Michigan General Contractor and Construction Manager Insurance: What Commercial GCs Need

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Michigan general contractor insurance for commercial work starts with general liability that will stand up to the owner's contract, workers' compensation priced to the trades your own crews perform, commercial auto, contractor's equipment, professional liability for the management and design-assist work you do, and an umbrella. For an established GC or construction manager, $1 million per occurrence and $1 million aggregate is the floor, and most commercial contracts require more.

No state license does not mean no requirement

Michigan licenses residential builders, not commercial ones. LARA says so directly, and the residential license itself covers only detached one- and two-family homes and townhouses of three stories or less. Some cities and townships have their own registration rules, and self-performed electrical, mechanical and plumbing work still requires the trade license.

Do not read that as permission to go light. If you run commercial projects, you need to be insured, and insured well:

• The contract is the real requirement. Owners, lenders and public agencies set limits, additional insured wording and policy restrictions before they sign. A program that does not match is a breach before work starts.
• Workers' comp is the law. It applies once you have three or more employees, or even one working 35 hours a week for 13 weeks (MCL 418.115), and you can owe benefits to an uninsured subcontractor's employee under Michigan's statutory-employer rule (MCL 418.171).
• Your exposure outlives the job. Michigan's statute of repose generally allows defect claims for six years after occupancy, up to ten for gross negligence (MCL 600.5839).

CM at-risk, agency CM and why the label matters less than you think

A construction manager at-risk holds the trade contracts and guarantees a maximum price; in practice it looks like a general contractor, with the same liability, builder's risk, bonding and subcontractor exposures. An agency CM advises the owner, who holds the trade contracts; its core exposure is professional, which the general liability policy is not built to cover.

Michigan case law is the reason not to lean on the label. In a footnote in Ghaffari v Turner Construction (2005), the Michigan Supreme Court said the CM-versus-GC distinction was "one without a difference" for purposes of that case. A local example makes the point: in Latham v Barton Malow, a carpenter fell while moving drywall from a scissor lift onto a mezzanine on the Oakview School project in Lake Orion. The construction manager's contract said it did not control safety precautions. The jury still found the CM 55% at fault, and the Michigan Court of Appeals upheld that in 2014 (in an unpublished decision) because the CM ran the safety program, could stop work and supervised the site full time. The Supreme Court's earlier ruling in the same case framed the danger as working at heights without fall protection.

The lesson: contract disclaimers do not move site-safety exposure. Your insurance, your subcontractors' insurance and their indemnity obligations do.

Additional insured forms: the details owners care about

Every subcontract should push the risk of the sub's work back to the sub's insurer, and every owner contract will ask the same of you. The ISO forms matter:

• Ongoing and completed operations are separate. CG 20 10 covers ongoing operations; completed operations needs CG 20 37 (scheduled) or an automatic form. A slip on a finished stair two years later is a completed-operations claim.
• Automatic status for upstream parties. CG 20 38 extends additional insured status to parties above you, such as the owner, when the written contract requires it — but only for ongoing operations. The completed-operations version for upstream parties is CG 20 40. CG 20 39 covers only parties you contracted with directly.
• "Caused, in whole or in part, by." These forms cover the additional insured only for injury or damage caused at least in part by the named insured's work. They do not cover the upstream party's sole negligence, and the automatic forms (CG 20 38, 20 39 and 20 40) carry their own professional services exclusion.

On AIA-based contracts, the insurance exhibit commonly prohibits general liability endorsements that delete the subcontractor exception, exclude residential or habitational work, exclude action-over claims from injured employees, or exclude explosion, collapse and underground work where the job involves them. Most of those exclusions are carriers' own endorsements, not standard forms, so they are easy to miss on a cheap renewal.

Wrap-ups: the gap after the program ends

On an owner-controlled (OCIP) or contractor-controlled (CCIP) wrap-up, the program provides on-site liability and workers' comp for enrolled contractors. Your own policy usually carries a wrap-up exclusion for that project, such as ISO CG 21 54. Read its last line: the exclusion applies whether or not the wrap-up program "remains in effect."

If the wrap's completed-operations coverage ends before Michigan's six-year repose period does, a claim in year five may land on nobody. Off-site work, your shop and your vehicles are outside the wrap entirely. Before you enroll, ask how long the completed-operations term runs and what your deductible chargebacks will be.

