General Liability Insurance

You own the house. That one fact is what a general liability policy responds to, and it is the fact most investors skip past while they are vetting crews and pricing the scope of work. A renovation is not a closed box. People cross it every week — most of them invited, a few of them not — and almost none of them are dressed for a stairwell with no rail on it.

When someone is hurt on a site you own, the demand letter finds the owner. It does not matter much that a framer left the opening unguarded or that a plumber cut a section of floor and covered it with a scrap of plywood. Your name is on the deed, and the deed is public. General liability is the coverage that takes that letter, hires the defense whether or not you did anything wrong, and pays a settlement or judgment if the case goes against you.

That is a different question from the one builders risk answers. Builders risk is about the thing you are building. General liability is about what the thing you are building does to somebody else. Both belong on a rehab, and neither stands in for the other.

Who actually walks onto a half-finished house

Count the traffic on a typical week of a gut rehab and the number surprises people. There is the crew, the crew’s subcontractors, and the supply house driver who backs in with cabinets. There is the inspector who comes out on the permit, the appraiser working an ARV opinion for your hard money lender, and the lender’s own inspector who has to see the work before the next draw goes out. Later there are agents, buyers, and buyers’ inspectors. Somewhere in there is the neighbor who wants to see what you did with the kitchen and lets herself in through an unlocked slider.

Now count what they are walking into. Open floor penetrations cut for ductwork and not yet patched. A stair with treads and no rail. No power upstairs, so no lighting, on a gray afternoon. Extension cords across a hallway. Bundles of shingles stacked where a walkway used to be. A sidewalk with demolition debris on it, which is a public way, not a private one.

Every item on that list is ordinary, and none of it means you run a sloppy job. It means the site is mid-transformation, and a mid-transformation site is a hazard to anyone not used to reading one. Premises liability is the claim that comes out of that gap: a person lawfully or foreseeably on the site, an unsafe condition the owner knew about or should have known about, and an injury.

The form this coverage is usually written on

Coverage for an owner’s exposure on a renovation is commonly written on the standard commercial general liability form. Rather than trust a form number that varies by carrier and edition, judge the policy by what it actually does.

It responds to bodily injury and to damage to other people’s property arising out of the premises you own and the operations conducted on them. It carries a defense obligation, which on most of these files is worth more than the settlement — a defense is owed on a suit that turns out to be groundless, and defense costs on many of these forms are paid in addition to the limit rather than out of it. It usually includes a small medical payments grant that can pay a genuine minor injury without anyone alleging fault, which quietly closes a fair number of neighbor incidents before they become suits.

Carriers modify all of this with endorsements, and the endorsements are where a placement is won or lost. Some markets attach a residential renovation exclusion, some restrict work above a given height, some exclude structural alteration outright, and some limit coverage for the work of subcontractors you did not insure. Ask which endorsements are attached before you compare one quote to another. The base grant looks much the same everywhere. The attachments do not.

Your contractor’s policy answers for your contractor

A general contractor hands you a certificate on day one and a lot of investors treat that as the end of the subject. It is not, for three separate reasons.

The first is structural. That policy insures its named insured — the contractor, the contractor’s operations, the contractor’s legal liability. Your exposure is not the contractor’s operations. It is your position as the person who owns the ground the injured party was standing on. A claimant will name you regardless of who created the hazard, and a policy you are not on has no obligation to show up for you.

The second is durability. That coverage can lapse mid-project for nonpayment, and no one calls to tell the owner. It can be issued to an entity whose name is not quite the name on your agreement. Its limit may be shared across every job that contractor is running this season, so a bad loss on someone else’s house erodes what is left for yours. It can exclude the exact class of work you hired for.

The third is timing. Contractors close, rebrand, and let policies go when the season ends. A claim that surfaces after you have sold the house may find nothing at the other end of that certificate. Your own policy is the one thing in the arrangement you control.

Getting named, and why paper is not coverage

Require additional insured status from every trade that sets foot on the job — not only the general contractor, but the roofer, the electrician, the demolition crew, and the hauler. Put it in the written agreement before anyone starts, because most carriers grant automatic additional insured status only where a signed contract required it prior to the loss.

Then understand what you are collecting. A certificate of insurance is a summary prepared for information. It confers no rights, it does not amend the policy, and it can be accurate the morning it is issued and wrong the following week. Additional insured status is created by an endorsement attached to the actual policy, and the endorsement is the document to ask for. Read its wording: some grants cover only ongoing operations and stop when the trade finishes, which is the opposite of what you want when a claim arrives after the job wraps.

Two further requests are commonly made in these agreements: that the trade’s coverage respond primary and noncontributory to yours, and that the carrier waive subrogation against you. Whether a given market will endorse either varies. Ask, and keep the paperwork with the file for the holding period and beyond.

Damage this coverage was never built to pay for

General liability is a third-party coverage. It answers to other people. That boundary rules out several things investors expect it to handle.

It does not pay for the house, the materials stacked in the garage, or the tools in the van. Fire, wind, theft of copper, vandalism during an empty stretch — that is course of construction territory, and it belongs on the builders risk policy described elsewhere on this site.

It does not warrant the contractor’s workmanship. If a tile job is out of plane or a wall is out of square, the remedy is against the contractor, not the liability policy. How the policy treats damage that results from bad work to other parts of the building is a genuinely carrier-specific question and turns on the exclusion wording attached to your form.

It does not cover injuries to your own employees. If you have people on payroll, that exposure sits with workers compensation and employer’s liability, which is a separate placement with separate rules in every state.

Two ways a policy decides which claims belong to it

Liability coverage is written on one of two triggers, and on a project with a beginning and an end the difference matters more than it does for an ongoing business.

An occurrence trigger looks at when the injury happened. If someone fell during the policy period, that policy answers, even if the claim shows up long after the policy has expired and the house belongs to someone else.

A claims-made trigger looks at when the claim is first made against you and reported. The injury has to fall after a date the policy names, and the claim has to arrive while coverage is in force. When that policy ends, the protection ends with it unless you buy an extended reporting option to carry the tail.

Here is why that lands hard on a flip. The project ends. The liability does not. A stair, a rail, a step at the back door — these outlive your ownership, and so does the window in which someone can sue you over them. Ask which trigger you are being quoted, and if it is claims-made, ask what extending the reporting period would take.

Running one policy for the structure and one for the people

For the life of a rehab you want both coverages in force at once, answering two different questions. Builders risk answers what happened to the work. General liability answers what the work did to someone else. A fire that guts the framing is the first policy. A delivery driver who steps through an unpatched floor is the second. Neither policy reaches across.

The same holds on the lighter end of the business. The scope of work decides which property form you use — paint, flooring, cabinets, fixtures and surfaces with the structure and the systems untouched can stay on an endorsed dwelling form with a cosmetic repair endorsement, as the dwelling coverage page on this site explains. What the scope of work does not decide is whether the liability exposure exists. A cosmetic rehab still has an unfamiliar staircase, an unlit basement and a steady stream of people who did not build the place. The property side changes with the scope. The people side does not.