FAQ's

 

What is General Liability?
General liability provides Bodily Injury & Property Damage coverage for the general public. There is a "Per Occurrence" limit and an "Aggregate" limit, which means the most the Insurance Company will pay for one loss and during the policy term respectively. The policy also covers Personal & Advertising Injury, Medical Payments and Fire Legal Liability (see below for those coverage's defined).  If the alleged incident is something that is covered, the Company will pay to defend the suit whether groundless, false or fraudulent. Coverage is provided while you are doing the work and after the job is completed.

 

What is a Certificate of Insurance?
A Certificate of Insurance is a document which shows the insured's name, liability limits, effective dates of the policy and also the brokers name and address. This form is often requested from clients in order to show proof of insurance or by cities and towns to pull permits.

 

What is an Additional Insured?
Contracts usually require that the General Contractor and/or Owner of the project name them as Additional Insured. This makes it so that the party that does the work and causes the claim has their Insurance Company pay the claim and pay to defend the Additional Insured if required.

 

What do I do if I have a General Liability claim?
If anyone is bleeding, call 911!  The Medical Payments section of your GL policy is a non-negligence coverage.  If someone is bleeding, get them help and don't worry about whether you think it is your fault or not. If it is your fault, the claim will move to your bodily injury limit. Never admit liability, and call your Agent.

 

What do I do if I have an Auto accident?
Call the police and then call the 24 hour number on your auto ID card. Never admit liability. Exchange Insurance information with the other party and take down the names and numbers of any witnesses or passengers.  When practical, call your agent.
 

What is Personal & Advertising Injury and why do I need to pay for that?
This is a coverage that is included in the GL policy and does not cost extra.  Examples of Personal Injury are Libel and Slander.  Examples of Advertising Injury are Copywrite infringement.

What is Fire Damage Liability or Fire Legal Liability and why do I have to pay for that?
This is another coverage included in the GL policy that does not cost extra.  The GL policy excludes property of others in your care, custody and control however and exception is made here for real property. The example would be: if you are a tenant in an office building and your negligence caused a fire that damaged the building.

What is Medical Payments and why do I have to pay for that?
Medical Payments is another coverage included in your GL policy that does not cost extra. This is the only Non-negligence coverage. It is there so that you will just call the ambulance and not worry about whether this was your fault.  If people are treated right away, they are less likely to sue.

 

What is a Hold Harmless Agreement?
In a Hold Harmless Agreement, one party (the indemnitor) promises to reimburse, and in some cases defend, the other party (the indemnitee) against claims or suits brought against the indemnitee by a third party. The purpose of the hold harmless is to transfer the risk of financial loss from one party (the indemnitee) to another party (the indemnitor).

 

What is Workers Compensation?
Workers Compensation insurance provides certain payments to an employee who suffers an on the job injury due to an accident or occupational discase.

 

 

Does my business need Workers Comp Insurance?
Workers Compensation insurance is required by law if you have employees. If you do not carry workers compensation insurance coverage and an employee gets hurt on the job, your business will have to pay for the medical expenses incurred, plus you will most likey be fined by the Industrial Commission.

 

If you are a sole proprietor without any employees,  then you can exclude yourself from Workers Compensation by signing a SOLE PROPRIETOR WAIVER.

 

If your legal entity is an LLC and you are the only member and without employees, then you can sign the SOLE PROPRIETOR WAIVER/ SINGLE MEMBER LLC WAIVER

 

If your legal entity is a Corporation and you do not have any employees, and someone that you are doing work for wants to see proof that the corporation has Workers Compensation coverage then you will have to purchase Workers Compensation coverage in the Corporation's name. However, normally as an officer of the Corporation, you can sign a REJECTION form excluding yourself from coverage; however, in order to be able to sign the Rejection form there has to be a Workers Compensation policy in place.

 

Does your Personal auto policy, rated for "business use" cover if your business is sued? Yes & No
YES:  if you are a sole proprietor doing business as, because you and your Company are the same entity.
NO:  if you are a LLC or Inc, because you and your Company are 2 different entities.

In order to get Business auto coverage for your LLC or Inc, your Company needs to have an Insurable Interest in the vehicle.  You can accomplish that by selling your truck to your Company (in which you go to the DMV (Dept of Motor Vehicles) and re-title the truck) OR you can lease your truck to the Company.

