General Liability
General liability is rated on receipts or payroll by classification and trued up at audit, and the single largest line on most contractors' audits is subcontractor cost charged at full rate. Koala is not reviewing this line yet.
Koala does not review this line yet, and this page is not an offer to. Everything below describes how the line is rated and where its errors come from; none of it describes a service you can order today. Workers' compensation, in Texas, is the only review Koala performs.
The paperwork you chased is worth money.
On most contractors' general liability audits the largest single adjustment is subcontracted cost charged at the full rate, and the thing that would have relieved it is a certificate of insurance that expired in month seven or was collected and never forwarded. Nobody treats a filing cabinet as a rating input. The audit does.
General liability
Third-party bodily injury and property damage arising out of your premises, your ongoing operations, and the work you have already completed. It is the coverage a general contractor asks you to prove before you are allowed on the site.
What the premium is built from
- Classification
- The trade category your operations are filed under, which sets the rate. A contractor doing three kinds of work may belong in three classifications and be filed under one.
- Exposure basis
- The measured quantity the rate is applied to — usually gross receipts or payroll, per $1,000. Which basis applies depends on the classification, and being on the wrong one changes the bill without changing the risk.
- Subcontracted cost
- What you paid subcontractors during the term. Whether it is charged at your full rate, at a reduced rate, or not at all usually turns on whether an acceptable certificate of insurance was on file for that sub.
- Audit
- The end-of-term true-up against actual figures. An audit completed from an estimate rather than from your records is the common way a wrong number becomes the number on the invoice.
Three ways this number goes wrong.
None of these is fraud, and none of them requires anybody to have behaved badly. They are what happens when a figure is entered once, under time pressure, by somebody who will never see the invoice it produces.
Error 01
Subcontractors are charged as if they were uninsured
Most policies rate uninsured subcontracted cost at your own classification rate, on the theory that their work is your exposure. The relief is a valid certificate of insurance meeting the policy's requirements. Certificates that were collected but expired mid-term, or that were on file but never sent to the auditor, are charged the same as certificates that never existed.
Error 02
Receipts are reported gross of everything
The exposure the rate applies to is defined by the policy and the manual rules, not by your income statement. Amounts that are excludable under those rules — and the treatment varies by state and by classification — are frequently reported anyway, because the fastest answer to an auditor's request is the total off the tax return.
Error 03
One classification is made to cover several trades
A single classification is convenient at binding and expensive at audit, because the whole exposure is then rated at whichever trade carries the highest rate. Splitting it requires records that separate the work, which is a bookkeeping question rather than an insurance one, and so it is nobody's job.
What you can do about it today
Nothing, from Koala, on this line. If your general liability audit has already landed and you believe it is wrong, the people to talk to are your broker and the auditor, in that order, and the document to ask for is the audit worksheet showing the basis they actually used.
The other lines
- Workers' CompLiveYour premium is built from three numbers entered by hand: the class code each worker is filed under, how payroll is split across those codes, and the experience mod carried over from past claims. Koala rebuilds all three from the published rate tables, for employers paying premium in Texas.
- Commercial AutoIn developmentCommercial auto is rated vehicle by vehicle, and the schedule it is rated from is a list somebody last reconciled at binding. Sold trucks, departed drivers and stale garaging territories all keep billing. Koala is not reviewing this line yet.
- Umbrella / ExcessIn developmentAn umbrella is priced off the policies underneath it, so an overstated exposure on your general liability or auto is charged twice: once on the underlying line, and again in the factor applied on top of it. Koala is not reviewing this line yet.
One line is live. This is not it.
Koala reviews workers' compensation premium in Texas, and nothing else yet. If that is a policy you hold, a review costs nothing to ask about. If it is not, there is nothing here to buy today.