Insurance Essentials: Liability risk mitigation tips for electrical contractors

Electricians face many threats to their professional well-being, from theft to faulty installations to unintentional property damage. Here’s how to manage those risks and ensure you’re protected if something goes shockingly wrong.

Demand for skilled electricians across Canada is typically consistent due to ongoing construction, renovations and maintenance projects, but according to Statistics Canada, we’re seeing a current shortage of electricians. 

Latest numbers show more than 5,000 job vacancies for electricians at this time last year, an increase of 51 per cent versus 2021. While job stability may provide a sense of security for those in the field, other concerns exist, including the risk of injury and potential lawsuits.

According to the Calgary Herald, citing government data, 1,081 workers were killed in workplace incidents in 2021 – a 16 per cent increase from 924 deaths in 2020 – representing almost five workplace deaths every working day. Moreover, electrocutions rank among the top four workplace fatalities.

Beyond those grim statistics, electricians face other threats to their professional well-being, ranging from theft to faulty installations to unintentional property damage. Let’s review some common liability risks electricians face and how to mitigate them.

What common liability risks do electrical contractors face?

Like any construction professional or skilled tradesperson, liability risk comes with the territory for electrical contractors. These include:

• Working with high voltage and potentially dangerous equipment is what electricians do. However, electric shocks, burns or electrocutions can occur, leading to injury or death. Both electricians and others on the jobsite may be at risk. 
• Property damage. Faulty electrical installations or repairs can cause damage to property or jobsites, triggering electrical fires, equipment damage or the destruction of buildings.
• Third-party bodily injury or property damage. Electricians working on a client’s property can accidentally cause harm to the occupants, passersby, visitors or nearby properties, leading to injury or property damage claims.
• Code violations. If electrical work does not adhere to building codes and safety regulations, an electrician could face legal penalties, fines or claims for damages resulting from non-compliance.
• Errors and omissions. Mistakes in electrical designs, planning or installations could lead to operational issues, system failures or inefficient electrical systems, resulting in financial losses for your clients.
• Contractual disputes. Disagreements with clients over the scope of work, project timelines or cost overruns can lead to legal disputes, financial losses and damage to your reputation.
• Product liability. If you install faulty or defective electrical components or equipment, you can be liable for the resulting damages or injuries caused by them.
• The special tools and equipment electricians use are expensive and, unfortunately, theft at construction sites is not uncommon. Likewise with the electrical supplies electricians need, such as copper wiring, which is always a popular target for thieves.
• Environmental liability. The improper disposal of hazardous materials, such as old wiring or used batteries, could lead to environmental violations and fines.

9 risk mitigation tips for electrical contractors

Preventing incidents and reducing the risks you face go a long way to safeguarding your finances and reputation (and keeping your annual insurance premium as low as possible). Here are nine tips to help electricians lower their liability risks:

1. Adhere to safety standards

It’s critical to stay up-to-date with the latest safety codes and regulations. Always follow industry best practices and ensure your work meets or exceeds these standards.

2. Wear protective equipment

Wear appropriate personal protective equipment, such as insulated gloves, safety glasses and flame-resistant clothing while working.

3. Thoroughly inspect jobsites

Before starting any electrical job, inspect the site for potential hazards, including faulty equipment, damaged wiring or unsafe conditions.

4. Invest in safety training

Participate in ongoing safety training; if you have employees, your team should too. Ensure everyone knows potential risks, safety protocols and emergency procedures for every project.

5. Label and organize wiring

Properly label electrical panels, wires and circuits to simplify troubleshooting and maintenance, reducing the risk of errors or confusion during repairs or upgrades.

6. Use Ground Fault Circuit Interrupters (GFCIs)

Get an extra layer of protection against electric shocks by using GFCIs in areas with a significant electrical shock risk, such as when working near water sources.

7. Limit access to electrical panels

Ensure only authorized personnel can access electrical panels and other high-voltage areas to prevent incidents and unauthorized modifications.

8. Test equipment and schedule routine maintenance

Use appropriate testing equipment, like multimeters, to check circuits and electrical systems for faults or irregularities before starting any work, and schedule routine electrical system inspections and maintenance to spot and address any issues before they become significant problems.

9. Keep an inventory of your tools

Engrave or paint an identifiable mark on all your tools and equipment that cannot be erased or is difficult to remove or hide. Maintain a detailed list of all tools and equipment, including serial numbers and descriptions, and take photos of each item. Digitize the list and store the information in encrypted, secure cloud storage. If you must leave your tools at a jobsite overnight, ensure they’re locked inside sturdy, purpose-built security lock boxes in a location that’s out of sight.

What should electrical contractors look for in a business insurance policy?

While electrical contractor insurance is a legal requirement for electricians – and your annual insurance premium is tax deductible – that doesn’t mean you should purchase any policy without closely scrutinizing it.

At a minimum, you’ll need general liability, professional liability and equipment and tools insurance protection. You’ll also likely need commercial auto and pollution liability insurance too. But it’s not only knowing what coverage you have within a policy but also what the coverage limits, exclusions and deductibles are that determines whether you’re getting value for money from your insurance provider.

Working with an experienced business insurance broker makes a significant difference. A business insurance broker can explain the ins and outs of your policy, recommend coverage limits, ensure you get a certificate of insurance fast and help you save money on your annual premium.  

Aharshan Thangarasa is a licensed broker and team lead, contractors at Zensurance, Canada’s leading source for small business insurance. Get a free quote for your insurance needs by visiting Zensurance.com/DCN.