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Do general contractors need liability insurance for architecture or engineering projects?

Q: Do general contractors need liability insurance for architecture or engineering projects?

A: When you get to the building or construction phase of a project, your architecture and engineering firm will probably need to hire a general contractor to bring that project to life. But you can't just hire any general contractor — you need one who is properly insured. In the event of a lawsuit over the completed work, the plaintiff's lawyer may sue everyone involved with the project — including the general contractor. That's why you should always make sure the contractor carries adequate General Liability Insurance before they begin working with your firm. For proof of coverage, ask to see their Certificate of Liability Insurance (COLI). Construction professionals are often required to offer proof of insurance before they sign a contract, so your general contractor will likely already have their COLI ready to go.

Liability Insurance Details: Protection from Frivolous Lawsuits

Even when you provide flawless service on an architecture or engineering project, you can't guarantee that the big-picture design is just as perfect. After all, there's only so much you can do while overseeing a project's construction.

If your architecture or engineering firm gets sued over professional negligence, your general contractor will likely to get dragged into the legal mess, too. And even if the claim doesn't have much merit, it still takes time and money to resolve a lawsuit. The U.S. Chamber Institute for Legal Reform estimates that, on average, it costs a small business $2,000 to $5,000 to get a frivolous lawsuit dismissed.

Furthermore, architecture and engineering projects can be susceptible to negligence lawsuits for years after their completion. You and your contractor might get hit when you least expect it. A lawsuit alleging professional negligence may arise from a number of different situations:

  • The client had unrealistic expectations.
  • The design or materials were faulty.
  • The client feels the work contributed to their economic loss.

Despite the merit of a claim, if a complaint becomes a lawsuit and your business is named, you'll need to resolve it somehow. And when you work with insured general contractors, you can ensure all parties involved with completing the project have the means to handle the dispute.

For more information on the relationship between architects, engineers, and contractors, read…

How to Check for a General Contractor's Insurance Coverage

When your architecture or engineering firm works with general contractors, it's important to check their Certificate of Liability Insurance for proof that they have the appropriate liability insurance. Most of the time, you'll want your general contractor to have…

  • General Liability Insurance to cover their liability for bodily injuries caused by their completed work.
  • Workers' Compensation Insurance to cover themselves and their workers in case of occupational injuries.
  • License Bonds / Permit Bonds to ensure they have the proper licensure in place before they begin working.

These policies help you ensure your general contractor is fully prepared to take responsibility for their work.

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