Contractors – Group Coverage

Painting & Paper Hanging Contractors Insurance Basics

Risk Management Techniques and Insurance Essentials for Painting & Paper Hanging Contractors

By William F. Schaake, CIC, CRM

Once the exposures are identified, ways to control the losses can be addressed.  This is often done by asking questions related to various aspects of job conditions, frequency of hazardous exposures, the habits of the workers with respect to safety and conditions of the equipment and safety devices.   

Here are just a few questions or concerns related to the exposure of heights and the risk of falling from ladders or scaffolds:

How often are ladders or scaffolding used?
What is the maximum height of the work?
What condition is the equipment in?
What safety measures are used to prevent falls?
Has the safety equipment been tested?
How is equipment training handled?

Once these issues are addressed. The risk tolerance of the contractor needs to be determined.  Is the contractor willing to assume most of the risk associated with the jobs or are they concerned about financing the risk?

Most contractors would look to secure general liability insurance to protect against third party bodily injury and property damage losses as well as workers’ compensation to protect against injuries to their employees.  

Commercial General Liability

Liability insurance provides coverage for third party liability losses due to bodily injury, property damage, and personal injury (hurting of the persona) caused by accidents and/or acts of negligence by a named insured.  The coverage is subject to the terms, conditions, limitations, and exclusions of the policy and within the covered territory.  Generally, liability insurance provides coverage for premises hazards, such as trips and falls; operations hazards such as injury resulting from the delivery of stock; completed operations such as injury caused by the installation of the goods; and personal & advertising injury such as copyright & trademark infringement and other acts of damage to the persona of an individual or entity.

It is important to note that most general liability policies do no cover faulty workmanship nor damage to the part of the work being performed.  In addition, there is usually a care, custody, and control exclusion that negates any coverage for damage to the product or area being worked on. The rationale is that liability insurance is not intended to replicate a warranty or guarantee of the contractor’s work.  However, usually the resulting damage, such as spilling of paint on a carpet would be covered, however it is very important to read the terms & conditions as well as the limitations & exclusions to determine is this as well as what limits would apply.  

How is the cost of these policies determined?

Most carriers rate the cost of liability insurance based on payroll however some may rate on employee count or even sales.  If payrolls are higher due to collective bargaining agreements or prevailing wages, head count could be an option to lower cost.  It should be noted that the cost can be adjusted based on the percentage of interior versus exterior works and commercials versus residential painting.  Other factors could include lead paint & mold remediation, sand blasting, power washing, and chemical spraying or waterproofing.

Perils and Risk Exposures	Likelihood of a Loss	Impact of a Claim on the Business
Fall	Moderate due to job conditions and frequency of usage of ladders and scaffolds	Severe - Death or serious injury can result.
Silicosis	Low due to safety masks used and the infrequency of the work	Long term exposure poses serious employee concerns
Lead Poisoning	Moderate due to the employees failing to use safety gear	Moderate to severe as typically claims result in topical treatment but long-term exposures are unknown
Breakage	Frequent due to moving furniture and items within the area	Low to moderate based on value of the loss
Auto Accident	Moderate due to the number of vehicles used and the employee driving habits	Low to severe based on the type of accident and the injuries involved

Commercial Auto and Truck Insurance

Auto and truck insurance provide coverage for liability, uninsured motorist, no-fault protection, and coverage for the physical damage to the fleet. Also worth considering are rental hire and non-owned liability, rental reimbursement, and glass.  Generally, vehicle insurance is covered under a separate form or policy. The rating is determined by classification, type, year, make & model, usage, radius of operation, value, driver information, location, among other factors.  It is especially important to determine the limits of liability when insuring trucks.   Most state DMV’s have specific limits of liability required.   

It is important to properly cover the vehicles used in business as the coverage is usually different with a commercial auto policy compared to a personal one.  Loading and unloading is generally covered by a commercial auto, but often excluded under a personal policy.  In addition, hired and unowned auto can normally be added to a commercial auto policy which provides coverage for the usage of a rental vehicle, or one used during business owned by someone else such as an employee.  

Finally, many painters haul ladders and scaffolding equipment on the trucks which are susceptible to falling off and damaging other vehicles or injuring others.  Misrepresentation of vehicle usage can be a serious matter besides the potential legal aspects.  

Commercial Property

Commercial property policies typically cover perils on a named basis.  Therefore, it is important to determine the value of what to insure and what risks are prevalent to the business.  These policies are generally written on either a basic, broad, or special basis. Basic and broad define which perils are covered, while special covers most direct physical losses except for the exclusions subject to the terms and conditions of the policy.  

Inland marine insurance provides coverage for property in transit or temporarily located away from the described premises. Painters and paper hangers generally own ladders, scaffolds, compressors, power washers, and other expensive equipment.  Inland marine insurance is generally added to a commercial policy for an additional cost or can be secured as a separate policy.  It is important to purchase this coverage if theft or damage to property kept off premises or in transit is a concern.  Most inland marine forms require the property to be scheduled, however some carriers will provide it on a blanket fixed limit basis.    

Installation insurance or floaters can provide coverage for loss or damage to the materials used in the construction or renovation.  Paint and wallpaper along with other materials left at a job site are subject to damage caused by water or fire and losses by theft.  Installation insurance may require the contents to be scheduled, however many carriers will provide the coverage on a blanket fixed limit basis.  

Machinery & equipment can often be scheduled by classification.  Heavy or mobile equipment is often excluded on a standard business personal property form, hence it prudent to schedule this equipment usually as a separate floater with its own limits.  Often, this allows for greater flexibility and control with the insurance costs and coverage.  Another advantage of itemizing the equipment is the ability to specify the perils of coverage by category.  

Loss of Business Income & Extra Expense or BI & EE - Generally the coverage pays for the continuing operating expenses and net profits before taxes due to a loss caused by a covered peril.  It usually requires a specific monetary limit scheduled and a time or term listed such as a period of three months.  

Extra Expense provides for payment due to a covered loss to help mitigate the claim such as with the loss of business income.  This may include the rental of a temporary location and the cost of transferring the contents to the location to help resume operations quicker than if no measures were taken.  It may also include the payment for temporary help to expedite business operations.

Workers’ Compensation & Statutory Disability Insurance

All states have workers’ compensation laws that require organizations to provide coverage or a means to pay for its employees claims in the event of an on-the-job injury or illness.  Please refer to the insurance department or the department of labor in the state for which the business operates and the employees are located or work in.  Statutory disability may also be required which provides coverage for off the job injuries and illnesses.