NAICS CANADA CODES: 236110 Residential building construction
236220 Commercial and institutional building construction
Description of Operations:
General contractors manage the construction of a new building or renovation to an existing building. They are in charge of the entire project from initial clearing and excavation of the land to finishing the final structure.
General contractors generally specialize in constructing single family homes, commercial buildings, or specific types of buildings such as restaurants, factories or stadiums. Most have a set group of permanent employees, and then subcontract the remaining tasks to specialty subcontractors. While firms whose employees do no actual construction work are commonly called “paper” contractors, they generally act as “prime” contractors for such tasks as framing carpentry, structural masonry, or metal building erection. Mechanical tasks such as plumbing, heating, and electrical are usually completed by subcontractors.
Once the land has been purchased and the design or architectural work has been done, the general contractor takes the project from the site or land preparation, through excavation and laying of the foundation, to the completion of the building, including the interior finish. Typically, the general contractor first turns the architect’s design into specifications for work and materials, setting quality standards and also scheduling the phases of the project, as well as dictating insurance requirements for the project as a whole and for the subcontractors. The contractor then gets bids (solicits competitive proposals) from potential subcontractors and suppliers. Together with the customer (the project owner), the general contractor awards the bids to the successful subcontractors.
The general contractor is also responsible for complying with all local and provincial ordinances, codes and zoning requirements. This includes purchasing the necessary permits and obtaining the necessary surety bonds.
Property exposures at the general contractor’s own location are usually limited to an office operation and storage of materials, equipment and vehicles. If the general contractor is a paper contractor there will be no yard since there are no operations other than paperwork. If the general contractor is involved in framework or masonry, lumber or bricks may be stored on site, increasing the exposure to fire, inclement weather, vandalism and theft.
Inland marine exposures may include accounts receivable, builders’ risk, contractors’ equipment, goods in transit, installation floater, and valuable papers and records. Subcontractors generally have their own equipment, but the general contractor may arrange for the lease of larger equipment, such as cranes, for subcontractors to use, either with or without operators. The contractual agreements with the rental firms determine who is responsible for any damage to the rented equipment. If the general contractor performs tasks at the job site, equipment may be subject to water hazards, drop and fall from heights, or being struck by other vehicles.
Builders’ Risk Coverage is an important coverage for many general contractors. Besides obtaining coverage, they may need to coordinate their subcontractors’ coverages and terms. Exposures will vary depending on type of project. New construction versus renovation building is also a major consideration.
Surety bond exposures arise from the requirement for many construction projects to obtain financial guarantees for the completion of projects and payment of labour and supplies. Inability of the contractor to qualify for these bonds due to prior experience and financial condition may indicate a moral hazard.
Occupiers’ liability exposures at the contractor’s office and storage facility are usually limited due to lack of public access to the premises.
At the job site, the general contractor is ultimately responsible for all injuries or property damage that results from construction operations, including those that are due to the acts or omissions of subcontractors. Lack of adequate communication between the different subcontractors can cause hazardous working conditions especially if blasting or similar hazardous operations are taking place. Heavy machinery used for excavation may cut power lines, disrupting service to other homes or businesses in the vicinity. Welding presents potential for burns or setting the property of others on fire if not conducted safely. The contractor’s employees can cause damage to the client’s other property or bodily injury to members of the general public or employees of other contractors. Tools, power cords, and scrap all pose trip hazards even when not in use. If there is work at heights, falling tools or supplies may cause damage and injury if dropped from ladders, scaffolding, or cranes. Failure to protect equipment, building materials and property of others left at job sites from theft and vandalism may result in a subrogated loss. Some sites may present significant attractive nuisance hazards as well. All hazards are increased in the absence of properly enforced procedures to control access to the jobsite.
Contractual liability exposures are significant for general contractors. While it is important to control physical hazards, the absolute key to successful performance as a general contractor is likely to be management of contractual language. Catastrophic financial losses (and expensive litigation) may arise if the general contractor fails to verify that subcontractors’ certificates of insurance are accurate and the limits are adequate. In addition, the general contractor and project owner must be included as additional insureds on all subcontractors’ policies; the specific terms may play a significant role in who pays for a loss.
Completed operations exposures are high. The designer and engineer of the project, the quality of materials, and the construction details are all critical. Failure of the insured to maintain quality control and full compliance with all construction, material, and design specifications may give rise to serious loss.
Automobile exposures may be limited to private passenger only as executive supervisors travel from site to site. Usage of private passenger vehicles for personal use should be controlled. If the general contractor is also handling part of the construction, workers, equipment and supplies may be transported to and from job sites. Hazards depend on the type and use of vehicles and radius of operation with the main hazards being upsets and collisions. Vehicles may have special modifications or built-in equipment such as lifts and hoists. Large materials such as air conditioners may be awkward and require special handling and tie-down procedures. Age, training, experience and the motor vehicle records of the drivers are important issues to consider, in addition to the age, condition and maintenance of the vehicles used in transportation operations.
Workplace safety exposures vary based on the size and nature of the job. Since the executive supervisor is only reviewing and giving oversight, the exposure is clerical with some jobsite inspection. However, if actual construction work is done, the exposure should be reviewed based on the type of construction taking place. Control of the jobsite is the responsibility of the general contractor, who may be held responsible for any injuries of subcontractors on the job.
Minimum recommended Insurance coverage for general contractors:
Business Personal Property, Employee Dishonesty, Builders’ Risk, Surety Bonds, General Liability, Umbrella Liability, Automobile Liability and Physical Damage, Non-owned Automobile Liability
Other Insurance coverage to consider for general contractors:
Building, Business Income with Extra Expense, Accounts Receivable, Computers, Contractors’ Equipment, Goods in Transit, Installation Floater, Tool Floater, Valuable Papers and Records, Employment Practices Liability, Environmental Impairment Liability, Stop Gap Liability