5.1 Insurance for Roofing Contractors: Liability, Workers' Compensation, Vehicles, Property & Builders' Risk
Key Takeaways
Commercial general liability covers third-party bodily injury and property damage, and products-completed operations coverage responds to claims after the job is finished.
Michigan workers' compensation applies to a private employer with 3 or more employees at one time, or fewer if one employee has worked 35 or more hours a week for 13 or more weeks in the past 52 weeks.
Under MCL 418.171, a principal contractor that hires an uninsured subcontractor is liable for compensation to that subcontractor's injured employees and may seek indemnity from the subcontractor.
An employer that fails to secure workers' compensation commits a misdemeanor punishable by a fine up to $1,000 or 6 months, with each day a separate offense, and the injured employee may sue in court.
Builders' risk insurance covers the building or materials during construction or renovation against perils such as fire, wind, and theft.
Does Michigan Require Insurance to Get a License?
Article 24 does not set a minimum liability-insurance amount as a condition of the builder or M&A license. Insurance still matters in three ways:
- Workers' compensation is required by the Worker's Disability Compensation Act (WDCA) once you have employees who meet the thresholds below.
- Commercial auto coverage is needed for business vehicles under Michigan's no-fault system.
- Customers and lenders expect it. LARA's homeowner guidance tells owners to require a contract statement that the contractor carries liability insurance and workers' compensation.
The Coverages in PSI's Outline
| Coverage | What it protects | Roofing example |
|---|---|---|
| General liability | Third-party bodily injury and property damage from operations | A bundle slides off and dents a neighbor's car |
| Products-completed operations (part of general liability) | Claims after the work is finished | A flashing leak damages ceilings six months later |
| Workers' compensation | Employee injury: medical care and wage loss, regardless of fault | A roofer falls from a ladder |
| Vehicle (commercial auto) | Liability and damage involving business vehicles | A dump trailer backs into a garage door |
| Property | The contractor's own buildings, inventory, tools, and equipment | A shop fire or trailer theft |
| Property damage | Damage to others' property. Usually provided through liability coverage | A crew cracks a driveway with a dumpster |
| Title | The owner's or lender's interest against title defects, including some lien risks | A lender requires title coverage for a construction loan |
| Employee coverages | Social Security, unemployment, disability, and benefit programs | UIA taxes and optional disability coverage |
| Business coverages | Business interruption, crime and employee dishonesty, umbrella or excess liability | An umbrella policy above the general liability limits |
| Accident | Accidental injury or death coverage, including occupational accident for owners not covered by workers' compensation | A sole-proprietor roofer's own injury coverage |
| Builders' risk | The structure and materials during construction or renovation | Wind damage to a partly built addition's roof |
General Liability Details
- Occurrence policies cover incidents that happen during the policy period, even if the claim is made later. Claims-made policies cover claims made while the policy is active.
- Many policies exclude or limit certain water damage. Read the policy's conditions before tearing off in unstable weather, and dry in the roof every day.
- Owners and general contractors often require additional insured status and a certificate of insurance. Collect certificates from your own subcontractors as well.
Workers' Compensation in Michigan
Who Must Carry It (MCL 418.115)
The WDCA applies to:
- private employers with 3 or more employees at one time;
- private employers with fewer than 3 employees if at least one has been regularly employed 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks;
- all public employers.
Employers secure coverage by buying insurance or by qualifying as a self-insurer (MCL 418.611).
Who Counts as an Employee (MCL 418.161(1)(n))
A person performing services in the employer's business is an employee unless the person maintains a separate business, holds themselves out to and serves the public, and is an employer subject to the act. Calling a roofer a "1099 subcontractor" does not change that status.
The Statutory Employer Rule (MCL 418.171)
If a principal contractor subject to the act hires a subcontractor that has not secured workers' compensation, and the subcontractor's employee is injured doing the work, the principal must pay the compensation as if it had employed the worker directly. The principal may recover the amount from the subcontractor. A principal that willfully pressures workers to pose as contractors to evade coverage faces the same penalties as an uninsured employer. The simple protection is to collect current certificates of workers' compensation from every subcontractor and keep them on file.
Penalties for Going Uninsured (MCL 418.641)
- Misdemeanor: a fine up to $1,000, imprisonment up to 6 months, or both. Each day without coverage is a separate offense.
- The injured employee may sue the employer for damages in court, because the usual exclusive-remedy protection does not apply.
- The state can recover benefit costs it paid from the uninsured employer. For a corporation, officers and directors are personally, jointly, and severally liable for amounts the corporation does not pay.
Workers' Compensation as a Cost
Premiums are based on payroll and job classification. Roofing classifications carry some of the highest rates in construction. At the annual audit, the insurer charges premium for uninsured subcontractors' payroll, which is another reason to verify coverage.
Builders' Risk
Builders' risk (course-of-construction) insurance covers the structure, materials on site, and sometimes materials in transit or storage, against perils such as fire, lightning, wind, hail, theft, and vandalism, while work is underway.
- The owner or the contractor may buy it. The contract should say which one.
- It usually ends when the building is completed, occupied, or accepted.
- It does not replace liability coverage for injuries to others or damage to neighboring property.
For a reroof of an existing, occupied home, the homeowner's property policy often covers the house itself. The contractor's liability policy covers the contractor's own negligence. Always confirm coverage in writing before a large renovation.
Exam Traps
- Workers' compensation thresholds: 3 employees, or 1 employee at 35+ hours per week for 13+ weeks in the past 52 weeks.
- "Completed operations" is the coverage for leaks that show up after the job ends.
- Hiring an uninsured subcontractor makes you liable for its workers' injuries.
A roofing company has two employees, one of whom has worked 40 hours per week for the past 20 weeks. Must it carry workers' compensation?
No, because it has fewer than 3 employees
Yes, because one employee has been regularly employed 35 or more hours per week for at least 13 weeks in the preceding 52 weeks
No, because roofing workers must buy their own coverage
Only if the company is a corporation
A general contractor hires an uninsured roofing subcontractor, and the subcontractor's laborer is injured on the job. Who is liable for workers' compensation benefits under MCL 418.171?
No one, because the laborer was not the general contractor's employee
Only the laborer's personal health insurer
The general contractor as principal, which may then recover from the subcontractor
The homeowner, because the injury happened on the owner's property
Eight months after a reroof, faulty chimney flashing lets water damage the homeowner's ceiling, and the homeowner sues the roofer. Which coverage is designed for this claim?
Builders' risk insurance
Products-completed operations coverage under the commercial general liability policy
Workers' compensation
Commercial auto coverage
Sections you finish are checked off in the contents.