You need to ask your Accountant the benefits of which way to go, I am not giving advice.  We do have a lot of businesses that choose to lease their Equipment and vehicles to their Company.  If you choose to do that, you can go to our forms section and print an "equipment lease" form.  Again, I am not a lawyer and you can pick up a leased equipment form at several places.  I took a legal size, 2 page leased equipment form and shortened it to the basics.  I figure you will probably not argue with yourself over the terms of the lease! 

Instructions for completing our form:  Your Company is the "lessee" and you, the individual, are the "lessor".  You need to identify the equipment by year, make, model and vin or serial number.  The lease is "continuous until cancelled" unless you put in a term limit.  You MUST have the Company pay you something each month for the use of the equipment, in order to make this a valid contract!  Then you sign as Corporate officer or Member as the lessee, and you sign as the lessor.

This makes your Company responsible for the lease payment to you. The insurance expense and all maintenance and operating costs are now expenses of the Company.   You now have additional income that is not subject to Social Security or Medicare tax, though it is still subject to income tax. If it is beneficial down the road to make this a personal asset, with a stroke of the pen you can cancel the lease and now it is your personal asset again.

 

What is a Subcontract Agreement and do I have to have one?

All Insurance Companies require that you have your subcontractors sign your Subcontract Agreement, that they carry limits at lease as high as yours and that they provide you with a Certificate of Insurance (with the Additional Insured Endorsement attached) prior to working on your jobsite.
We are not attorney's, but we have consulted with an attorney to draft the copy of our  "Master Subcontract Agreement" which is listed in our resources section under the forms tab of this website.  This MSA is not designed to protect you from all that can happen on the project.  It just has the kind of Insurance and Indemnity (hold harmless) clauses in it that Insurance companies like.  It is designed to get signed just once and then you should also have a different contract that addresses the project specific situations, like change orders and safety issues.  This contract is only 2 pages, so it is not intimidating for your subs to sign.  Then you need to follow through and get Certificates of Insurance with an Additional Insured (preferably form CG2037) attached.

The Additional Insured endorsement makes it so that whoever caused the claim, it is their Insurance Company that needs to pay it and defend you if necessary.  Most Additional Insured endorsements only cover you while the work is ongoing, not after the job has been completed.  For potential completed operations claims, you need the protection during and after the job is done.  If your subcontractor says he can't get the CG2037, have him call Marty or Jane and we will gladly give him a quote!

Once you get your Certificates, I suggest you keep track of them by Month that they expire.  That way when you are in February, you can request renewal certificates from all your subs whose policies expire in March.  If you maintain a file for each subcontractor you can keep his signed subcontract agreements in the file, but make separate Monthly files for certificates.

 

When can you pay Casual labor on a 1099?
There seems to be a lot of confusion around this question and most of it stems from contractors doing it wrong for so many years it has become standard operating procedure, but it is wrong and can get you in a lot of trouble.

Basically, if the entire project (labor and materials) is under $1,000.00 then an unlicensed contractor can do the job i.e. you can pay someone on a 1099.  If it is over $1,000.00 then the work has to be done by a licensed contractor OR his W-2 paid employees.  There are some jobs that don't require a license and the $1,000 rule doesn't apply to them.  That means if you are doing a $40,000 remodel on a home, all your employees need to be paid on a W-2 or you need to use licensed, insured subcontractors (if you are a GC) who have signed your subcontract agreement.  You can always use people you get from a "Labor Ready" type service, as they are paying them on a W-2, but keep in mind that those services mark up the labor price by 40-60% so you could have hired the person and paid him on a W-2 for a lot less than that!

 

What can happen if you pay on a 1099 when it should have been on a W-2?
ROC can write a cease and desist order and if you don't stop the job, they can fine $200 for each trade they catch you doing subject to max $2,500 and $2,500 for each additional day you continue to do the work without desisting.  They call this "aiding and abetting an unlicensed contractor".  You should look at their list of "most wanted" on their website!

Your Liability:  Your W-2 employees are required to be covered by Workers Comp.  If this 1099 employee gets hurt on the job, the doctor that treats him will fill out a 1st report of injury and send it to the Industrial Commission and they will 1. Fine you at least $500.00 2. Make you pay for the medical treatment. 3. Make you get workers comp or close your doors.  Then, depending on how severely this man was injured, he can sue and own your business! The Workers Comp policy has 2 sections, statutory benefits and employers' liability.  According to our Statute, if an employee is covered under your workers comp policy and he is injured, he can only get statutory benefits - he can't sue you!  You want all your employees to be covered under your work comp policy.

The best and least expensive way to do that is to contact our Sister Company, Trigon Staff Administrators at (602) 358-0300 and talk to Mike or Dianna.