Sooner or later a snow contractor opens a tender or a property management contract and sees a liability requirement of $5 million. For a business that has carried $2 million for years, it can come as a surprise.
Below are real examples we found in published snow tenders, the reasons a client may set a higher number, and the other insurance terms that usually travel with it. Requirements vary from contract to contract, so treat these as examples, not a rule.
What We Found in Published Tenders
Township of Otonabee-South Monaghan, Ontario. The township's facilities winter maintenance request for proposals asked for commercial general liability of at least $5,000,000 per occurrence and $10,000,000 aggregate, including products and completed operations of $5,000,000 and sudden and accidental pollution of $1,000,000 per claim and $2,000,000 aggregate. It also required owned vehicle liability of at least $5,000,000, non-owned automobile coverage of at least $2,000,000, the township as additional insured, 30 days' notice of cancellation, a certificate within seven working days of award and proof of WSIB registration.
Town of Slave Lake, Alberta. The town's Government Centre snow removal tender for November 2020 to April 2023 required bidders to list the town as additional insured and provide proof of commercial general liability of $5,000,000, plus automobile liability with limits of $2,000,000.
Bruce Grey Catholic District School Board, Ontario. For contrast, the board's snow removal contract template asked for commercial general liability of at least $2,000,000 per occurrence and automobile liability (owned, hired and non-owned) of at least $2,000,000, with the board as additional insured.
The examples we found range from $2 million to $5 million in general liability. Each tender sets its own requirements. See our pages on Ontario municipal snow contracts and Alberta municipal snow contracts.
Why a Client Might Set a Higher Limit
The documents do not explain their reasoning, but the general logic of contract insurance requirements helps:
- The client carries its own exposure. Property owners and managers owe duties to people on their property. Courts have held occupiers liable for ice they could have dealt with, as in Waldick v. Malcolm. See snow and ice liability cases every contractor should know.
- Risk transfer. Naming the client as an additional insured and adding an indemnity clause means the contractor's policy may be expected to respond first. A higher limit leaves more room for that.
- One incident can involve several people. A per occurrence limit caps what the insurer pays for a single occurrence, however many people are hurt.
- Guidance from the client's own insurer. Intact Public Entities, which insures municipalities, publishes guidance recommending that municipalities be named as additional insured, receive 30 days' notice of cancellation and require the contractor's insurance to be primary. It leaves the limit to each municipality.
The Terms That Travel With the Limit
A $5 million requirement rarely arrives alone. The tenders above also asked for additional insured status and auto liability limits, and the Ontario documents added completed operations coverage, notice of cancellation and WSIB proof. Intact Public Entities' guidance also recommends that the contractor's insurance be primary; see primary and non-contributory. The fine print can matter as much as the headline number.
How Contractors Usually Reach Higher Limits
Contractors often combine a primary general liability policy with an umbrella policy that sits on top of it and adds limits. Whether that satisfies a particular contract depends on its wording, so it is worth confirming with the client before you bid. For the trade-offs, see $2 million vs $5 million liability and CGL vs umbrella.
Before You Bid
Send the insurance section of the tender to a broker before you submit your bid. A broker can tell you whether your current program meets it, what it would take to meet it, and how long a certificate might take. The contractor who finds out after winning the work is the one who scrambles.
Read more in insurance requirements for commercial snow contracts.
Sources
- Otonabee-South Monaghan Township: Winter maintenance RFP
- Town of Slave Lake: Snow removal bid package
- Bruce Grey Catholic DSB: Snow contract template
- Intact Public Entities: Insurance requirements guidance
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Frequently Asked Questions
Do all commercial snow contracts require $5 million in liability?
No. Requirements vary by contract. The published examples we found ranged from $2 million to $5 million in general liability.
Can an umbrella policy help meet a $5 million requirement?
Contractors often use an umbrella policy over their general liability to add limits. Whether it satisfies a specific contract depends on the contract wording, so confirm with the client and a broker.
What else do tenders ask for besides the liability limit?
Common items include additional insured status, notice of cancellation, auto liability limits, completed operations and proof of workers compensation registration.