Your Insurance Is Fine. Your Contract Isn't.

Watley Insurance Group  |  April 26, 2026  |  Contractor Insurance Series

By Wayne F. Watley, Jr. — Agency Principal

 Most contractors I talk to have solid insurance. The right limits. The right coverage. They've done what they're supposed to do. And they still end up with a denied claim or a dropped job.

Not because their policy failed them.

Because their contract did.

When a claim gets denied, everybody points at the insurance. Nine times out of ten, the policy isn't the problem. The contract is.

This is something most agents won't tell you — partly because it's outside their comfort zone and partly because it requires a different kind of conversation than confirming limits and sending a renewal invoice. But it's true, and contractors in this region need to understand it before they sign their next agreement.

Let's talk about the three contract clauses that create the most problems.

1. The Indemnification Clause

The indemnification clause is the first place to look in any construction contract. In plain English, what it says is: if something goes wrong on this job, you're responsible — even if it wasn't your fault.

The dangerous versions use language like "to the fullest extent permitted by law" or "any and all claims arising out of the work." That's broad language. And it can push liability onto a contractor for things that go well beyond their actual scope of work.

Here's the problem: your general liability policy was not designed to cover liability you voluntarily took on for someone else's negligence. There's a concept called insured contracts — your GL policy covers liability assumed under certain types of contracts — but it has limits. And some indemnification obligations are structured in ways that go beyond what any policy was built to cover.

Some of those obligations are uninsurable. Period. And most contractors find that out when there's already a claim on the table.

Read the indemnification clause before you sign. If it says "to the fullest extent permitted by law," that's the one to flag.

What to look for: indemnification language that isn't tied to your own negligence. If you're being asked to indemnify someone for their own acts or omissions — and especially if there's no limiting language — that's worth a conversation with your agent before you sign.

2. Additional Insured Requirements

General contractors require additional insured status from subcontractors constantly. Subcontractors agree to it constantly. Most people on both sides of that transaction don't fully understand what they've agreed to.

When you add someone as an additional insured on your policy, you're allowing them to access your coverage. The question is how far that goes — and that depends entirely on which endorsement form is actually on your policy, not on what the certificate of insurance says.

A certificate of insurance is a snapshot. It shows coverage existed on a date. It does not confirm which endorsement forms are on the policy. And there's a critical difference between:

•        Ongoing operations additional insured — covers claims that arise while the job is active

•        Completed operations additional insured — covers claims that arise after the job is done

Many contracts require both. Many policies only provide one. The COI won't tell you which. You have to ask for the actual endorsement form numbers — CG 20 10 for ongoing operations, CG 20 37 for completed operations.

If a contract requires completed operations additional insured status and your policy only provides ongoing operations, you have a gap. A real one. And it won't show up until someone files a claim after the job is finished.

The COI won't show the gap. The endorsement forms will. Always ask for the form numbers.

3. Waiver of Subrogation

This one gets overlooked because it sounds technical. Most contractors sign it without giving it much thought.

Here's what it means. If someone else causes damage on your job and your insurance has to pay, your carrier normally has the right to go after that party to recover what they paid out. That's called subrogation. A waiver of subrogation takes that right away. Your carrier pays — and then can't pursue whoever actually caused the problem.

Sometimes, a waiver of subrogation is a reasonable ask. On a job site where multiple parties share risk, a mutual waiver can make sense for everyone. But not all waivers are mutual. Some contracts require only your carrier to waive subrogation rights, while the other party's carrier keeps theirs. That's a one-sided concession.

It also matters how broad the requirement is. Some contracts require a waiver of subrogation across general liability, workers' compensation, and auto all at once. That's three separate rights to recovery being waived simultaneously. Worth knowing before you agree to it.

The Most Important Thing You Can Do Before Signing

Send the insurance requirements section of any contract to your agent before you sign it.

That's it. That's the whole tip.

I've had contractors come to me after signing a contract needing coverage that the contract required but that couldn't be added after the fact. Specific endorsement forms, higher limits, completed operations coverage — some of those things have to be confirmed before you sign. Not after.

The conversation takes five minutes. It can prevent a lot more than that.

The cheapest risk management you can do as a contractor is send the insurance requirements section to your agent before you sign.

Most insurance problems contractors experience aren't policy problems. They're contract problems that nobody caught in time. The contractors who don't get surprised at claim time are the ones whose coverage keeps up with what they're signing.

Watch the Full Breakdown

This topic is the subject of the first episode in our ongoing contractor insurance video series on YouTube. We go through each of these three clauses in detail — what the language actually means, how it affects your coverage, and what to do about it before your next job starts.

Watch the full video on our YouTube channel. New episodes post every Thursday, built specifically for general contractors, subcontractors, and artisan contractors.

Have questions about your current coverage?

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Watley Insurance Group serves contractors, businesses, and families across the Ark-La-Tex region. We're an independent agency — we work for you, not the carrier.