Contractors Property/Inventory in Transit to the Job Site

Does your policy cover goods or products/materials on their way to the jobsite?  Or, on the jobsite once delivered?

I get this question quite frequently as most contractors have product delivered to the jobsite directly from their supplier.  Most of the time, the materials are not installed in one day.  This could pose a problem if vandalism or theft would to occur when the jobsite is unattended.

There are two types of coverage’s or endorsements that are necessary to fill in the gaps in coverage that usually lacks (excluded) in the General Liability and Property forms for this scenario:

Property in Transit – This coverage is usually added by endorsement via commercial auto extension.  This protects the value of items (either yours or in your care, custody or control) up to the specified limit of coverage when they are being transported or delivered by you.  You can increase the amount of coverage as desired.  Rule of thumb:  Always insure the limit to be the most expensive items in transit at one time.

Ex.  If your limit of “Property in Transit” is $25k and you are picking up $50k of material, my suggestion would be to increase that amount to $50k.  In this situation, if you were in an accident and the material is damaged, your policy would only cover up to $25k.  You would be on the hook for the other $25k.

Installation Floater – Depending on the company form/insuring agreement, this coverage will insure against materials at the jobsite.  In some cases, this will also be inclusive of “Property in Transit” as long as the property being transported is yours.  This coverage is for material being installed at the job location.  It does not included equipment rented or tools stolen at the jobsite.

Ex.  Plumbing contractor has $15k of copper piping to be delivered at the jobsite for a commercial job.  The next day, the plumbing contractor goes to the jobsite to start the project, only to find that all the material (copper piping)  was stolen the night before.  If the contractor does not have this coverage endorsed to his/her policy, they would be responsible for the $15k.

A common misunderstanding is Business Personal Property.  If you have this coverage, it usually will not extend to outside the premises you are located at.  It might have an extension that allows property to be covered up to 100 ft. from the location, but that is very limited.

Lastly, always insure your items to limits you are comfortable self-insuring after.  Meaning, if you have an installation floater limit for $10k but you routinely have material of $25k at the jobsite, then you should be financially comfortable of bearing the risk of the difference of $10k- $25k = -$15k.  If $15k would hurt your business, ask your agent to increase the limit to $25k.  This will have a nominal increase in premium vs. not increasing the limit.

If you have any specific questions about how you may be affected by additional risks during transit to jobsites, please reach out here or call our office.

Workers Comp – Subcontractor or Employee?

Arizona Workers Compensation – The Dichotomy: Subcontractor or Employee?

I get many questions with regards to a specific workers compensation question: “Why do we have to cover a 1099 contractor?” So I decided to bring some clarity to the issue. Please keep in mind, there are exceptions to every rule. This is a general response to this question.

If you are a business and employ one person in the State of Arizona, you are required to have a workers compensation policy. Two of the many misconceptions I hear is “We do not have employees, just sub-contractors” or “We hire sole proprietors that are owner only and they are not required to carry workers compensation per Arizona law”. While that sounds great, in most cases, those two examples usually fail the “sub-contractor” test.

My rule of thumb to insureds is as follows: “If your sub-contractor does not have a workers compensation policy, you will be providing coverage for him under your policy”.  And more often than not, that sub-contractor exposure will be caught at audit and additional premium will be owed.

You are probably thinking, what about “hold harmless agreements” and “signed workers compensation” exclusion forms. I usually answer this question by stating that I am not a lawyer, but with my experience, those agreements are about as good as the paper they are written on as they usually fail “true” sub-contractor/employee tests. Meaning, they usually do not stand up in court or litigation which is why insurance will not accept them. Just because you 1099 for accounting purposes does not mean they are a “true” sub-contractor.

Who do you think is going to pick up a medical/indemnity claim when one of the subcontractors/sole proprietors gets hurt on a job you hired him for? The answer is most likely you and your policy! Best case scenario, your insurance company will get pulled into litigation and will have to defend.

Back in 2014, FedEx ran into this same situation in California: Article here.

Ask yourself the following questions to determine if the person is truly considered an employee or not:

  • Do you have managerial control over the subject? (i.e. what time to be where)

  • Does the subject carry General Liability and Workers Compensation?

  • Who’s tools and transportation does the subject use? If yours, does he lease them from you for fair market value?

  • Does the subject wear uniforms that bear his company’s name?

*Please note, these are only a few questions that determine eligibility. Other resources include Arizona Revised Statutes:

and The Industrial Commission of Arizona:

To protect yourself from future claims and possible large audits, you must remember “If you cannot provide, you abide”. If the subcontractor cannot provide a certificate of insurance (GL & WC), you will most likely be subject to paying insurance for their exposure.

Lastly, if they are a “true” sole proprietor and they fit the test, make sure they file the Sole Proprietor/Independent Contractor Statement off the Industrial Commission of Arizona’s website (send to your carrier/agent for processing). But, please remember that form is only good if they meet conditions for an independent contractor.

If you have any questions, you can email me at, call me at 602-271-9171, or leave a message for me to follow up on here.