage under the general liability insurance policy.
Read more: What is Commercial General Liability Insurance?
Irrespective of what type of construction or installation business you are running, general liability insurance can safeguard you from various lawsuits which may happen due to the work you complete. Remember, a general liability insurance policy is something that you should purchase as it covers many of your company’s biggest risks and thus, secure you from lawsuits and hefty compensation that could otherwise disrupt your business.
Case
Since 2012, K.S Air Conditioner has made a name for itself in the electronics industry. The company has a team of expert professionals who have so far completed every project successfully. Though the company always abides by strict professional norms. It has also purchased general liability insurance to get coverage in case something goes wrong. Last year, the company got a contract for installing ten air conditioners at K.K School.
The company sent its team to the site which installed all the air-conditioners. While eight air conditioners were installed correctly, there were issues with two air conditioners installed in the computer room. The coolant pipe narrowed, leading to the accumulation of condensation and frost. Here, the moisture started to rot the floors of the room.
In this situation, the school filed a case against K.S. Air Conditioner for failure to deliver what it was promised. Here, the lawsuit was initiated for damages pertaining to repair expenses, deteriorated floors, and other monetary losses.
Read more: What are the different types of liability insurance?
In this case, as K.S. Air Conditioner had a general liability insurance policy, the company approached the insurer for the claim settlement. The insurer appointed a surveyor who came to do a site inspection and found that the losses happened due to the wrong installation of the air conditioner and therefore, the claim was genuine. Here, the insurer agreed to settle the claim of K.S. Air Conditioner. The insurer paid the cost of the lawsuit along with the damages which the court asked K.S Air Conditioner to pay to the school.
Without a general liability insurance policy, it would have been a major financial loss for K.S. Air Conditioner which would have to pay compensation from its pocket otherwise.
