MR. PLUMBER

The plumbing franchise you bought comes with a specific set of insurance requirements. Those requirements were written to protect the franchisor's system. Your job is to make sure the policy you carry actually covers what you do — not just what your agent thinks a plumber does.

Commercial general liability insurance at $1,000,000 per occurrence and $2,000,000 aggregate on an occurrence form — not claims-made. Completed operations coverage must be included. For any plumbing franchise performing physical work in customer homes, the completed operations exposure is too long-tailed for a claims-made form. Work done today may produce a water damage or mold claim two years from now. An occurrence form responds to when the damage occurred, not when the claim was filed.

Commercial auto liability at a combined single limit of $1,000,000. This must cover all owned vehicles, hired vehicles, and non-owned vehicles. The hired and non-owned auto coverage is what protects you when a technician uses their personal truck on a job. Without it, there is no coverage for that vehicle during business use — not on your commercial policy, and not on their personal policy, which excludes commercial use.

Workers' compensation insurance at statutory limits for your state, with employers' liability limits of $1,000,000 per accident, $1,000,000 per disease per employee, and $1,000,000 per disease policy limit. The workers' compensation policy is not optional in any state where you have employees — and in most states, the owner is included in that requirement. Confirm your state's rules before electing any owner exemption.

Umbrella liability at $2,000,000 per occurrence and $2,000,000 aggregate, sitting above your general liability, auto, and employers' liability policies as a follow-form policy. 

Plumbing claims — particularly water intrusion, flooding, and sewage backup — can produce multi-hundred-thousand-dollar outcomes. The $2,000,000 umbrella provides the layer between the underlying policy and those outcomes.

The additional insured endorsement on your general liability policy must be written on occurrence form ISO endorsement CG 20 10 (ongoing operations) and CG 20 37 (completed operations). A blanket additional insured endorsement may satisfy some requirements. Confirm which endorsement form your franchise agreement specifies — or request both to be safe.

Primary and non-contributory language must be included. This means your policy responds first when the franchisor is named in a claim arising from your operations. Their policy does not contribute. Waiver of subrogation in favor of the franchisor must also be included — this prevents your carrier from suing the franchisor after paying a claim.

Probably not — and the reason is worth understanding before the next time you bring someone in.

Your general liability policy covers your operations. When you hire a 1099 plumber to handle an overflow week, a specialty job, or a second crew on a large commercial call, that subcontractor's work is not automatically covered under your policy. Most general liability policies include a subcontractor exclusion that removes coverage for bodily injury and property damage caused by independent contractors working on your jobs.

The endorsement that fills this gap requires subcontractors to maintain their own general liability coverage with a current certificate of insurance on file. Current means valid on the date the work was performed — not on the date you hired them, and not on a certificate you collected six months ago.

There are two separate exposures when a 1099 plumber is on your job. The first is the general liability audit exposure — if a claim surfaces and the sub's certificate is lapsed, the subcontractor exclusion applies. The second is the workers' compensation exposure.

The audit risk is financial: any 1099 payroll without a current workers' compensation certificate is treated as your payroll at year-end audit, generating an additional premium bill at your classification rate.

The injury risk is more serious: a 1099 plumber hurt on your job who carries no workers' compensation coverage of their own may have their medical expenses and lost wages become your direct obligation. This is not an audit adjustment — it is an uncapped out-of-pocket exposure. Collect certificates before every job. Both risks disappear with a current certificate.

Your commercial property policy covers equipment at a fixed business location. Your commercial auto policy covers physical damage to the vehicle. Neither one automatically covers tools, diagnostic equipment, or parts inventory that were inside the vehicle when it was broken into.

The gap is the inland marine coverage gap — specifically a tools and equipment floater or inland marine policy that covers business property in transit, at job sites, or in vehicles. Without this coverage, a break-in that takes $15,000 in pipe inspection cameras, motorized drain snaking equipment, and diagnostic tools is an out-of-pocket loss.

For a plumbing franchise with one to three service vans, the equipment in those vehicles often represents a significant share of the business's invested capital. The trade name on the van suggests a professional operation. The insurance behind it needs to match.

Most plumbing franchisees bring in licensed 1099 plumbers during overflow weeks or for specialty work. When that plumber causes a water loss and his certificate has lapsed, your carrier finds the subcontractor exclusion before you do. See how subcontractor compliance monitoring works for plumbing franchisees at  subcontractor-compliance.

Your agent is not wrong that you have coverage. The question is whether that coverage matches your actual operations — and your franchise agreement's specific requirements.

