Commercial General Liability Insurance in Construction


As a subcontractor providing construction services to a contractor, you’re typically required by contract to provide evidence of commercial general liability insurance (CGL), automobile, worker’s compensation, employer’s liability, and umbrella or excess liability to protect your company from third-party lawsuits. When dealing with large contractors, they typically try to push off as much liability as possible to the subcontractors to reduce their own overhead, which results in some of the following contract requirements.

Hold Harmless Clauses

Nearly all construction contracts require the subcontractor to “indemnify, defend and hold harmless” the general contractor through the use of hold harmless clauses, also known as indemnification clauses. In Utah, subcontractors are responsible for the general contractor’s negligence through this clause, even when the general contractor is 99% responsible for a resulting liability claim. Most commercial general liability insurance policies include contractual liability coverage, which provides protection for the subcontractor for liability assumed by virtue of the hold harmless clause. Due to the simple reason hold harmless agreements vary between states, most contract language will require subcontractors to provide an additional insured modification to the subcontractor’s policy as a backup if the hold harmless clause is rendered void.

Additional Insured

Most upper tier contractors will require you to include an amendment to your liability policy that names the upper-tier contractor as an “additional insured” under your policy. In addition to serving as a backup precaution to hold harmless clauses, it also provides a duty to defend you and potentially the general contractor. What this means for you as a subcontractor is that the general contractor would enjoy the benefits of your policy’s coverage before their own policy would take effect. For example, if you were performing work for a general contractor at a job site and one of your employees started a fire or caused damage to the project, your insurance would cover any subsequent claims. Only when the coverage of your insurance policy is exceeded would the general contractor need to cover additional claims. This isn’t necessarily the only reason a general contractor would want to be included as an additional insured. The benefits of this clause to contractors are quite numerous, though the most common reasons include the following three:

  • Direct rights of action against the other insurer
  • Faster and cheaper litigation
  • Triggers by liability arising out of or caused by your work

These are just two ways in which general contractors reduce their own insurance costs and save money. While this does additional risk to you as the subcontractor, compliance in these insurance policies helps ensure that you continue to find general contractors willing to work with you. In part two of this segment, I’ll explain waivers of subrogation and evidence of insurance as additional methods through which general contractors place more responsibility on subcontractors.

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