If the Property Owner Buys Builder’s Risk, Who Covers the Owner for Liability?
Your Builder’s Risk Policy Covers the Building. But Who Covers You for Liability?
Imagine you're a property owner building a new commercial building.
You purchase a Builder’s Risk policy to protect the building while it’s under construction. Your contractor has a General Liability policy.
Then someone is injured at the construction site and files a lawsuit against you, the property owner.
A common question is:
“Does my Builder’s Risk policy cover me?”
Usually, no—not for general liability claims.
Builder’s Risk and General Liability serve very different purposes. Understanding the difference can help property owners avoid an unexpected coverage gap during construction.
What Does Builder’s Risk Insurance Cover?
Builder’s Risk is primarily designed to protect the property and materials involved in a construction project against covered physical damage.
Depending on the policy, covered property can include the building under construction, materials, temporary structures, and other property associated with the project.
Covered causes of loss may include things such as:
🔥 Fire
🌬️ Wind
⛈️ Hail
⚡ Lightning
🏗️ Certain construction-related property damage
🛠️ Theft of covered materials
💥 Certain explosions
🏚️ Vandalism
The exact coverage depends on the policy form and endorsements. Travelers, for example, describes Builders’ Risk as coverage for projects under construction against covered damage to materials and the structure from causes such as fire, wind, theft, collapse, lightning, hail, explosion, and vandalism. Travelers
But Builder’s Risk is generally not your liability policy.
If someone trips and falls at the construction site and claims the property owner was responsible, that's a liability exposure, not simply physical damage to the building.
That's where liability insurance becomes important.
Does the Contractor’s General Liability Policy Cover the Property Owner?
Not automatically.
A contractor having General Liability insurance does not necessarily mean the property owner is insured under that policy.
For example:
Property Owner: ABC Properties, LLC
Contractor: XYZ Construction
XYZ Construction may have a $1 million General Liability policy.
That policy is designed primarily to cover the contractor's liability exposures. The property owner doesn't automatically become an insured simply because ABC Properties hired XYZ Construction.
This is where the Additional Insured provision becomes important.
What Is an Additional Insured?
An Additional Insured is a person or organization added to another party's insurance policy for certain claims or exposures, subject to the terms of the endorsement.
For a construction project, the property owner may require the contractor to add the owner as an Additional Insured under the contractor's General Liability policy.
Travelers notes that an Additional Insured endorsement can be requested from a contractor's liability carrier as part of a contractual risk-transfer arrangement. Travelers
So, instead of:
Contractor → GL coverage
you may have:
Contractor → GL coverage → Property Owner added as Additional Insured
The exact protection depends on the specific endorsement, policy language, contractual requirements, and circumstances of the claim.
Here's a Simple Example
Suppose ABC Properties hires XYZ Construction to build a new office building.
ABC Properties purchases:
🏗️ Builder’s Risk
Protects the covered building and construction materials against covered physical damage.
XYZ Construction carries:
🛡️ General Liability
Provides liability coverage for covered bodily injury and property damage claims arising from the contractor's operations, subject to the policy.
ABC Properties is also added as:
➕ Additional Insured
This may provide the owner with liability protection under the contractor's GL policy for certain claims arising from the contractor's operations, subject to the applicable endorsement.
That creates a much clearer insurance structure.
What If the Owner Isn't an Additional Insured?
This is where property owners need to be careful.
If the contractor's policy doesn't include the owner as an Additional Insured, the owner should not assume the contractor's insurance will automatically protect them.
The owner may need their own General Liability policy or another appropriate liability arrangement depending on the nature of the property and project.
For larger or more complex projects, an Owners and Contractors Protective (OCP) Liability policy may also be considered.
OCP coverage is specifically designed to protect a project owner or general contractor from certain liability arising from the operations of a designated contractor. Travelers describes OCP as project-specific coverage that can provide dedicated limits for the project owner. Travelers
What Is OCP Insurance?
Owners and Contractors Protective Liability (OCP) is a separate liability solution that can be used to protect a project owner against certain liability arising from a contractor's operations.
One important difference is that OCP is designed specifically around the owner/contractor relationship and project.
