A roofing subcontractor on your jobsite falls from a ladder and fractures his back. He is not your employee – he is a 1099 sub with no workers compensation policy. Under Pennsylvania and New Jersey law, the general contractor is responsible. The medical bills, the lost wages claim, the legal fees – all of it lands on your business.
This is the scenario that puts contractors out of business, and it happens more often than most trade business owners expect.
Whether you are a general contractor, electrician, plumber, HVAC tech, or any licensed trade operating in PA or NJ, this article covers the coverages you need, the classification traps that void policies, and what to verify before you sign your next contract.
Key Risks for Contractors
Jobsite bodily injury – workers, subcontractors, or bystanders injured on your project site. A single serious injury claim can exceed $500,000.
Property damage to the client’s building or adjacent structures during work – cutting a water line, causing a fire during welding, structural damage from excavation.
Workers compensation exposure from employee classification errors – misclassifying W-2 employees as 1099 subcontractors triggers audit penalties, unpaid premium assessments, and potential criminal liability in both PA and NJ.
Commercial auto accidents involving work trucks, vans, or vehicles hauling materials between jobsites – personal auto policies exclude business use.
Tools and equipment theft or damage – losing $40,000 in tools from a job trailer overnight with no inland marine coverage means replacing them out of pocket.
Certificate of insurance (COI) requirements – general contractors and property owners increasingly require specific coverage limits, additional insured endorsements, and waiver of subrogation before you step onto a jobsite.
Required Coverages
General Liability (GL): This is the foundation. GL covers third-party bodily injury and property damage claims arising from your work – both during the project and after completion. If your HVAC installation causes a fire six months later, completed operations coverage under your GL policy responds. Most contracts require $1 million per occurrence and $2 million aggregate as a minimum. Without GL, you cannot bid on most commercial or residential projects in PA or NJ.
Workers Compensation: Mandatory in both Pennsylvania and New Jersey for businesses with employees. Workers comp covers medical expenses, lost wages, and rehabilitation for employees injured on the job. In PA, even sole proprietors working on certain job types can be required to carry it. Failing to carry workers comp when required exposes you to state penalties, lawsuit liability, and contract disqualification.
Commercial Auto: Covers vehicles used for business – work trucks, vans, vehicles hauling materials. Personal auto policies exclude commercial use, so if your employee causes an accident in a company truck, your personal policy will deny the claim. Non-owned and hired auto coverage is critical if employees ever use personal vehicles for work errands.
Inland Marine / Tools and Equipment: Covers your tools, equipment, and materials in transit or stored at jobsites. Standard property policies only cover items at your listed business location. A $30,000 concrete saw stolen from a trailer at a jobsite is not covered by your BOP – inland marine fills that gap.
Umbrella Liability: Extends the limits on your GL, auto, and workers comp employers liability. For contractors, a $1 million umbrella is often the difference between surviving a catastrophic claim and closing the business. Many GCs now require subs to carry umbrella coverage as a contract condition.
Common Mistakes Contractors Make
Using the wrong classification codes on their GL policy – if you are classified as a handyman but performing structural framing, the carrier can deny the claim for material misrepresentation. Class codes must match the actual work you perform.
Not verifying subcontractor insurance – if your sub has no workers comp and gets hurt on your site, you inherit the claim. Always collect certificates of insurance before any subcontractor starts work and verify they are current.
Assuming a Business Owners Policy (BOP) covers everything – a BOP bundles GL and property, but it typically excludes commercial auto, inland marine, professional liability, and pollution. Trade contractors need supplemental coverage for the exposures a BOP does not address.
Letting policies lapse between projects – one gap day without GL or workers comp can void your COI, disqualify you from active contracts, and leave you exposed if a claim is filed during the lapse.
Ignoring additional insured and waiver of subrogation requirements – many contracts require you to add the property owner or GC as an additional insured on your GL policy. Missing this endorsement can breach your contract and leave the other party unprotected.
Strategic Recommendation
Build your coverage from the ground up: GL first at $1M/$2M, workers comp with correct class codes, commercial auto for every vehicle used in the business, and inland marine for mobile equipment.
Add an umbrella of at least $1 million – it covers the excess across all underlying policies and is typically the most affordable way to meet higher contract limits.
Implement a subcontractor compliance process: require certificates of insurance, verify coverage is active, and confirm additional insured endorsements are in place before any sub starts work. This is a process you can delegate to an office manager or admin – it does not need to be on your plate.
Review your class codes annually with your broker. As your business evolves – from residential remodels to commercial buildouts, for example – your codes need to follow. A mismatch at audit time results in premium penalties or claim denials.
Get Your Jobsite Covered
In the trades, your reputation is everything – and one uninsured claim can undo years of it. The right coverage structure does not just protect your business; it makes you more competitive by meeting the insurance requirements that GCs and property owners demand.
Please reach out for a quote by contacting us online, or call (267) 888-4790.
