Most excavators understand the importance of comprehensive liability coverage to protect their business. But, many of them don’t realize that a general liability insurance policy is limited in its scope of coverage. For instance, many excavation businesses carry the recommended $1 million limits on their general liability coverage, and some carry even less than that. But, what happens if something catastrophic occurs, leaving the small business you’ve worked years to build with millions of dollars in lawsuit liens? That’s where excess liability insurance comes in.
While a general liability policy protects your site preparation business from smaller everyday risks that commonly occur, an excess liability policy offers protection to your company from financial ruin in case something more catastrophic happens.
What is Excess Liability Insurance and How Does it Work?
General liability insurance policies rarely offer enough protection to a busy and thriving business like excavation. The dangers involved with unearthing the soil are too great, and almost anything can go wrong.
Excavation work is part of the construction industry. The National Safety Council ranks construction work as one of the four most dangerous jobs in America, causing more deaths in the workplace than in any other industry.
The truth is that your excavation business needs a second line of defense to ensure its financial stability in case of an accident or other incidence. Excavation accidents and resulting lawsuits happen every day.
An excess liability insurance policy bolsters your general liability coverage and enhances the financial protection for your company.
Excess liability insurance increases your coverage limits over an existing general liability policy. It closes the coverage gaps and takes over when the limits on a general liability policy are exhausted.
Whereas your general liability coverage might have a $1 million limit, your excess liability policy may have as much as $25 million in limits.
Let’s take a look at how this might affect your excavation business through the following examples:
Excess Liability Example #1:
Imagine that your company is doing some excavation work for an apartment building contractor. Most of the building has been erected but isn’t yet occupied.
Your crew takes a lunch break, and as you’re driving away in the company truck, the apartment building partially collapses. The general contractor blames your excavation equipment and improper site preparation procedures and decides to take you to court.
Your attorney argues against the integrity of the construction work. The judge decides to have you both split the tab on the $40 million apartment building, leaving your excavation business responsible for $20 million.
You have a $1 million general liability policy. That leaves another $19 million in damages awarded by the court. It’s a good thing you have an excess liability insurance policy with a $20 million limit. That’s enough to pay the excess $19 million that your company is designated to pay.
Excess Liability Example #2:
Consider the possibility that a stack of planks is improperly secured and snaps, falling on one of your workers.
The impact of the planks also makes him fall into a trench. Your worker breaks his leg and has quite a concussion and later on has a brain bleed. He sues your company, and the judge later awards him $5 million in damages.
This is a problem for your business because you only have a $500,000 limit for your general liability insurance policy, and you put off getting an excess liability policy. You always figured it would never happen to your business or that you had more time to look into it. Now your business is held liable for the remaining $4.5 million.
It’s possible that your business’s assets could be seized or have liens placed on them to help satisfy some of the amount awarded by the lawsuit. This means your entire business is at risk, and you could lose everything you’ve worked for.
What Will Excess Liability Insurance Pay For?
Generally speaking, excess liability insurance will cover the same things your excavation business’s general liability policy covers, including:
- Property damage to property that is not yours, including client’s property and third-party property
- Claims of negligence, failure to act, or carelessness
- Personal injury claims
- Bodily injury claims
- Lawsuits levied against your excavation business
- Legal expenses related to claims and lawsuits
Depending on the insurer, excess liability coverage may protect your business against other types of claims or incidences. The excess liability policy kicks in after your general liability policy has exhausted its limits.
Is an Excess Liability Policy Right for my Business?
Most any type of business should at the very least have a comprehensive general liability policy. But, how do you know if you should take it a step further and get an excess liability policy?
The truth is that if someone decides to sue your business, general liability coverage may not be enough to protect your company. And, honestly, it could happen to any business.
But, if your business is in a high-risk industry, such as the excavation business, or you’re concerned about any gaps in your basic commercial insurance policies, excess liability is the solution your business needs to have complete coverage if the worst should happen.
Let’s face it. The working conditions and environment that excavators are exposed to each day are beyond risky. Under the right circumstances, it’s a dangerous business. So, instead of asking if it’s right for your business, a more accurate question might be, ‘can my excavation business afford to be without excess liability coverage?’
Is Excess Liability Insurance Expensive?
The benefits of having the security of an excess liability policy far outweigh the negative consequences of not having one, should it ever be needed. One excessive claim outside the boundaries of your general liability policy could place your business at risk and even bankrupt it.
Insurers examine different factors when determining the premium of an excess liability policy. For instance, if you are a huge company that takes on larger projects with higher-dollar price tags, your premium will naturally run higher than a smaller company that does simpler projects.
Even still, the cost is rarely prohibitive and worth the peace of mind in knowing the enterprise you’ve built with your own sweat equity is protected from financial devastation if the worst comes to pass.
An experienced excavation industry insurer can shed light on the various factors that can impact your premiums.
When it comes to excess liability coverage for excavators, you’ll want to be sure you’re dealing with a specialized insurer who truly understands the industry.
What Should Excavators Look for Before Purchasing an Excess Liability Policy?
As an excavator, you likely already realize that the excavation business has its own set of unique circumstances that set it apart from other companies.
For one, your excavation business is exposed to hazardous conditions every day. You also need highly trained workers to complete each job project.
Because of the highly specialized nature of excavation work, you could look at ten different insurance companies and not feel confident that you’ve found the right coverage for your business. It’s more common than you might think.
There’s a reason for that. Very few people, or even insurers, understand the complexities and risks involved in site preparation. A million things can go wrong, and, unfortunately, they often do. Many excavation business owners constantly have this truth at the back of their minds, worrying about a setback for their business.
So, your first goal as a small business owner who regularly works towards completing successful excavation projects is to have the proper coverage in place to give you the peace of mind to go about your business as usual.
There’s only one way to accomplish that, and that is to choose a highly regarded specialty insurer that’s an industry expert in the field of excavation. There are only a few of these insurers, and some offer more than others and go beyond simply covering your business.
For instance, SitePro by NIP Group offers the following services for excavators:
- Expert claim management
- Resources to increase safety and compliance for your excavation business
- Risk control assessment
- Expert valuation of your entire business, including its equipment, tools, and property
Your business deserves more than a standard excess liability policy. It warrants having the best-targeted excavation coverage available to manage and reduce the financial burden for you if anything unforeseen happens.
The right excess liability insurance for excavator contractors can mean the difference between your business surviving and thriving after an expensive lawsuit or losing your business altogether.
Look for an insurer, such as NIP Group, that will tailor coverage specifically for your excavation business. An insurance company that can offer you support beyond basic coverage is even more beneficial for you and your business.