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Office of Management & Finance

Bureau of Internal Business Services

BIBS is the provider of central services for the City of Portland

1120 SW 5th Avenue, Room 1250, Portland, OR 97204

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Insurance Coverage Assessment

City Risk LogoInsurance

Risk Management, Portland, OR


 

Risk Assessment Roadmap Toolkit

Insurance Coverage Assessment

 

What kinds of insurance should be required of Contractors?

See Smart Contracting Toolkit for details.

 

Examples of Common Types of Insurance and Bonds: 

  • Commercial Automobile Liability – Defends and pays Contractor’s liability for Property Damage and Bodily Injury to others while operating owned, non-owned, and hired vehicles.
  • Commercial General Liability – Defends and pays Contractor’s liability for unintentional Bodily Injury and Property Damage to others.  This coverage also includes Products and Completed Operations and Personal Injury coverage.  However, frequently, policies have lower limits of coverage for these exposures. 
  • Professional Liability – Defends and pays Contractor’s liability for Property Damage and Bodily Injury caused by errors, omissions, or mistakes made in the Contractor’s professional judgment.
  • Performance Bond – Guarantees the City that work will be completed according to the contract specifications. The key bond on a work project when city bureaus not only want the work completed, but also want it to be done on time and according to specifications. If the Contractor does not keep either of the promises, the surety is obligated to satisfy the city. Builder’s Risk and Commercial General Liability insurance do not cover this exposure. 

Based on the Risk Rating (RR) – How much insurance should be required?

SEVERITY: Insignificant Minor Moderate Major Critical
LIKELIHOOD:          
Almost Certain M H E E E
Likely M M H E E
Possible L M H E E
Unlikely L L M H E
Rare L L M H H

 

Risk Rating:

  • Extreme Risk – First, consider not doing the activity. If you must, you will need to decide how much a potential loss could cost. In general, risks at this level warrant more than $1 million per occurrence in coverage for Property Damage (PD) and/or Bodily Injury (BI).  Also, consider if more than one loss is likely to occur during the term of the contract.  If so, consider requiring more than $1 million aggregate coverage per policy period e.g. recommendations for contractor insurance requirements on extreme risks are generally at least $5 million per occurrence with a $10 million aggregate limit.
  • High Risk – Could a potential loss cost in excess of $1 million per occurrence in coverage for Property Damage (PD) and/or Bodily Injury (BI)?  Also, consider if more than one loss is likely to occur during the term of the contract. If so, consider requiring more than $1 million aggregate coverage per policy period e.g. recommendations for contractor insurance requirements on high risks are generally at least $2 million per occurrence with a $5 million aggregate limit.
  • Moderate Risk – Standard limit is $1 million per occurrence in coverage for Property Damage (PD) and/or Bodily Injury (BI). Also, consider if more than one loss is likely to occur during the term of the contract. If so, consider requiring more than $1 million aggregate coverage per policy period e.g. recommendations for contractor insurance requirements on moderate risks are generally at least $1 million per occurrence with a $1 million aggregate limit. However, your risk assessment should consider the costs of all potential losses. If your assessment reveals potential of losses in excess of $1 million per occurrence in coverage for Property Damage (PD) and/or Bodily Injury (BI) consider requiring higher limits of coverage, your risk may actually be high (see H for High Risk).
  • Low Risk – If risk is minimal, this is the area where coverage and limits may potentially be flexible. Standard limit is $1 million per occurrence in coverage for Property Damage (PD) and Bodily Injury (BI). Also, consider if more than one loss is likely to occur during the term of the contract. If so, consider requiring more than $1 million aggregate coverage per policy period e.g. recommendations for contractor insurance requirements on low risks are generally at least $1 million per occurrence with a $1 million aggregate limit. In the case of minimal risks, the bureau could make a business decision to lower the limits of coverage. Risk Management would generally not recommend limits of less than $500,000 per occurrence in coverage for Property Damage (PD) and Bodily Injury (BI). If your risk assessment reveals only minute risk, the bureau could make a business decision to waive coverage requirement.

 

 

 

 

Rev 09/10