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Review Checklist: Insurance and Indemnity Clauses Lenders, Owners and GCs Often Demand from HVAC Subs

Target audience: HVAC subcontractors operating in the USA — with specific focus on Los Angeles, CA; Houston, TX; and New York City, NY.

This checklist helps HVAC subs review and negotiate the insurance and indemnity contract demands most commonly required by lenders, owners and general contractors (GCs). It highlights what to expect, sample limits, financial impact, negotiation levers, and specific endorsements that frequently trip up HVAC trades.

Why this matters for HVAC contractors (brief)

Owners, lenders and GCs push risk onto subs via contract language and insurance requirements. That transfer affects:

  • Premiums and underwriting appetite,
  • Scope of coverage (what carriers will actually pay),
  • Your exposure to catastrophic losses and litigation costs.

Correctly reviewing and negotiating these clauses can save tens of thousands in excess payments and protect your company’s balance sheet.

Quick summary — typical demands you will see

  • Commercial General Liability (CGL): $1M per occurrence / $2M aggregate minimum; often $2M/$4M or more on large projects.
  • Umbrella/Excess Liability: $1M–$5M commonly required by GCs or lenders.
  • Workers’ Compensation: Statutory in the state where work is performed (California, Texas, New York rules vary).
  • Commercial Auto Liability: $1M combined single limit (CSL) for hired/non-owned and owned vehicles.
  • Professional Liability (Design/Performance): $1M for design-assist or engineering tasks.
  • Additional Insured endorsements (CG 20 10 / CG 20 37 or equivalents) and Waiver of Subrogation requests.
  • Primary & Non-Contributory wording and Broad Form Indemnity are frequent sticking points.

For market cost context, small HVAC contractors often pay annual premiums in these ranges: General liability roughly $400–$2,000/year for small single-shop operations, commercial auto $1,000–$3,000 per vehicle/year, and workers’ comp depending on payroll (many small HVAC firms pay $5,000–$50,000+ /year depending on payroll size and state). Online brokers like Next Insurance advertise lower entry-level pricing (packages often starting near $30–$60/month for very small trades), while legacy carriers such as The Hartford and Travelers typically quote higher for broader exposures. See market references: Next Insurance, Insureon, The Hartford.
Sources: Next Insurance, Insureon, The Hartford.

Detailed review checklist (step-by-step)

1) Verify limits & layers

  • Confirm per occurrence and aggregate limits for CGL (e.g., 1M/2M vs. 2M/4M).
  • Check umbrella/excess: who is named as insured on umbrella? Ensure underlying limits match umbrella requirements.
  • Confirm commercial auto limits — often $1M CSL. If GC requires higher limits, obtain a cost estimate before signing.

2) Additional Insured endorsements

  • Common asks: CG 20 10/20 37 (ISO) or equivalent. These extend CGL to GC/Owner for vicarious liability.
  • Ensure the AI endorsement matches the scope of operations — do they ask to be AI for completed operations or only operations?
  • Ask for the least-broad AI acceptable (operations-only vs. completed operations + products).

Internal link: Additional Insured Endorsements: Why Clients Require Them and How They Impact Your Policy

3) Primary and non-contributory wording

  • Owners/GCs often demand your policy be primary and non-contributory. That means your insurer pays before the GC’s insurer and won’t seek contribution.
  • Negotiate to limit this to insured v. insured claims or to operations only rather than completed operations, where feasible.

4) Waiver of Subrogation

  • Waiver of subrogation is commonly required in owner or lender contracts. It prevents your carrier from pursuing recovery from the GC/owner after a claim.
  • Accept only when carrier confirms endorsement is available in your state and will not void coverage.

5) Indemnity clauses (hold harmless, defense)

6) Professional liability / design exposure

  • If you perform design-assist, commissioning, or control programming, expect requests for Professional/E&O limits (commonly $1M).
  • Confirm retroactive dates and claims-made vs. occurrence triggers.

7) Certificates of Insurance & endorsements

  • Ensure COIs reflect:
    • Required limits,
    • AI endorsements attached,
    • Waiver of subrogation endorsed when required,
    • Policy term matches project duration (and extended reporting/ERP periods where needed).

8) Workers’ Compensation and Employer practices

  • State-specific: California, New York and Texas have different WC rules and experience modification impacts premiums dramatically.
  • Lenders/Owners may ask for evidence of compliance only. GCs may ask for safety programs and drug testing policies.

Internal link: How to Push Back on Unreasonable Insurance Requirements in HVAC Contracts

Negotiation levers — what reduces cost/exposure

  • Limit “additional insured” to operations-only or to specific scope/duration.
  • Replace “indemnify for all claims” with “to the extent of subcontractor’s negligence” (comparative negligence).
  • Request evidence that umbrella/primary language will be honored by your carrier in writing prior to signing.
  • Bundle coverages (GL + umbrella + commercial auto) with one carrier for better pricing.
  • Use loss control programs and training to lower Experience Mods (EMR) — big driver of workers’ comp.

Typical clause matrix (sample)

Clause Typical Demand What to Push For Cost Impact (annual estimate)
CGL Limits $1M / $2M → $2M / $4M Keep at $1M/2M unless project > $1M; add umbrella if needed $1M/2M GL: $400–$2,000; upgrading to $2M/4M or adding $1M umbrella: +$800–$3,000
Additional Insured AI + broad CG wording AI operations-only; limit to project/site AI endorsement: administrative cost $50–$300; potential premium impact minimal but claim exposure increases
Primary/Non-contributory Required on all contracts Limit to operations-only, or carve out completed operations Carrier may charge 5–15% surcharge if accepted broadly
Waiver of Subrogation Often required Accept if insurer confirms endorsement available Typically no direct premium change but reduces recovery options
Professional Liability $1M claims-made Limit to design-assist tasks only E&O: $600–$2,500/year depending on payroll and exposures

(Note: cost estimates are illustrative ranges — see market sources below.)

State-specific considerations: Los Angeles, Houston, New York City

  • Los Angeles, CA: Higher WC, strong GC bargaining power on large public jobs; expect stringent completed operations AI requirements.
  • Houston, TX: Texas has no state WC for some employers with independent contractors nuance; GCs still demand statutory coverage and high umbrella limits for large industrial HVAC work.
  • New York City, NY: Very litigious — owners/GCs often require higher limits (2M+/4M+) and more robust AI endorsements for high-rise and MEP projects.

Practical next steps before signing any subcontract

  1. Send the proposed contract to your broker and get a pre-quote for requested limits and endorsements.
  2. Obtain “carrier confirmation” in writing for primary/non-contributory and waiver of subrogation endorsements.
  3. Push to convert overly broad indemnity to “to the extent of subcontractor negligence.”
  4. Require GC to furnish written confirmation of AI requirement scope (operations-only vs. completed operations).
  5. Get COI and attach necessary endorsements prior to mobilization.

Market suppliers & pricing examples

Final note

Always route contract insurance and indemnity language through both your attorney and your insurance broker before execution. Small wording changes (e.g., “to the extent of negligence”) can materially reduce your exposure and lower long-term insurance costs.

References:

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