It can provide the project owner with dedicated liability limits rather than relying solely on being an Additional Insured under the contractor's GL policy. Travelers
OCP is not automatically necessary for every construction project, but it can be an option worth discussing depending on the project's structure, contract requirements, and exposures.
Builder’s Risk vs. General Liability vs. OCP
Here's the easiest way to think about the different coverages:
ExposurePotential CoverageBuilding under construction is damaged by a covered causeBuilder’s RiskCovered property/materials are stolenBuilder’s RiskContractor causes bodily injury to a third partyContractor’s General LiabilityContractor causes covered property damage to a third partyContractor’s General LiabilityOwner is covered for certain contractor-related liability as an Additional InsuredContractor’s GL + applicable AI endorsementOwner needs dedicated project-specific liability protectionOCP may be consideredOwner's own business/property operations create liabilityOwner’s own General LiabilityContractor's employee is injured at workWorkers’ Compensation, subject to applicable law and policyConstruction equipment or tools are damagedMay require contractors equipment/inland marine coverage, depending on ownership and circumstances
The actual coverage depends on the policies, endorsements, contracts, and facts of the claim.
Don't Stop at the Certificate of Insurance
One of the biggest mistakes property owners can make is assuming that a Certificate of Insurance (COI) tells the whole story.
A COI can help confirm that a contractor has insurance and show policy limits and other information. But the actual policy and endorsements determine coverage.
Travelers recommends reviewing the COI and obtaining the appropriate Additional Insured endorsement as part of a construction contractual risk-transfer process. Travelers
For an owner, it can be helpful to ask for:
✅ Current Certificate of Insurance
✅ Contractor's General Liability limits
✅ Additional Insured endorsement
✅ Primary and noncontributory wording when required by contract
✅ Waiver of subrogation when required
✅ Workers’ Compensation coverage
✅ Auto Liability coverage when applicable
✅ Umbrella/Excess Liability when appropriate
Your insurance professional and legal counsel can help determine what should be required in the construction contract.
What About Subcontractors?
Don't forget about the subcontractors.
A general contractor may hire electricians, plumbers, roofers, HVAC contractors, concrete contractors, and other trades.
Each subcontractor can introduce another layer of risk.
That's why construction contracts often include insurance requirements for subcontractors, including General Liability, Workers’ Compensation, and Additional Insured provisions.
A strong contractual risk-transfer program can help clarify who is responsible for what before a claim happens. Travelers
A Simple Construction Insurance Checklist for Property Owners
Before construction begins, property owners should consider discussing these questions with their insurance professional:
🏗️ 1. Who is purchasing the Builder’s Risk policy?
The owner? Contractor? Another party?
🛡️ 2. Who is covered under the Builder’s Risk policy?
Review the named insureds and other insured interests.
➕ 3. Is the property owner an Additional Insured on the contractor's GL?
Don't assume—verify.
📄 4. Do the actual endorsements match the contract?
The certificate alone may not tell the whole story.
⚖️ 5. Is OCP coverage appropriate?
For some projects, dedicated owner liability coverage may be worth considering.
👷 6. Are subcontractors properly insured?
Make sure insurance requirements flow down through the project when appropriate.
☂️ 7. Are the liability limits high enough?
Larger projects may warrant higher limits or an umbrella/excess policy.
The Bottom Line
Builder’s Risk protects the construction project. General Liability protects against covered liability exposures. They are not interchangeable.
If the property owner purchases Builder’s Risk, that doesn't automatically provide the owner with General Liability coverage.
And if the contractor has General Liability, that doesn't automatically make the property owner an insured.
For many projects, the owner should consider whether they are properly protected through:
Builder’s Risk + Contractor’s General Liability + Additional Insured status + appropriate owner liability coverage
For some projects, OCP coverage may also be an option.
The right structure depends on the project, contracts, ownership, operations, and insurance policies involved.
Building or Renovating a Property?
Construction insurance can get complicated quickly.
At RISE Insurance, we can help property owners and contractors review the insurance requirements for a construction project and identify potential coverage gaps before work begins.
📞 423-541-1111
