United States
Hong KongInsurance a contractor must carry
Workers compensation covers employee injury on a no-fault basis. Commercial general liability covers bodily injury and property damage to third parties. Builders risk covers the work in progress.
Three policies, three exposures, and the exam asks which one responds to a described loss.
The three
| Policy | Covers |
|---|---|
| Workers compensation | Employee injury arising out of employment, no-fault |
| Commercial general liability | Bodily injury and property damage to third parties |
| Builders risk | The work in progress, and materials |
Employee injured on site: workers compensation. Passer-by injured by falling material: general liability. Partially built structure destroyed by fire: builders risk.
Workers compensation is no-fault
The employee does not have to prove the employer was negligent, and in exchange generally gives up the right to sue.
That trade is the whole design of the system, and it is asked directly.
Treating an employee as an independent contractor to avoid workers compensation premiums exposes the business to back premiums, taxes, penalties and an uninsured injury claim. It is a recurring exam scenario because it is a recurring real-world failure.
Additional insured
An owner or general contractor commonly requires naming on a subcontractor's liability policy.
That extends the policy's protection to them for liability arising from the subcontractor's work. It is not the same as a certificate of insurance, which is only evidence that a policy exists. Three exposures.
Indemnification
A contractual promise to cover another party's defined liability. It shifts risk by contract rather than by policy, and it works alongside insurance rather than instead of it.
An indemnity that is not backed by insurance is only as good as the indemnifying party's balance sheet.
Common questions
What insurance must a contractor carry?
Workers compensation for employees, commercial general liability for third parties, and commonly builders risk for the work in progress.
What does no-fault mean?
The injured employee need not prove employer negligence, and generally gives up the right to sue in exchange.
What does builders risk cover?
The work in progress and materials, against loss during construction.
What is an additional insured?
A party named on another's policy, extending protection to them for liability arising from that party's work.
Is a certificate of insurance the same as coverage?
No. It is evidence a policy exists, not a grant of rights under it.