Back on January 8th, I was surprised to get a phone call from Cullman City Licensing. I can see who is calling, and remember wondering – what did I forget to sign the form or the check? Nope, they were requesting a copy of my General Liability Policy. Did I miss something in the directions? No, it was explained to me that is a new requirement and they did not have time to update the form. Ok, that is not an issue and quite honestly, I am glad to hear they require it now – one quick call to my insurance agent to fax them the page and I had our license within a week.
Well imagine my surprise when I catch this article in the Cullman Times – City pushes contractor decision.
The council postponed a decision to either keep or rescind a new city ordinance requiring contractors to have general liability insurance if they work a job in the city limits. Some contractors are up in arms over the change due to fears that it will significantly raise costs.
“There’s no way I can do it,” he said. “I’ll just have to move. I’ve done jobs in the city in the past, but I’ll have to stop if they keep this.”
“I will pull out,” he said. “I probably did about 20 jobs in the city last year and I can’t afford this insurance … When good contractors leave, that’s when the customers will be hurt by this.”
“Since they’re looking at it now, I think they’re trying to get out of it,” he said. “They need to rescind it, because everyone I’ve talked to said they can’t afford it.”
And it keeps getting better… A call to action in the Cullman Shoppers Guide (they cannot afford a $600 policy but they can afford to place a $300 ad?)
What is Liability Insurance
Liability insurance is defined as an insurance policy that offers protection against third-party claims of property damage, injury or bodily harm, loss of life or limb, or negligence. General liability insurance offers blanket coverage that includes both “public” and “product” liability, meaning that coverage extends to direct or indirect actions of the insured (and the insured’s employees) which result in loss or damage, as well as products or structures manufactured by the insured that cause loss or damage due to a fault in the product.
The cost
A general price is assigned based on your projected sales, and the amount of subcontractors you use. Your agent at that time will also be able to tell you what your rates will be if you exceed those amounts, so it should come as no surprise if you figure out that you will do 2x the projected amount that your insurance amount will go up accordingly. Down here the base price for a policy is $600 for a year or approx $3 per working day (200 days for roofing due to weather).
Why you should require it
Insurance is rarely a priority during a home repair or remodeling. However, accidents can and do happen, which can occasionally lead to lawsuits. I cannot think of any professional contractor or any other professional business or organization that would argue that having insurance is not necessary (a necessary evil maybe, but still necessary). The reason why is simple, it is a business obligation to protect its assets. One of the first questions the BBB, NARI, NAHB and other industry group’s stress that homeowners need to ask a prospective contractor is; Are you Insured?
Your Liability: Anytime someone gets hurt on your property because of your negligence or carelessness, you can be held legally responsible. Not only that, but you can also be held responsible if someone working on your property injures someone else or causes damage to someone else’s property. While a typical homeowner’s policy includes $100,000 of liability insurance, certain losses may not be covered. You can also jeopardize your coverage if you knowingly hire unlicensed or uninsured workers or start work without pulling the necessary local building permits. Even if a covered loss is covered, you will probably end up with a higher annual property insurance premiums.
Your Property: As a few of us pointed out, in the comment section – what happens if your property gets damaged due to the contractor; accidently breaking something, making a repair that fails resulting in your house being damaged, etc? If they are uninsured, or as some of them alluded to in the article & they cannot afford to pay $3 a day for insurance, do you really expect them to pay for or be able to pay for the repairs? While your homeowners insurance may pay for the damage, do you really want to pay the deductible, or the higher rates that will probably be incurred?
For the “Good Contractors”
I have to agree with you, times are tough but you need to start learning how to run your business like a business. It is one thing to be a good roofer, but quite another thing to run a company. If you wish to subcontract work from someone that carries insurance, you need to have the same limits that they currently have. We personally will not even consider a bid from an uninsured sub. While some GC’s might allow you to work for them, you might want to watch out for a back-charge to cover their costs of insuring you. If you wish to work in Huntsville, Birmingham, or on any federal or state funded job, you need to be insured.
On the other side of the coin, with the mindset shown on not only this issue, but also the way you have operated and continue to operate, you are losing customers and money. Many of the residents simply do not even look locally any more, they start looking for contractors located in Huntsville or Birmingham. I have sold numerous jobs simply because I am not from around here, and I show up on time & do what I say I am going to do.
A few final thoughts
Granted, no one likes to pay for insurance and everyone knows the insurance companies are out to make money. I love hearing how insurance companies should not be out there to make money. Let me ask what happens if an insurance company did not make money? What then happens when it became time to pay out on a claim that exceeded their cash on hand? Along the same lines, can’t the same thing be said for the rest of us? An hourly employee goes to work to make money; a business owner runs a business to make money.
But the costs are so high – Bull, at most for a normal residential jobs it might add $3 to $10 to the cost. If you are only doing 20 jobs a year in the city, you are looking at $30 a job. Do you really think that this small amount is going to cause you to lose the job? I doubt it and besides you have an additional selling point that it appears many of your competitors do not when you are working in the “county.”
While we are at it, let me take a stab at the jab leveled against the Texas & Pennsylvania contractors licensed here. Let me guess, they are probably working on a commercial project that requires insurance that you do not carry and your jab does not fly. If they were storm chasers, than you might have a valid point as that group generally causes some major issues, but we have not had a storm big enough to bring that group in. I guess this will be an interesting meeting tomorrow whe tha City of Cullman decides which way they want to go.