Commercial General Liability Insurance for Contractors.

Commercial General Liability Insurance is generally not legally required in Ontario. However, many clients, municipalities, general contractors and project owners require contractors to carry liability insurance before work begins.

Many government, municipal and public-sector contracts require Commercial General Liability Insurance and may specify minimum liability limits such as $2 million, $5 million or more.

It depends on your policy wording and the contractual relationship. Always discuss subcontractor exposures with your insurance broker to ensure your business is properly protected.

Generally, Commercial General Liability Insurance does not cover the cost of repairing or replacing your own faulty workmanship. However, resulting damage to other property may be treated differently depending on the policy wording and the circumstances of the claim.

Many Commercial General Liability policies include Products and Completed Operations coverage, which may help protect against covered claims arising after your work has been completed, subject to the policy wording.

Commercial General Liability Insurance generally does not insure rented tools or equipment against damage or theft. Separate equipment or rental insurance may be required depending on the circumstances.

The appropriate liability limit depends on your trade, contract requirements, project size and risk exposure. Many Ontario contractors purchase $2 million or $5 million in Commercial General Liability Insurance.

While $2 million may satisfy the requirements of some contracts, many contractors today choose $5 million in Commercial General Liability Insurance, particularly as claim costs and legal awards continue to increase.

When deciding on a liability limit, consider more than just the minimum contract requirement. Ask yourself: If your business were found legally liable for a serious third-party injury or property damage claim, how much of your own assets would you be prepared to risk?

For many contractors, the additional cost of increasing liability limits is small compared to the financial protection it can provide.

Many commercial, industrial and government projects require $5 million in Commercial General Liability Insurance. Even when it isn't contractually required, many contractors choose higher limits to better protect their business from potentially significant liability claims.

Rather than asking, "What's the minimum I need?", consider asking: "What liability limit would allow me to confidently continue operating my business if a major claim occurred?"

Your broker can help you determine an appropriate liability limit based on your trade, operations, project size and overall risk exposure.