Bonds, sworn statements and trust funds

• Public work. Michigan requires a performance bond and a payment bond on public construction contracts exceeding $50,000 (MCL 129.201). The statute sets a floor of 25% of the contract for each; many public owners require 100%. See our guide to Michigan contractor surety bonds.
• Subcontractor default insurance. Some larger GCs buy SDI instead of bonding subs. It is a two-party policy with high deductibles and co-pay layers, and it does not protect lower-tier subs and suppliers the way a payment bond does.
• Sworn statements. Under the Construction Lien Act (MCL 570.1110), a contractor must provide a sworn statement of subs and suppliers when payment is requested; a GC that does not provide one cannot get paid or enforce its lien until it does, and a false sworn statement given with intent to defraud is a crime — a felony once it involves $1,000 or more.
• Construction money is held in trust. Michigan's Building Contract Fund Act makes payments to a contractor a trust fund for the subs and suppliers on the job. Misusing it with intent to defraud is a felony, and it is not something liability insurance covers.

Coverage beyond general liability

• Professional liability. If your policy carries ISO's contractors professional liability exclusion (CG 22 79), claims from design and engineering services you provide or hire out are removed. If you do design-assist, value engineering or agency CM work, you need a contractor's professional policy.
• Contractors pollution liability. The standard pollution exclusion leaves most construction pollution claims uncovered. Owners increasingly require a separate policy.
• Builder's risk. On AIA contracts the owner usually buys it, but not always; know who is responsible on every project. See builder's risk insurance.
• Workers' comp classification. Michigan has no single "general contractor" class code. Your payroll is rated by the trades your own employees perform, and an off-site executive supervisor class (5606) applies only to supervisors who direct work through job foremen and are not stationed on site. Uninsured subs are charged at your rates at audit. See workers' comp for 1099 subcontractors.

Frequently Asked Questions

Does Michigan require a license for commercial general contractors?

No. Michigan's residential builder license applies only to residential structures, and LARA states it licenses residential builders, not commercial builders. Some municipalities have their own registration rules, and trade work such as electrical or plumbing still requires the trade license. Owners and lenders impose insurance requirements through the contract.

Is a construction manager liable for jobsite injuries in Michigan?

It can be. Michigan courts look at actual supervisory and coordinating authority, not the title. In a 2005 footnote the Michigan Supreme Court called the CM-versus-general-contractor distinction one without a difference for that case, and in a 2014 unpublished decision the Court of Appeals upheld a jury finding a construction manager 55% at fault for a fall on a Lake Orion school project despite contract language disclaiming control of safety.

What is the difference between CG 20 38 and CG 20 40?

Both automatically extend additional insured status to parties you are required to add under a written construction contract, including parties above you such as the owner. CG 20 38 covers ongoing operations only; CG 20 40 covers completed operations. Many owner contracts require both.

Does my liability policy cover me after a wrap-up program ends?

Usually not for that project. The standard wrap-up exclusion (CG 21 54) applies whether or not the wrap-up program remains in effect, so if its completed-operations coverage ends before Michigan's six-year statute of repose, you may be uninsured for late claims. Ask how long the wrap's completed-operations term runs before you enroll.

What bonds are required on Michigan public construction projects?

Michigan requires a performance bond and a payment bond on public construction contracts exceeding $50,000. The statute sets a minimum of 25% of the contract amount for each, and many public owners require 100%.

The bottom line

A commercial contractor's insurance program is judged against two documents: the owner's contract and the claim. The questions that decide it are whether your additional insured forms cover completed operations for everyone above you, whether your policy carries exclusions the contract prohibits, and what happens to a wrap-up project in year five.

We work best with established Michigan commercial contractors and construction managers — payroll on the books, a steady book of commercial projects, subcontractors you collect certificates from, and a few years of loss runs. Send us your current declarations pages, your full schedule of forms, a recent owner contract's insurance exhibit and your last two loss runs, and we will show you where your program and your contracts do not match before we talk about price. J. Jacobs & Associates has insured Michigan contractors for more than forty years, and as an independent agency we take your program to multiple preferred commercial carriers. Call (248) 693-6455 or request a contractor review.