Contractor general liability insurance: what it covers, and the exclusion that decides defect claims
General liability answers for what your work does to other people and to other people's property. It does not answer for the work itself: exclusion l, the "your work" exclusion, leaves that with the contractor. The exception is the part worth knowing, because it does not apply where a subcontractor performed the work the damage arose out of. A general contractor who subcontracts most of the job and a specialty trade who self-performs all of it are buying two very different policies out of the same form.
What the policy answers for
The NAIC's plain-language description is the place to start. A commercial general liability policy covers four categories of events a business can be held responsible for: bodily injury, damage to others' property, personal injury including slander and libel, and false or misleading advertising (NAIC, small business insurance). For a contractor the first two categories carry the account, and the third turns up more often than owners expect, in the accusation made on a jobsite rather than in advertising copy.
The part of the form that separates construction from most other trades is the products-completed operations hazard, which holds liability arising out of the insured's products or business operations conducted away from the insured's premises once those operations have been completed or abandoned, and which draws on an aggregate limit of its own. IRMI defines completed operations as work completed as called for in a contract, work completed at a single jobsite under a contract covering several, or work that has been put to its intended use. Read those two definitions next to each other and the shape of a contractor's exposure appears: the claim usually arrives after the invoice is paid, sometimes years after, and it draws on a limit the current year's operations have also been drawing on.
The "your work" exclusion, and the subcontractor exception
This is the paragraph a general contractor should read twice. Exclusion l of the standard general liability form removes coverage for, in the wording IRMI quotes, "'Property damage' to 'your work' arising out of it or any part of it and included in the 'products-completed operations hazard.'" The sentence that follows it is the exception: "This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor" (IRMI, Patrick Wielinski, "Back to the Exclusions: The 'Subcontractor' Exception").
Strip the quotation marks away and the logic is one an operator already knows. Redoing your own bad work is a cost of being in business, not an insurable accident, and the policy says so. But a builder who hires out framing, roofing, and mechanical is not in a position to inspect every hour of it, and the form recognizes that. Wielinski's reading, which we give as his: the exception narrows the business risk doctrine, so a general contractor keeps coverage for property damage to its work when the damage stems from a subcontractor's defective work, while still carrying the risk for damage arising out of its own.
The exception has a history, and a vulnerability. IRMI reports that it dates to the 1986 revision of the standard form, where the industry moved into the policy a protection previously sold through the Broad Form Property Damage Endorsement, and that the construction industry, the insurance industry, and the courts have treated it since as an enhancement for anyone who builds through subcontractors. Then, in response to construction defect litigation, particularly residential, ISO promulgated a standard endorsement that eliminates the subcontractor exception from the "your work" exclusion (IRMI, Wielinski, on the subcontractor exception in recent case law). The endorsement's number is beside the point. The question to put to an agent does not need it: is the subcontractor exception intact on what you are quoting me, or has an endorsement taken it out.
One boundary. Whether defective construction is an "occurrence" under the form at all is a separate fight, decided differently in different states, and this page does not summarize it. What is settled enough to print is the structure above: the exclusion, the exception, and the endorsement that can remove the exception.
Four things a general liability policy does not reach
Your own employees. Injury to the people on your payroll is workers compensation's subject, and the NAIC's summary is that nearly all states require an employer to carry it. Which employers, which owners, and how the price gets built are the subject of the contractor workers comp insurance page.
A mistake in a professional service. The NAIC lists professional liability for errors and omissions among the risks a general liability policy does not protect against. For a contractor that means design, engineered layouts, load calculations, and construction management: work where nobody is hurt and nothing breaks, but the schedule slips or the job has to be redone. That claim is the subject of contractor errors and omissions insurance.
Property in your care, custody, or control. IRMI describes care, custody, or control as an exclusion common to several forms of liability insurance, eliminating coverage for damage to property in the insured's care, custody, or control, and records that courts have read it to mean either physical possession or a legal duty to exercise care over the property. Whether the thing you were hired to work on is inside the exclusion is a form-and-facts question. Ask how the form you are offered treats property you are working on rather than assuming either answer.
Pollution, broadly. The post-1986 form carries what the industry calls the absolute pollution exclusion, and its definition of a pollutant is wide enough to reach substances a trade handles daily. That gap has its own policy; see contractors pollution liability.
A fifth item belongs here only to be moved out of the way. Your own tools and equipment are not a liability question at all. The NAIC's description of business property coverage names the building, inventory, furniture, equipment, machinery, and computers, and a contractor's version of that problem is contractor equipment insurance, because the property does not stay in one place. Damage to a project under construction is a third thing again, which is builders risk insurance.
Where the gaps bite, by trade
The exclusions above are the same on every contractor's form. What differs is which one gets tested. A handyman working alone rarely has a subcontractor exception question and often has a scope question instead, since the same person may do work that three different licensing regimes cover; the handyman insurance page has the state-by-state version of that. A janitorial contractor almost never faces a completed operations claim and faces the care, custody, or control question every single night, on the client's floors, furnishings, and keys; that is the substance of the janitorial insurance page. A general contractor's whole exposure runs through the subcontractor exception, because most of the work was performed by somebody else.
For the rest of the set a contractor is usually asked to carry, and how the lines sit next to one another, start at the contractor insurance coverage overview, or from the InsuredCrew home page if you would rather start from your trade.