Building Service Contractors: How to Evaluate Insurance Policies
Question: How can building service contractors (BSC) effectively evaluate insurance policies?
What do they need to look for? What pitfalls exist that BSCs need to be aware of? Answer: As with any industry's insurance policies, there are two main things to keep in mind:
- You want to make sure you are covering your "individual" company's exposures to loss
- You want to make sure you are covered for "specific" exposures and limits that your contracts with individual customers are mandating.
Regarding individual company exposures, although many BSCs have similar exposures, there are many services that are now being provided to their customers that can vary. These ancillary services include snow plowing, landscaping, building construction, or re-construction services, electrical, painting, and window washing (specifically high-rise cleaning). With the exception of painting, all of these services need to be separately classified on insurance policies, preferably up front.
If a BSC is subcontracting these services to other companies, a current certificate of insurance showing that they have their own work comp and general liability coverage will suffice for the audit department to avoid a large additional premium. If the BSC's employees are performing these services, separate class codes should be added. Building service contractors need to be aware that quotes differing in this regard can become a huge problem later.
With respect to contract specific exposures, your agent should review all major contracts to assure that all mandated coverages/limits are endorsed to your policies. The coverages/exposures that are fairly common to all BSCs can be categorized in the following list:
Care, Custody and Control Coverage (sometimes referred to as Voluntary Property damage):
This general liability coverage will reimburse a BSC's client for damage to property they are cleaning. Limits vary greatly by insurance policy and should be at limits reflecting contract mandates with their customers.
Lost Key Coverage:
This liability coverage will reimburse a BSC's client should they lose keys to buildings they are cleaning, and that customer asks to have all of the locks replaced.
Third Party Theft Coverage:
This crime coverage will reimburse a BSC's client should employees steal from buildings they are located in. There is a key difference here between a "Janitorial Service Bond" and Third Party Theft Coverage. A Janitorial Service Bond will only reimburse a BSC's client if the employee in question is convicted. A Third Party Theft policy will reimburse their client if a preponderance of evidence exists for that employee (i.e they were the only one in the building or had access at the time the theft occurred).
Limited Work Site Pollution Coverage:
This is a much overlooked exposure to a BSC. The chemicals brought onsite to perform cleaning services have been known to make employees of your clients sick. Pollution is excluded on every general liability policy. Unless this endorsement is added to your policy you will be "self-insured" for any claim that may arise from this exposure.
