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Following a natural disaster, contractors and tradesmen from both in-state and out-of-state gravitate to the affected area. The insurance requirements for these contractors and tradesmen present unique challenges for insurance agents and underwriters. This Bulletin will provide you with some guidance for handling these challenges.

An important part of the State’s response to a disaster is to expedite the licensing process for contractors and tradesmen. Insuring only licensed contractors will help minimize losses caused by defective work. Most supplemental applications ask if the applicant is licensed. Most companies will require the insured contractor to be licensed, unless you’re dealing with a type of operation that requires little to no expertise such as Debris Removal.

Be particularly careful when insuring contractors that are classified as Handypersons. Many carriers will specifically restrict roofing or tree removal operations under this class. The Handyperson class applies to anyone who is not licensed in a particular trade or trained as a professional artisan, but is in the business of being hired to do a variety of miscellaneous work for others. This work usually involves minor residential repairs such as fixing holes in walls, replacing electrical receptacles, cleaning gutters, etc.

• Any contractor from outside the affected area, who intends to operate in the affected area, must be underwritten carefully. Some key questions should include:
• What percent of their operations will be in the affected area?
• Are they going to hire employees from the affected area or bring in employees?
• Is the risk moving their entire operation to the affected areas and plans on being there for an extended period of time?
• How long do they anticipate being there?
• Will the risk set up a temporary location in the affected area?
• What increased payroll is expected due to this new exposure?
• What type of work will they be doing? Is it the same type of work they normally do? Do classifications need to be added to the current policy? What experience do they have in the type of work they will be doing if different from their main operation?

An un-endorsed CGL policy typically provides for a coverage territory that includes the entire United States. However, individual insurance companies may choose to freely write contracting business in one state and elect to write no contracting business in other state because of court decisions or adverse legal climates. These carriers may actually exclude coverage for operations in New York or Colorado or other states that they deem to have poor legal climates. These restrictions in coverage territory are not necessarily restricted to surplus lines carriers. Check your insured’s policy to see if the state they are planning to travel to is included within the scope of the policy’s coverage territory.