I’ll be up front about this.  You might want to save this blog for some night when you’re having trouble falling asleep.  However, if you’ve received a premium audit of your general liability (GL) policy and you’re being charged premium for things you don’t do, you may want to stay awake and keep reading.

As a general contractor, most of your GL premium is based on your “total cost” to build your homes.  For the most part, almost all the work is done on your behalf by subcontractors who are covered on their own GL policies.  Where do we get this?  From an independent clearing house of huge amounts of insurance data called the Insurance Services Office, or ISO.  The main ISO classification for general contractors, which appears in all GL policies issued by the RWC Insurance Advantage, is:  “91583, Contractors – subcontracted work – in connection with building construction, reconstruction, repair or erection – one or two family dwellings.”  The ISO manual says:   This classification applies to that portion of the operations performed by adequately insured subcontractors of the insured. Operations performed by subcontractors without adequate insurance shall be classified and rated under the specific classification description for each operation.”

Imagine you hire a landscaper to lay the sod and plant the shrubs and do all the necessary and proper “yard work” required to make you finished homes salable.  Unless you’re diligent about obtaining a certificate of insurance from minor subs like this, its easy to let one fall through the cracks occasionally.  At audit the lack of a certificate means no GL for the landscaper, so his classification is added to your policy and you are billed for the premium.  The reason for this is simple.  Any claim the landscaper is responsible for reverts back to the general contractor who hired him.  For that additional exposure, your GL carrier is entitled to premium.  In this example the additional ISO classification is 97047 Landscape Gardening including laying out grounds, planting trees, shrubs, flowers or lawns.  The premium basis is payroll, which, in effect, now becomes part of your “total cost” of construction.

Fortunately, the rate for Landscape Gardening isn’t very high.  But what if you failed to obtain a certificate of insurance for your electrical contractor, or plumber?  That can’t happen, you say?  We’ve been insuring general contractors for a long time and unfortunately, oversights like this happen all too frequently.  They result in sometimes significant additional premium charges that could have been avoided.  When certificates are available, but were simply overlooked during the audit, we’ll be happy to listen to the explanation.  Mistakes happen.  However, a reliable audit trail is important and can be very difficult to reconstruct after the fact making you responsible for your subs’ GL regardless.

You don’t want to pay additional audit premium especially when it is for classifications your subcontractors should be covering on their own GL policies.  Making sure you have up-to-date certificates of insurance for ALL your subcontractors isn’t just good housekeeping, it can have a big impact on your bottom line.

If you have any questions regarding audits, certificates, classifications, or anything else related to your insurance needs, please give us a call at 1-866-454-2155, or contact us at

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