General Liability Insurance for California (and as an example for other states)

By Diane Dennis

General Liability Insurance

In California you can usually bid work without general liability insurance but most often you cannot perform the work without that liability insurance.

Liability insurance costs vary based upon the amount of liability you go with, ie: one million, two million, three million or more.

It also varies based upon the type of work you will be doing, the gross receipts of your company, and total payroll expenses.

Typically, you will pay a down payment on your general liability insurance and then make 9 or 10 consecutive monthly payments.

Your best bet here is to check out several different insurance companies (make sure you look specifically for companies that "do" construction general liability insurance) through various agents, and talk to other contractors to find out which companies they are using and how their general liability insurance providers are performing.

Also, these insurance companies have ratings just like the bond companies do: A++, A+, A, A-, B+, etc. Be sure that you find out what each company's rating is while you are obtaining quotes from various agents.

Admitted General Liability Insurance Carriers vs. Non-Admitted General Liability Insurance Carriers

At one time I thought that it was preferable to purchase my liability insurance from a liability insurance company which is 'admitted' in California (as opposed to non-admitted) but due to an e-mail I received from Hugh Thorne (Insurance Agent), I now know that it is not always necessarily better.

California general liability insurance companies which are California 'admitted' carriers are required to place a certain amount of funds in to a special account, governed by the California Insurance Guaranty Association (CIGA), to protect policy purchasers (you) if the carrier were to go out of business, and/or file bankruptcy, and/or just plain flake out.

General liability insurance companies which are not California 'admitted' carriers do not place funds into this special account, therefore you are not protected by CIGA if the insurance company has problems.

However, according to Hugh, sometimes new contractors with no business experience, and/or particular types of subcontractors, may find it difficult, if not impossible, to find an admitted carrier to write their liability insurance policy.

Surplus lines (or non-admitted) carriers fill this "need" for many contractors. It is the agent/broker's responsibility to offer coverage from well respected, financially stable insurance companies, whether they be admitted or non-admitted.

Says Hugh "It could be better to be insured by an A++, non-admitted company, than a B+, admitted company . . . If the B+, admitted company goes 'belly-up', CIGA would only pay up to $500,000 of a liability insurance claim - with the subcontractor/ contractor left, uninsured, for any additional liability."

General Liability Insurance Certificates aka General Liability Certificates of Insurance

For most every project you work on, you will be required to provide an original certificate of insurance from your insurance agent to show your customer that you do indeed have general liability insurance.

Some insurance agents excel in how quickly they supply the certificate to your customer, and other agents do not.

Many times you can't even step foot onto a project until the general contractor has that general liability insurance certificate from your agent.

If your agent makes a mistake and does not supply the certificate soon enough, it could feasibly throw you into breach of contract with your general contractor, because you are unable to man the job when you are supposed to because you have not provided the certificate of insurance.

It is not unreasonable to expect your insurance agent/broker to process your certificate of insurance on the same business day that you have made the request, provided you're not trying to "slip it in under the wire", meaning pushing it too near to the time your insurer closes for the day.

Some agents will automatically mail you a copy of the 'cert' (certificate of insurance) at the same time that they mail an original to your customer, but if you have a quick job you may need a copy quicker than the postal service can deliver one to you.

A suggestion here is: when you request your agent to mail a certificate of insurance to your customer, also request that the agent fax a copy to you. The reason for this is two-fold: a) peace of mind that your request has been processed and b) in times of urgency, general contractors will usually accept a fax copy with your promise that an original is in the mail to him.

Chances are that the certificate of insurance is being mailed if you've received a fax copy. 

Besides which without the fax copy you really won't know whether or not the certificate is being processed in a reasonable amount of time ... until and unless your general contractor and/or owner calls you and tells you "We haven't received your liability insurance certificate and you can't start work until we have it."

Yikes! Nothing like being in breach of your contract before you even start the project!

Make sure your insurance agent or broker gets your liability insurance certificate of insurance to your customer ASAP!

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