In the world of construction and trade, every project holds the promise of growth and success. However, along with opportunities come risks that can potentially disrupt the smooth course of your endeavors. This is where trade and contractor’s liability insurance steps in as a crucial shield for businesses and professionals alike. 

In the construction and trades sectors, various risks are inherent due to the nature of the work involved. These risks can range from accidents causing property damage or bodily injury to third parties to mistakes or errors that lead to financial losses for clients. Trade and contractors’ liability insurance can help mitigate these risks by covering the costs associated with legal claims, lawsuits, settlements, and judgments arising from such incidents.

Whether you’re a seasoned contractor or a budding tradesperson, understanding the significance of this insurance is paramount in ensuring the longevity and security of your ventures. In this blog, we delve further into what trade and contractors’ liability insurance is to help you confidently navigate the world of trades and construction insurance.

What is liability insurance for tradespeople and contractors?

Trade and contractors’ liability insurance is a type of general liability insurance coverage specifically designed to protect businesses and professionals operating in the construction and trades industries. This insurance provides financial protection if the insured party (contractor or tradesperson) is held legally responsible for bodily injury, property damage, or other types of liabilities that may arise during their work.

What is the meaning of contract works?

“Contract works,” also known as “contractors all risks” (CAR) insurance, refers to an insurance policy designed to provide coverage for construction projects, including the materials, equipment, and work being carried out. This type of insurance is meant to protect contractors, builders, and project owners against a range of risks that can occur during the construction process.

Contract works insurance typically covers the following aspects:

  • Physical damage
  • Third-party liability
  • Contactor’s equipment
  • Materials in transit
  • Delay or business interruption
  • Professional fees

Contract works insurance is especially crucial for construction projects because of the numerous potential risks that can disrupt or damage the work. A construction site is inherently exposed to various perils, from accidents causing damage to ongoing structures to unexpected events like fires or storms.

This type of insurance helps provide financial protection to project owners, contractors, and other stakeholders by covering the costs of repairing or rebuilding damaged work, replacing stolen equipment, addressing third-party claims, and managing the financial impact of project delays.

What is the meaning of trade works?

“Trade works” typically refers to the specific tasks, activities, or services that professionals or tradespeople perform within a particular industry. In the context of construction and trades, “trade works” specifically refer to the specialized skills and services carried out by various tradespeople who contribute to the construction, renovation, or maintenance of buildings and infrastructure.

In the construction industry, trade works encompass a wide range of specialized trades, each with its own set of skills, tools, and expertise. Some examples of trade works include:

  • Electrical work
  • Plumbing work
  • Carpentry
  • Masonry
  • Painting and decorating
  • HVAC (heating, ventilation, and air conditioning)
  • Roofing
  • Flooring
  • Landscaping
  • Welding and metalwork

What is not covered by trade liability insurance?

Trade liability insurance, also known as general liability insurance or public liability insurance, provides coverage for a wide range of liabilities that businesses and tradespeople may face. However, there are certain exclusions and limitations to what is covered by this type of insurance covers. Here are some common situations and risks that may not be covered by standard general liability insurance policy:

  • Professional liability, including claims related to professional mistakes, errors, or advice (errors and omissions insurance).
  • Intentional acts or deliberate wrongdoing by you or your employees.
  • Car accidents if your business uses vehicles for work purposes (commercial auto insurance).
  • Product liability if your business manufactures, sells, or supplies products. (product liability insurance)
  • Property damage to your own property, as general liability insurance generally doesn’t cover damage to your own property. (property insurance or builders’ risk insurance)
  • Contractual liabilities that are not covered by general liability insurance.
  • Environmental risks and pollution-related claims (environmental liability insurance).
  • Fines and penalties imposed by regulatory agencies due to non-compliance with laws or regulations.

Is trade and contractor’s liability insurance important?

Trade and contractors’ liability insurance is essential for businesses and professionals in construction and trade industries. It is an investment in your business’s stability and growth. It’s a proactive step to manage risks, protect your assets, comply with legal requirements, and reassure clients that you are a responsible and reliable professional in the construction and trades industry. Below are some key reasons why this type of insurance is crucial:

Financial Protection

Construction and trade-related work can involve various risks, including property damage, bodily injury to third parties, and legal claims. Liability insurance helps protect your business from the potentially significant costs associated with legal defence, settlements, and judgments arising from such incidents.

Legal Requirements

Certain types of contractors are legally required to have specific insurance coverage in many provinces and territories. For example, some provinces may require contractors to have workers’ compensation insurance to cover employees in case of workplace injuries. Additionally, liability insurance may be mandated by regulatory bodies or licensing authorities for certain trades.

Liability Protection

Regardless of legal or contractual requirements, liability insurance is highly recommended for contractors. It provides protection against legal claims and potential financial losses arising from property damage or bodily injury caused by your work or your employees’ actions.

Risk Management

Liability insurance encourages risk management practices within your business. Knowing that you’re covered for potential liabilities can lead to more cautious and safety-conscious behavior, reducing the likelihood of accidents and claims.

Reputation Protection

Being covered by liability insurance helps protect your business’s reputation. Accidents and claims can lead to negative publicity, but having insurance in place demonstrates your commitment to addressing issues responsibly.

Contractual Requirements

Many clients and project owners may require contractors to carry certain types of insurance coverage as a condition of working on a project. This is particularly common in larger construction projects where clients want to ensure that contractors have the financial capacity to address potential liabilities.

Unexpected Events Protection

Accidents and unexpected events can still occur, no matter how careful you are. Liability insurance provides a safety net to help you navigate such situations without risking the financial stability of your business.

Client Confidence

Having liability insurance can make clients more confident in hiring your services, as they know they won’t be financially burdened in the event of an accident or damage caused by your work.

Do all contractors need to work with an insurance policy in Canada?

In Canada, the requirement for contractors to have insurance policies can vary depending on factors such as the province or territory in which you operate, the type of work you do, and the specific contracts you undertake. However, having insurance is generally advisable for contractors to protect themselves, their businesses, and their clients. This protection offers security against potential liabilities, safeguards business assets, enhances professionalism, and provides peace of mind. Liability insurance, in particular, is highly recommended to cover legal claims arising from property damage or bodily injury.

Researching and understanding the insurance requirements and recommendations for your specific province or territory is essential. Consulting with an insurance professional who specializes in the construction and trades industry can help you determine the appropriate types and levels of coverage for your business. Ultimately, while not all contractors are legally obligated to have insurance in Canada, having the right insurance policies can significantly benefit your business by protecting you from various risks and ensuring that you meet the expectations of clients and regulatory authorities.

No matter your industry, or business size, we have your back. Contact Oracle RMS to learn about ways we can deliver trade and contractor’s liability today.