Insurance requirements for California public works contracts
A California public works contract typically requires the contractor to carry commercial general liability of $1,000,000 per occurrence and $2,000,000 aggregate, automobile liability of $1,000,000, and workers' compensation as required by the Labor Code, with the agency named as an additional insured on a primary and non-contributory basis. Most contracts also require a waiver of subrogation and insurers rated A-:VII or better by A.M. Best (some agencies ask for A:VII), and the agency should hold the endorsements themselves, not just a certificate.
The typical requirements
Most California cities, counties and special districts start from a set of requirements very like the one below, often from their risk pool's model contract language, and raise it for riskier work. Your own contract and risk manager decide the numbers; this table is a starting point for reading one.
| Coverage | Common minimum | Usually also required |
|---|---|---|
| Commercial general liability | $1,000,000 per occurrence, $2,000,000 general aggregate | Additional insured, primary and non-contributory, waiver of subrogation; occurrence form |
| Automobile liability | $1,000,000 combined single limit | Any auto, or owned, hired and non-owned autos; additional insured |
| Workers' compensation | Statutory limits | Employer's liability of $1,000,000 per accident; waiver of subrogation |
| Umbrella or excess | When the contract's limits exceed the primary policies | Follows the form of the underlying policies |
| Professional liability | For design and consulting work, often $1,000,000 per claim | If claims-made, kept in force or extended for a period after the work ends |
Agencies commonly raise the limits, or add an umbrella requirement, for work on roads and highways, over water, at height, or with hazardous materials, and add pollution liability where the work can release something.
Additional insured: the wording and the endorsement
Most California public agency contracts use wording close to this:
The City, its officers, officials, employees, and volunteers are to be covered as additional insureds with respect to liability arising out of work or operations performed by or on behalf of the Contractor.
Some agencies add “agents” or their council or board to the list.
Two things trip contractors up. First, the list matters: an endorsement that names only “the City” may not cover its officers, employees or volunteers, who are often named in a claim too. Second, the certificate does not make anyone an additional insured. The ACORD 25 says so in capitals: “If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed.” Ask for the endorsement itself. On general liability that is usually:
- CG 20 10 (owners, lessees or contractors) for the work while it is under way, or CG 20 26 (designated person or organization);
- CG 20 37 for completed operations, so the agency stays covered for claims that arise after the job is finished;
- or a blanket additional insured endorsement that covers anyone the contractor has agreed in writing to add.
Check the edition date and the wording, not just the form number: some editions limit coverage to the contractor's ongoing operations, and some cover only liability “caused, in whole or in part” by the contractor.
Primary and non-contributory
“Primary and non-contributory” means the contractor's policy pays first and does not ask the agency's own coverage or risk pool to share the loss. Without it, an otherwise valid additional insured claim can turn into a dispute between the two insurers. On general liability it is often written with ISO's CG 20 01 endorsement, or included in the additional insured endorsement's own wording.
Waiver of subrogation
After paying a claim, an insurer can normally sue whoever caused the loss to recover what it paid. A waiver of subrogation gives up that right against the agency. Contracts usually require it on general liability (ISO's CG 24 04 or a blanket waiver) and on workers' compensation, where an injured worker's insurer would otherwise pursue the agency. California workers' compensation policies use the state's own waiver endorsement, issued under the Workers' Compensation Insurance Rating Bureau's forms, so expect a different form number from the one a contractor based in another state shows you.
Insurer ratings: what A-:VII means
A.M. Best rates insurers on two scales. The letter is its Financial Strength Rating: A- is the lowest of the “Excellent” grades, above B++ (“Good”). The Roman numeral is its Financial Size Category: VII means the insurer's policyholders' surplus is between $50 million and $100 million. “A-:VII or better” therefore needs both a letter of A- or higher and a size of VII or higher.
The rating is not on the certificate. Someone has to look the insurer up, which is why it is the requirement most often left unchecked. Many contracts also say whether insurers must be admitted (licensed) in California or whether a surplus lines insurer is acceptable.
What California law adds
- Workers' compensation is the law, not a contract term. Labor Code section 3700 requires every employer to be insured for workers' compensation or to hold a certificate of consent to self-insure. Under Labor Code section 1861, a contractor awarded a public works contract signs a statement that they are aware of section 3700 and will comply before starting work. Section 3700 applies to employers, so a sole proprietor with no employees does not need a policy; agencies usually ask for a signed statement or their own waiver form instead of a certificate, with a promise to get coverage before hiring anyone.
- Payment bonds above $25,000. Civil Code section 9550 requires a payment bond from the direct contractor on a public works contract over $25,000. Performance bonds are set by the agency's own rules and the contract.
- Indemnity has a limit. Civil Code section 2782(b) makes void any clause in a public agency construction contract that shifts liability for the agency's own active negligence onto the contractor. Insurance requirements are written alongside the indemnity clause, not as a way around it.
What the certificate does not tell you
- It confers no rights. The ACORD 25 begins: “This certificate is issued as a matter of information only and confers no rights upon the certificate holder.”
- It does not promise notice of cancellation. The form says notice will be delivered “in accordance with the policy provisions”, so a contract that requires 30 days' notice to the agency needs an endorsement that provides it.
- It does not show the insurer's rating, the additional insured wording, or any exclusions on the policy.
- It is a snapshot. Policies renew on their own dates, often in the middle of a long contract, so a certificate that is valid on award day needs replacing before each policy expires.
A checklist for each certificate
- The named insured matches the contractor on the contract.
- The certificate holder is your agency, as named in the contract.
- Each required coverage is present, with limits at or above the contract's minimums.
- Each policy is in effect on the start date and does not expire before you have a renewal.
- The additional insured, waiver of subrogation and primary boxes are marked, and the endorsements are attached.
- Each insurer meets your rating minimum, such as A-:VII, looked up on A.M. Best.
- For workers' compensation: a certificate, a certificate of consent to self-insure, or a signed exemption.
How SiteSquare handles this
Each contract, purchase order or permit in SiteSquare carries its own requirements, and the public works starting point includes the limits above, additional insured, waiver of subrogation, primary and non-contributory, an A-:VII rating minimum and a performance bond. Every limit can be changed per agreement.
When a certificate arrives, SiteSquare reads it, and code checks every limit, the additional insured, waiver and primary boxes, the dates and the certificate holder against that agreement. The reviewer records the insurer's A.M. Best rating, which is not on the certificate, and nothing counts as compliant until a person approves it. Endorsements and bonds can be kept on the contractor's file, and a bond's amount is checked against the minimum. SiteSquare does not yet read an endorsement's wording: your reviewer still checks that.
Watch the walkthrough videos and request a demo, or read more about insurance compliance for cities, counties and special districts.