As a solar contractor, you know better than anyone that your work comes with a certain amount of risk. You and your business are vulnerable to a whole range of possible missteps from damage to a residence or a worker injury to loss of equipment or a truck running off the road.
The right insurance coverage is essential to mitigate these kinds of potential risks and liabilities. While there are general insurance requirements that every contracting business must meet, there are also a number of considerations specific to the solar industry. A contractor should keep these factors in mind when designing the perfect policy for their business.
In this article, we discuss some of the important insurance considerations for solar contractors and some of the coverage types they may want to explore. For firsthand knowledge about insurance for solar contractors, we spoke with Petar Georgiev, Managing Partner at Renewable Energy Insurance Broker, an insurance company that has specialized in serving commercial and industrial solar companies for the past 16 years. We’ve also included particular recommendations for the residential solar contractor from the Solar Energy Industries Association (SEIA) regarding basic standards for insurance during the construction phase of an installation, standards that need to be met for a finance provider to provide system financing.
It is important to note that it is the contractor’s responsibility to fully understand their policy in order to avoid financial losses from lack of coverage. This article is meant as a starting point because, ultimately, contractors should consult a licensed insurance broker about their particular needs when deciding on the ideal policy.
Bottom Line Coverage
There are certain baseline insurance coverage requirements all solar contractors and subcontractors should meet. Georgiev states that policies for all contractors and subcontractors must include general liability insurance, workers’ compensation, employer’s liability insurance, automobile liability insurance, and excess/umbrella liability insurance.
General liability insurance provides several types of coverage for the contractor: bodily injury, property damage, and comprehensive coverage to protect your finances in case of lawsuits or claims. Bodily injury coverage pays for third-party bodily injuries, which means that it covers injuries that occur on the property under construction by the contractor (not including injuries to employees of the contracting company).
Property damage coverage applies to property other than the work the contractor has performed. Georgiev gives the example of a solar contractor installing a commercial solar system on a warehouse. If a fire from an electrical malfunction were to destroy both the solar system and the warehouse, the warehouse would be covered while the solar system would not.
General liability also includes what is called products liability/completed operations coverage. This covers injuries or damages that may be caused by goods or services sold by the solar contractor. For example, Georgiev explains, if a contractor installs a new solar system on a rooftop and a panel later falls off and hurts someone, then the injury would be covered (but not the panels themselves).
Georgiev states that “general liability insurance is critical for any solar contractor (general, or sub-contractor) because of the simple fact that even a single accident could turn into a lawsuit from which you could not recover on your own and without it you won’t be able to protect your company and your assets.” Mike Smith, an agent with Solar Insure, another firm that specializes in solar contractor insurance, suggests that contractors retain a trimmed-down general liability policy after retirement or sell the business to protect themselves from liability. This is because there is no time limitation for bodily injury lawsuits, making them very common in the U.S.
There are two types of limits to consider when purchasing general liability insurance: the per occurrence limit (the maximum a carrier will pay per claim filed) and the aggregate limit (the total they’ll pay during the policy period). Both Georgiev and SEIA recommend $1,000,000 minimum per occurrence and $2,000,000 minimum for aggregate.
Also standard for solar contractors is workers’ compensation and automobile liability insurance. Georgiev recommends a policy limit of $1,000,000 per accident, per employee for the workers’ compensation. He also suggests combined single limits of at least $1,000,000 per occurrence for vehicles owned or hired for the automobile liability insurance.
Both Georgiev and SEIA advise contractors to consider excess/umbrella insurance on top of the general liability policy to cover any loss that goes beyond the coverage. For this type of coverage, SEIA recommends limits ranging from $2,000,000 to $5,000,000. SEIA also suggests professional liability insurance if the contractor is providing design work and cyber liability coverage if they are storing confidential customer data.
Other Coverage to Consider
There are a number of other insurance coverage considerations solar contractors may want to explore when assessing their insurance needs. According to Christy Howley of ProSight Specialty Insurance, errors and omissions (E&O) coverage “goes beyond general liability to protect against subjective claims like negligence, unfair dealing, and inaccurate advice.”
A contractor may also consider employment practices liability insurance (EPLI) for protection against employment related lawsuits including wrongful termination, discrimination, or sexual harassment. Another type of coverage to consider is obstruction of premise supplemental (OOPS) coverage which protects a contracting business from having to personally compensate a client for an installation accident that leaves their home uninhabitable. Georgiev notes that contractors may also want to ensure that their coverage includes the testing period of a new installation, which can take anywhere from 72 hours to 1 week long.
Finally, contractors should make sure that they are covered for the loss of their own work from things like damage by vandalism or a natural disaster. A “builder’s risk” policy can insure against this, including covering the resulting loss of income for the project owner.
Watch for Exclusions
It is important to be aware of any exclusions in your policies. Exclusions are policy provisions that remove coverage for a particular risk, usually to narrow the scope of a very broad agreement. Therefore, Georgiev warns, there are certain situations a contractor should explicitly ask about because they might not be covered in the contract.
One such exclusion is “care, custody, and control” which means that the policy does not cover items temporarily under care or control of the contractor, like a roof. Another particularly important exclusion to be aware of is coverage for tools and materials on the jobsite. Renewable Energy World recounts the story of a contractor who had a $52,000 inverter stolen from a job site only to realize the loss was excluded under their insurance policy. Ara Agopian, President of Solar Insure, says that a contractor would need to specifically ask to add an “installation floater,” a type of inland marine insurance, to have this covered.
Another area where coverage gaps may exist pertains to working with subcontractors. General contractors should ask their subcontractors to add them as an “additional insured” on their own policy, so the general contractor can deal directly with the sub’s insurance company if needed. To avoid situations where a party’s coverage has lapsed, all subcontractors should show an up-to-date certificate of insurance before performing any work. In addition to these insurance considerations, contractors should look into adding “hold harmless” and indemnification clauses in their contracts with a subcontractor. These ensure that the general contractor is not liable for negligence on the part of the subcontractor.
The amount and type of coverage a solar contractor needs varies depending on certain factors. These include the particular services of the company, such as whether they procure and sell systems or just install them or whether they predominantly install large-scale commercial PV systems or smaller residential ones. Georgiev says that proper due diligence in the beginning is key so that a contractor knows what is needed for their particular business.
Georgiev also states that it is a good idea to remember that the certificate of insurance (COI) is not the actual policy. A COI is merely temporary evidence of insurance that includes disclosure about the parties involved, coverages, and limits. All actual negotiations and agreements are already set in the policy itself and a contractor should look there when seeking to understand the details of their coverage.
Additionally, “It’s important to be open when communicating with your insurance company. During the quoting process, the more information an insurance provider has about your operations, the better job we can do to help you craft the appropriate coverage and potential safety programs best suited for your company,” says Matthew Burrows of Travelers Insurance.
Finally, there are a number of steps a contractor can take to keep premiums low. Treating employees well, making sure they are sufficiently trained, and using up-to-date equipment are important. Having industry certifications like NABCEP certification can also help offset long-term costs.
Understanding your unique insurance needs as a solar contractor can help you avoid costly gaps in coverage that may haunt you down the line. Working with a broker that specializes in solar is can be helpful, because they will be familiar with solar contractors’ needs. Taking the time to ensure appropriate coverage is good for contractors and good for the industry in general. You’ll have peace of mind knowing you are protected if a claim arises and the solar industry can function with greater stability.