Top 5 Things to Avoid When Getting GL for your 1M-10M Company
No. 5 "Claims made" vs. a "Full occurrence"
In the pursuit of savings, many large companies will opt for a "claims made" policy vs. a "full occurrence" policy. While the short-term savings are immediate, the long term exposure often negates these savings and a single uncovered claim can sink even the largest of ventures. A "claims made" policy is designed to cover damages from claims arising within the policy term (usually 12 months). Some "claims made" policies have what's called a "sunset" provision which extends the coverage to to or even three years but the industry norm is one year. "Full occurrence" policies, on the other hand, have a look-back period (or the period within which a claim can be made) of, on average, ten years.
Oftentimes, when deciding between a claims made or a full occurrence, it's helpful to look at the nature of the work being performed. It is rare that damages from painting, drywall, debris removal or landscaping will manifest seven years after-the-fact but with commercial roofing, industrial plumbing and structural welding, the likelihood is much greater. As a company grows and the number of jobs increase, it often becomes not a matter of if someone will file a claim, but when.
The full occurrence policy affords protection and peace of mind, well after the work is completed and the next project begins.
No. 4 "Read the Exclusions"
While signing up for Commercial General Liability might feel a bit like purchasing a home or vehicle, without the home or vehicle...but it is important to read the fine print.
All general liability policies have exclusion and reading through all of them can be exhausting. The most important thing is to identify any exclusions that pertain to the work that you do. If you have questions, ask your agent or ask for the actual exclusionary language itself.
Most of these exclusions can be removed by way of a 'buy back' which excludes the exclusion, thereby covering said exposure. An easy example of this is the common exclusion of work performed at schools, hospitals and churches. If you're remodeling an elementary school, and they are requesting to be added as an Additional Insured, you'll want to make sure that work is not categorically excluded before you step foot on the job site.
Other common exclusions include "open roof" damages for roofers, "heating element" exclusions for plumbers, "foundation repair" for concrete workers, and "stand-alone roofing" for general contractors.
No. 3 "Get It Right the First Time"
Shopping for insurance, for most, is not the most exciting activity one can engage in so, it's no wonder that many simply pick up a policy that's quick and inexpensive. Unfortunately, this can be costly down the road when the coverage purchased does not meet the insurance requirements being demanded by your clients.
If you have a laundry list of attributes that your GL coverage needs to satisfy, provide that to your agent on day one.
Many carriers do not allow for flat cancellations after a policy has been issued and bound. They are assuming risk the moment that bind takes place; typically to the tune of $1,000,000 at a minimum. Likewise, the agent has given time and attention to the application process and typically has a non-refundable broker fee to cover those costs.
Common Mistakes:
1. A client requests a "claims made" policy when a "full occurrence" policy is required.
2. A client goes with the least expensive carrier which carries no formal rating when an 'A Rated or better' carrier is required.
3. A client purchases a policy without requesting any one of a number of required endorsements (e.g. Additional Insureds, Primary Wording, Per-Project Aggregate or Waiver of Subrogation etc.).
Remember, even the most seasoned of agents is not telepathic. Providing as much information as possible from the start will help to ensure you get what you need the first time!
No. 2 Know How Policies Influence Each Other
Just like with medications, not all policies play well with others. As your business grows, you can anticipate your risks (and the coverage designed to protect you from them) will grow in kind.
If you anticipate having multiple lines of coverage within the next fiscal year or two, communicate that to your agent so, that, when the time is right, you are eligible to do so.
Common mistake:
A client reaches out requesting the least expensive GL policy. Presented with a number of options, they go with a "claims made" policy through a non-rated carrier with no additional endorsements.
Two months pass and the same client comes back advising they are now required to carry a 3M Excess policy on top of their General Liability.
That presents an issue as you cannot "stack" an Excess policy on top of a GL policy of that nature. In fact, most Excess carriers will require that the underlying General Liability coverage be written on a "Full Occurrence" basis, through an A Rated carrier, with limits of 1/2/2 Million and Defense Outside the Limits, Per-Project Aggregate, Waiver of Subrogation, Primary Wording and blanket Additional Insureds endorsements all included.
If that client decides to fulfill the new Excess insurance requirements, they will have to cancel their existing GL and start over with a new underlying policy that will support the Excess coverage.
This is hardly limited to the General Liability as minimum thresholds for Commercial Automobile, Workers Compensation, Environmental/Pollution and even Errors and Omissions need to be honored as well.
The easiest way to avoid this is thorough communication with your agent. Tell 'em where you're at now and where you'd like to be in the next few years so they can help to chart the trajectory of your business and anticipate the protection that growth inevitably demands.
No. 1 Choosing Pricing Over Service
This may sound like a marketing line but the reality is that saving a few dollars at the beginning of the year loses any semblance of value when you cannot obtain a time-sensitive Certificate of Insurance to bid on a project or step foot on a site, cannot reach a live human being when someone becomes hurt or something gets damaged, have a question on your GL or WC audit, need a new line of coverage bound same day for a particularly lucrative contract or experience an inadvertent cancellation due to lack of premium payment or audit compliance.
Even understanding the basics of what is covered and what's not, what drives pricing, how do you 'project and protect' as your business grows can be frustratingly convoluted or, with the right advocate and agent, be surprisingly straight forward.
Investing in a seasoned agent with years of industry experience and a genuine desire to see his clients grow and succeed can be a decision that pays dividends for the life of your business.