General Liability vs. Professional Liability: What Michigan Trades Contractors Need to Know

Protecting Your Business: Choosing the Right Liability Coverage for Your Trade

As a Michigan trades contractor, you face risks on the job every day. From physical injuries to costly mistakes, the right insurance coverage can protect your business from devastating financial losses. Two of the most important types of liability insurance are General Liability (GL) Insurance and Professional Liability (PL) Insurance. While they both provide financial protection, they cover different types of risks.

Let’s break down the key differences, when you need each, and real-world examples of claims that could arise.

What Is General Liability Insurance?

General Liability (GL) insurance is designed to protect businesses against third-party claims for bodily injury, property damage, and personal injury (such as libel or slander). It is often considered the foundational insurance policy for contractors because it covers common risks that can occur on job sites.

Examples of General Liability Claims:

1. Bodily Injury: A client visits your construction site, trips over materials, and suffers an injury. General Liability would cover their medical expenses and potential legal costs.

2. Property Damage: While installing new flooring in a commercial building, you accidentally damage expensive furniture. GL insurance would cover the cost of repairs or replacement.

3. Personal Injury: A subcontractor alleges that your company defamed their reputation in a public statement. Your GL policy could help cover legal defense and settlements.

What Is Professional Liability Insurance?

Professional Liability (PL) insurance, also known as Errors & Omissions (E&O) insurance, covers claims related to negligence, mistakes, or failure to perform professional duties. This type of coverage is particularly useful for trades contractors who provide design, consulting, or specialized services beyond physical labor.

Examples of Professional Liability Claims:

1. Design Errors: You’re a contractor providing design-build services, and your incorrect measurements lead to structural defects. A lawsuit is filed for costly redesigns and repairs—PL insurance helps cover the claim.

2. Project Oversights: A client claims you failed to meet contractual obligations, resulting in financial losses. PL insurance would assist in covering legal defense costs and potential settlements.

3. Incorrect Material Recommendations: A client relies on your expertise when choosing materials, but your suggestion leads to early deterioration of a structure. They sue for damages, and PL insurance helps cover the costs.

Key Differences Between General Liability and Professional Liability

Do You Need Both GL & PL?

For many Michigan trades contractors, having both General Liability and Professional Liability is the best way to ensure complete protection. If your business involves physical labor and design or consulting work, a single policy won’t be enough. Many contracts—especially for public or large commercial projects—require both coverages.

Why Having Both General Liability & Professional Liability Matters

Understanding the difference between General Liability and Professional Liability is essential for protecting your business. While General Liability covers physical accidents and property damage, Professional Liability safeguards against financial losses due to errors or omissions in your work.

To ensure you have the right coverage for your trade, work with a knowledgeable insurance agent who understands the unique risks Michigan contractors face.

Sources:

• Michigan Department of Licensing and Regulatory Affairs (LARA)

• Insurance Information Institute (III)

• National Association of Insurance Commissioners (NAIC)

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