Starting a new construction project is always an exciting endeavour with inherent risks and uncertainties. From accidents to legal disputes, contractors in Ontario may have to contend with unexpected (and possibly costly) challenges during a project. 

That’s where construction liability insurance comes in. 

So, what is construction liability insurance, and why do you need it? This article explains construction liability insurance, what it covers, and why Ontario contractors can’t go without it. 

What is Construction Liability Insurance? 

Construction liability insurance – sometimes called “contractor’s insurance” – protects contractors and their businesses from losses relating to property damage, injuries, and accidents. 

For example, if you were digging on a construction site and accidentally hit and damaged a water line, construction liability insurance may cover you for any financial losses relating to the damage. Alternatively, suppose an individual injures themselves on your work site (whether a worker or an individual passing through). In that case, construction liability insurance may cover you for any settlement or court judgment relating to the claimed injuries. 

What Does Construction Liability Insurance Cover? 

As a starting point, it’s critical to note that a contractor’s specific liability coverage will depend on their construction liability insurance policy terms. Construction liability insurance might cover you for some or all of the following: 

  • Property damage: for example, if you damage buildings, vehicles, or other property owned by third parties while working on a construction project. 
  • Bodily injury: for example, if an individual (whether an employee or a passer-by) is injured on your job site. 
  • Product claims: for example, if the buyer is dissatisfied with equipment or products installed in relation to the construction project. 

Remember: if you already have construction liability insurance, you should check with your insurance provider to ensure you understand the coverage your policy provides. And, if you’re new to construction liability insurance, be sure to ask questions and ensure you understand your coverage before making assumptions about what you’ll be covered for. 

Why Do I Need Construction Liability Insurance? 

Construction liability insurance is much more than a “nice to have” – in many cases, it’s legally required before contractors embark on a new project. 

Below, we’ve outlined just a few reasons (legal or otherwise) why contractors need construction liability insurance. 

Construction Liability Insurance May Be Legally Required

In Ontario, carrying construction liability insurance may be legally required in certain circumstances. For example, municipal bylaws may require that a contractor carry construction liability insurance before beginning work on a project. Failing to have construction liability insurance in place before beginning a project can expose you to penalties, fines, or other legal consequences, depending on the circumstances. For further information, ensure you do your due diligence before starting a project by contacting your municipality or an experienced construction lawyer

Construction projects are complex on their own, but as is often the case, unexpected issues can arise. Whether you’re dealing with property damage or an employee injury, contractors may face unexpected – and expensive – lawsuits, which can be financially devastating. Carrying construction liability insurance helps cover the legal expenses and potential costs of settlement rather than facing the risk of paying these costs out of pocket. 

Construction Liability Insurance Can Provide Peace of Mind for Clients

Some clients – such as large-scale developers or organizations – may require contracts to carry construction liability insurance. But in any event, having construction liability insurance brings peace of mind to all types of clients. Knowing that a contractor has insurance coverage in the event of the unthinkable can ease clients’ nerves and help establish a contractor as a reputable and professional business partner for construction projects. 

Construction Liability Insurance Can Be Tailored for Contractors’ Unique Needs

Like many other types of insurance, construction liability insurance comes in many forms – and, chances are, there’s a policy out there that will meet your business’s unique needs. Working with a reputable insurance provider can help you explore options and find a policy that will provide you with the appropriate coverage for your situation. 

What Happens if I Don’t Have Construction Liability Insurance? 

The primary consequence of not carrying construction liability insurance is financial – meaning, if something goes wrong during your project, you will be personally liable for paying for any damages that arise. 

But not carrying construction liability insurance can create more problems. For example, operating without construction liability insurance may: 

  • expose your personal assets – such as your home – to claims if you do not have the money to pay in the event of a lawsuit; 
  • impact your construction company’s reputation if you struggle to pay in the event of a lawsuit or other claim in relation to a workplace issue; 
  • expose you to fines, penalties, or other legal consequences if you are required to carry construction liability insurance on a project and have failed to obtain it; or 
  • limit your business opportunities – for example, you may be missing out on projects that require contractors to carry construction liability insurance. 

Tips for Choosing Construction Liability Insurance

Finding the right construction liability insurance can feel difficult. To make things easier, we’ve provided some tips below to help you choose the right construction liability insurance for your business: 

  • Consider Your Needs. Every contractor is different, so take the time to understand what your goals are with respect to construction liability insurance, including your budget and primary risk areas. 
  • Shop Around. Speak to multiple insurance providers to get a good sense of the cost and coverage available (and whether you are eligible for savings). 
  • Consider a Broker. If you need extra help, retaining an insurance broker can take the guesswork out of finding the right policy for your business. 
  • Carefully Review Your Documents. While your insurance provider will walk you through your insurance policy, take care to thoroughly review the policy so that you understand what you are covered for and what you are agreeing to. And, if you ever have any questions or concerns about the terms of your policy, don’t hesitate to speak with a skilled construction lawyer for guidance. 

Contact Tierney Stauffer LLP in Ottawa, Cornwall, Kingston, and North Bay for Trusted Advice on Construction Law

The skilled construction lawyers at Tierney Stauffer LLP provide practical solutions to construction disputes that protect our client’s financial interests. We represent clients at all levels of the construction pyramid in all legal forums, including litigation and alternative dispute resolution. For advice on your construction project, including issues relating to liens and construction contracts, contact us online or at 1-888-799-8057.  


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