If you want to keep your general liability-insurance premiums in check, you may want to start with a thorough analysis of your client and subcontractor contracts. Well-worded documents that clearly establish the responsibility of all parties, but especially the remodeler, will keep claims against your company and ultimately your premiums to a minimum.
Obtaining general liability insurance has become a remodeler's biggest nightmare, thanks to a wave of claims for construction defects and other litigation, says Mark W. Kinsey, a partner with wife Carol in PKG Insurance Associates Inc., Doylestown, Pa. "Not only do they have to contend with soaring rates, lack of availability for general liability and other issues that are putting a squeeze on insurance, but they have to make certain that they can cover themselves properly from the unexpected or escalated job costs that result from a claim," he explains.
Kinsey says construction-defects litigation has hobbled residential contractors’ ability to get affordable insurance in places such as California, Colorado, Florida, Nevada and other high-growth states. "The rules have changed. The legal system has changed," he says.
Contracts can aid in preventing liability claims against the remodeling contractor if they’re worded properly, updated regularly and checked by an attorney who knows construction law and local building codes. Insurance companies are cautious, so they prefer to do business with firms that have their own ducks in a row, Kinsey says.
He offers the following tips on how remodelers can protect their businesses:
"In today's legal environment, the strength of the contract is everything," Kinsey says. "Handshakes and your word will not protect you." But a carefully written and frequently reviewed contract can go a long way toward shielding your company and saving some money on insurance premiums.
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