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Is liability insurance required for a small contracting company?

Expert: Larry Simoes

Jeff asked:

I am looking to open a small electrical contracting company and want to know what requirements, if any, are there for liability insurance for work done at a customer's business?

Does my work become the responsibility of their insurance coverage in the event that something should go wrong?

Larry Simoes answered:

There is no legal requirement that you have to carry Commercial Liability Insurance. However, you will be responsible for your actions. If the work you do causes damage to your client's business or to his neighbours, you will be sued by the business owner or his insurer.

When an insurance company pays a claim, they obtain the rights of their client to sue the party which caused the damage. They will not only sue for the fire damage but also the time the business had to shut down in order to make the repairs. If your company is not incorporated, then you will be personally responsible for the damages.

Also, it is now standard practice that a general contractor or any medium to large business will not allow you to work on their premises without proof of Insurance.

About the author

Larry R. Simoes BA CIP, Division Vice-President, Ontario, Personal Insurance Manager for Gallagher Lambert Group.

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