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Insurance, by definition, is a contract where the insurer, for consideration (premium) agrees to indemnify another against a contingent or unknown risk of loss. It is used as a method to spread losses among many people who are insured with the same company. The insurer, by its policy, promises, in exchange for a premium, to pay to defend and indemnify the insured, in the event that a certain type of loss occurs within a specified period of time called the “policy period.” By spreading the risk of loss among many, each individual only pays a minuscule portion of the risk of loss insured against.

Liability insurance is limited to insurance against the risk of losses that can be incurred by a person for damages done to the person or property of another by an accidental or fortuitous cause.

In exchange for the promise to pay the premium charged, the insurance company agrees to provide the insured protection from various risks faced by an owner, developer, or builder of real property. The risks of loss taken by the insurer are listed on the policy. For each promise made by the insurer it charges a premium.

Purchasing CGL Insurance

When purchasing insurance as a named insured, it is imperative to purchase only the insurance coverages needed. Seek the advice and assistance of the insurance brokers and agents with whom insurance is sought, at least three months before the inception date of the policy needed. Regardless of whether the policy sought is a new policy or a renewal, the agents and brokers will need sufficient time to shop the available insurance market. The person seeking insurance should not rely on the broker to simply renew the previous policy for the same price with the same insurer. Coverages available and prices vary considerably every year. Insurers will enter and leave the market for the construction industry every year. The prudent insured will shop wisely and diligently every year.

The prudent person seeking insurance will provide the broker with a list of coverages needed, the status of the insurer with whom the broker is to shop
(e.g., a Best’s Rated A or better and admitted to do business in your state or an approved surplus line insurer). The prudent person will have the agent or broker avoid, if possible, unapproved and not admitted insurers and recognize that the surplus lines market is the market of last resort.

Barry Zalma is an expert witness on insurance fraud and a consultant on insurance.  He can be found and reached at zalma@zalma.com and www.zalma.com