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What Project Owners Need to Know About Contractors, Accidents & Liability


Risk InsuranceProject owners may be liable when under-insured contractors cause accidents.

Bill Willbrand, CPA, CCA, CCP, Partner in Charge, Real Estate Advisory Services, and Bill Goddard, CPCU, Principal, Insurance Advisory Services, talk with Construction Today about how to protect your business  assets when working with contractors.

Accidents happen.  When you have a contractor for a building project, the reality is that you may be liable for unforeseen disasters your contractors and subcontractors may have caused. Recently, a national cable provider contracted with a company to extend fiber-optic cable to businesses located in a popular entertainment and shopping district. While drilling, the contractor struck a natural gas line, causing a leak that led to an explosion that destroyed the restaurant, damaged nearby properties, injured many and killed one. Weeks later, survivors filed suit against the contractor and the cable company, among others. This case illustrates that a project owner’s liability may not end where its contractor’s liability begins.

Organizations that contract with third parties for any type of work must take a close look at their general liability insurance coverage. Failure to obtain the proper insurance could bankrupt your company if something goes wrong and a judgment is levied against you. Here’s what project owners should consider:

Do You Have Proper Coverage?

Your risk manager or an independent insurance advisor can help you evaluate your level of risk based on your industry and the type of work for which you use third party contractors. Each project should be reviewed separately.

Are Your Contractors Underinsured?

When selecting contractors to do work on your behalf, it’s critical to ask and verify that they are carrying the appropriate coverage. Your in-house risk manager or an independent insurance advisor can assist with this review. Working with contractors that are insured at sufficient levels could help protect your organization from financial exposure in the event of an accident. If your contractors are underinsured and have limited assets, those seeking damages will go after anyone associated with the disaster that may have financial resources.

What Should You Do?

Follow these five steps to help minimize risk:

  1. Review agreements you sign with your contractor. It should make them liable to indemnify and defend you against potential claims.
  2. Verify and evaluate your contractor’s coverage. The contractor’s indemnity and defense are only as good as the contractor’s insurance. Make sure you get evidence from their insurance company of their coverage. Then determine if it’s enough. Owners should consider being added to the contractor’s policy as an additional insured.
  3. Determine how much insurance you need. The answer can be different for each project.
  4. Your contractor’s insurance may not cover you. Make sure your insurance also covers you in case the contractor’s insurance doesn’t.
  5. Work with an independent insurance advisor. Insurance can be difficult to understand. There’s too much at stake to leave anything to chance. Engage an experienced professional to devise the right risk strategy for your business situation.

Bill Willbrand is partner in charge of Brown Smith Wallace’s real estate advisory services and construction practices. He has more than 25 years of experience serving clients in the construction and real estate industries. He can be reached at, or 636-754-0200.

Bill Goddard is a principal in the Brown Smith Wallace insurance advisory services practice. He has 40 years of risk management experience and specializes in insurance consulting and captive insurance strategy. Bill can be reached at, or 314-983-1253.

Click here to read the original Construction Today blog post.



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