Testimonial - E. Been, PCH Electric

"We just want to let you know how helpful you were and how you answered every question and how we felt so comfortable with you and you did not seem like a sales man but a real person whom cares about there customer and we wanted to thank you for that. We feel like we were taken care of and givin the best Insurance for our company. Thank you, Ethan Been (owner) P.C.H. Electric" 11/20/2009

You've been sued, Now what?

You come home after a long day and you're just about to relax when your doorbell rings. A smiling man asks you your name and when you say "yes", he hands you some papers and says you're being sued. Now what?

That little job you did last year is coming back to haunt you. You remember the job and remember how happy the people were about your work. You are confused and maybe a bit angry about why this is happening.

My recommendation is that you get some quailified legal advice as soon as possible. Start digging up your files and find the contract for the job and any change orders. As soon as you can, write down what you remember about the job. If you are insured, notify your insurance broker after talking to your attorney.

Many contractors get caught up in lawsuits for work they did not do. This is one reason why carrying liability insurance can protect you from the high cost of defending yourself .

Why you need to carefully read your insurance quote

Yesterday I got a call from a current client asking me why my quote to renew his liability policy was $400 more than a quote he got from another broker for the same insurance company. I asked him to fax me the quote for review. While the insurance parent company was the same, the coverage was not comparable at all. The "cheaper" quote stripped out some important coverages (it did not cover any water damage, no overspray coverage, no contractual liability, and defense costs would be paid out of the limits of insurance instead of the insurance company coffers). The other broker made no attempt to explain the difference.

The point is you must carefully read any insurance proposal to see if it fits your needs. Cheaper policies almost always have something vital missing.

Is the name of the insurance company listed on your quote?

Believe it or not, some insurance brokers send out written quotes for liability or workers compensation insurance but will not list the name of the actual insurance company providing coverage. Why do they do this? Competition.

They do not want you to be able to compare your quote with the quote from another broker representing the same or similar insurance companies.

When you get an insurance quote, always insist that the quote contain the name of the actualinsurance company providing your coverage. This will allow you to research the carrier online and compare quotes from different brokers.

Why do I need liability insurance? I've never had a problem with my work.

I hear this all the time from contractors who have worked for years without insurance and never had a problem. I tell them that's great! It shows they are quality craftsmen with satisfied customers. Unfortunately, you can't please everyone all of the time. Many contractors find themselves the victim of unscrupulous clients who are looking for a reason to sue and "recoup" the cost of their home improvements. Some contractors merely find themselves caught up in a lawsuit simply because they were on the wrong jobsite with another contractor who had a problem. When an accident or injury occurs someone pays.

How does a Manifestation clause alter a contractors general liability policy?

In an attempt to offer a cheaper version of a liability policy, some insurance companies offer a manifestation clause. This clause usually states that the insurance applies to injury or damage that FIRST occurs, FIRST diagnosed, or becomes apparent to any person.  If the injury or damage is continuously or progressively deteriorating, there may be no coverage.

Tool Coverage - Is it a good deal?

Most contractors have everything from simple hand tools up to large backhoes or tractors. I am often asked if tool coverage is a good deal. If you primarily use small hand tools (hammer, saw, wrenches, etc) the answer is probably no. All the tool policies I've seen (known as inland marine policies in the the insurance world) have deductibles, coinsurance limits, and pay out actual cash value. In my opinion you are better off setting up a side account and tossing a few dollars in there to build a fund to replace any lost/stolen tools. If you have larger equipment to insure, then an inland marine policy may make sense. Talk to your insurance broker about your options.

Liability Insurance Coverage Types

Full Occurrence - Coverage for insurance claims with damage or injury that occurred while the policy was in force. Best coverage.

Manifest Occurrence - Coverage for insurance claims on damage or injury that
FIRST OCCURRED while the policy was in force.

Claims Made - Coverage only if the damage or injury occurs during the policy duration and the claim is filed before the policy expires.

Major Liability Insurance Company Types

Admitted Insurer - Rates filed and approved by the California Department of Insurance. Member of California Insurance Guarantee Association.

Non-Admitted Insurer - Recognized by the California Department of Insurance, but rates are not filed with the state. Not a member of the California Insurance Guarantee Association. Lloyds of London is a well know non admitted insurer.

Risk Retention Group - A liability company owned by its members. No financial rating. Not a member of the California Insurance Guarantee Association.

Do I need to carry workers compensation insurance?

If you have an employee, even a day labor guy, the answer is YES.

"All licenses on active status, and all applicants for issuance of the license, must file evidence of workers' compensation or exemption from the requirements. The Certificate of Workers' Compensation Insurance is provided by the workers' compensation insurer. A certificate of consent to self-insure is secured from the Director of Industrial Relations. If the license is on inactive status with the board, the certificate does not have to be filed. Contractors who do not hire employees and who are exempt from this requirement should file the "Exemption from Workers' Compensation".
Contractors State License Board - 8/2009


If you fail to file either a certificate of insurance or the exemption form with the CSLB, your license may be suspended.

As a free service to my clients, we will file your certificate of insurance with the CSLB once your policy has been activated.

Why cheap liability insurance can be lethal to you

As a result of the current economic downturn, all contractors are looking for ways to trim expenses. Every day I get calls from contractors looking for the "cheapest" insurance they can find.  This is based on their belief that all liability insurance policies are the same. They are dead wrong and the decision to go cheap can be very costly.

No insurance policy covers everything. All policies contain exclusions. (things that are not covered) If you are a plumber, would you want a policy that has no coverage for water damage? If you are a painter, would you want a policy that has no coverage for overspray? If you are a general, would you want a policy that has almost no construction defect coverage? Would you want a policy that pays the lawyers from the same pot of money they use to pay your claims? What if the lawyers use up all the funds? Who pays then?  YOU!

Insurance companies can offer a "cheaper" product simply by eliminating coverage for the most common sources of claims. If a claim comes in and it is not covered, who pays?  If the claim is denied or is frivolous, can you afford to hire an attorney to defend your good name?

The old saying that you get what you pay for is very true when it comes to liability insurance. If you want a "cheap" policy, that is exactly what you'll get.

What's the difference between an Additional Insured and a Certificate of Insurance?

Most general contractors will request to be added to the liability insurance policy of a subcontractor as an additional insured. Why?

The typical additional insured endorsement will provide some defense and indemnity to the party named as an additional insured. If a subcontractor causes bodily injury or property damage while working for a general contractor, the general will want access to the protection afforded under the subcontractors insurance policy against claims made by the injured /damaged party. This endorsement is intended to accomplish this.

Warning: Not all additional insured endorsements are alike. In recent years many insurers are limiting the protection afforded under this endorsement. Discuss with your insurance consultant.

A certificate of insurance is nothing more than a piece of paper that shows the name/company insured, the policy number, the policy effective date, and the limits of coverage as of the day the certificate was issued.

How to reduce the risk of a lawsuit

Perform high quality work within the scope of your expertise.

Only use subcontractors who also do high quality work and will stand behind that work for years to come.

Be sure to respond quickly to any alledged defective workmanship issue.

Buy the Full Occurrence form of Commercial General Liability Insurance.

Be sure your subcontractors are insured and name you as an additional insured.

Maintain insurance year after year with no gaps in coverage.