There are four things to verify that most agents who do not specialize in franchise insurance do not automatically address:

First: Is the correct franchisor entity named as additional insured on your general liability and commercial auto? The specific legal entity name matters. A franchise parent company name, a brand name, or the wrong subsidiary produces a non-compliant certificate even if every other coverage element is correct.

Second: Is your general liability policy written on an occurrence form? Claims-made policies are used in some trades, but they create a completed operations tail exposure problem for plumbing franchises. Completed operations coverage on an occurrence form protects you for claims that arise from work done years in the past, even after a policy cancels or changes.

Third: Is the subcontractor exclusion removed — or modified to require certificates from your subcontractors? If the exclusion is in the policy in its unmodified form, your carrier can invoke it any time a 1099 worker was involved in a job that produced a claim.

Fourth: Is the additional insured endorsement written to specifically include completed operations? The most common additional insured form for ongoing operations is ISO CG 20 10. The completed operations additional insured is ISO CG 20 37. You need both — not just one.

The workers' compensation premium is the most variable line in a plumbing franchise insurance stack — and the one most likely to produce a year-end audit surprise if the policy was not built for the full scope of what your technicians actually do.

How workers' compensation premium is calculated

Your workers' compensation premium is built from this formula: payroll divided by 100, multiplied by the rate for your NCCI classification code, multiplied by your experience modification factor.

The classification code determines the rate. Standard plumbing work falls under NCCI code 6400. The rate per $100 of payroll under NCCI 6400 varies by state — from approximately $2.50 in lower-rate states to $7.50 in higher-rate states. Florida and Illinois tend toward the higher end. Texas and Tennessee tend toward the lower end.

If your technicians do any underground plumbing work — sewer line excavation, trenchless pipe bursting, water main replacement — those activities classify under NCCI code 6010, which carries a higher rate in most states. A policy built on code 6400 only, where excavation work is absorbed into the plumbing payroll, is misclassified for that work. The carrier finds the gap at audit.

What happens at audit if your subcontractor certificates are missing

Your workers' compensation carrier audits your actual payroll at the end of every policy year. The auditor reviews both your W-2 payroll and your 1099 payments to independent contractors. If a subcontractor cannot produce a certificate showing their own workers' compensation coverage, your carrier treats their payroll as yours — and charges premium on it at your classification rate.

This is not a penalty. This is how the audit mechanism works for every workers' compensation policy. The premium adjustment at year end is the carrier collecting what they were always entitled to charge. A certificate that was current when you hired the sub and has since lapsed provides no protection at audit.

What the Mr. Plumber FDD says about insurance costs

No FDD was available for this review. Mr. Plumber's franchise disclosure document does not appear in publicly available records at this time. Coverage requirements and cost estimates in this article reflect the Rikor home services benchmark for single-territory plumbing operations. Compare these figures against your specific franchise agreement when you receive it.

What actually determines your number

Your premium for a complete Mr. Plumber franchise insurance stack is determined by five variables:

Your state. Your payroll. Your fleet. Your claims history. Your subcontractor use.

Insurance premium for a Mr. Plumber franchise is not a single number. Your state, your zip code, your payroll, your fleet, and your claims history all move it. A quote built for your operation, your state, and your specific service lines is the only number that applies.

These are not required by your franchise agreement. Experienced plumbing franchise operators carry them because the gaps they fill are real — and because the claim patterns in this trade have made the gaps visible.

Contractors pollution liability covers damage from chemicals, sewer gases, contaminated water, or biological hazards that your work releases or disturbs. A drain cleaning job that releases hydrogen sulfide gas, a sewage backup that contaminates a crawlspace, a pipe repair that disturbs lead solder in a pre-1986 home — these are all pollution events under standard general liability exclusion language. The general liability policy will not respond. The contractors pollution liability policy is built for exactly these scenarios. Every plumbing franchise performing any sewer, drain, or excavation work should carry it.

Contractors errors and omissions (also called professional liability) covers mistakes in your work — a wrong recommendation, an improper installation specification, or professional advice that a customer relied on and was harmed by. A franchisee who advises a customer against a full repipe and the customer has a catastrophic failure six months later faces a negligence claim that general liability will not cover. Errors and omissions fills that gap.

Tools and equipment coverage (inland marine) covers your business property when it is in a vehicle, at a job site, or in temporary storage — not just at a fixed business location. The pipe inspection cameras, motorized snaking equipment, and diagnostic tools in your service vans are not covered by your commercial property policy when they are off-premises. This coverage is worth looking at for any operation with significant equipment investment in mobile vehicles.

Third-party crime coverage — specifically protection against employee theft from customer property — is the coverage most plumbing franchisees do not carry and most need. Standard commercial crime policies cover theft from the business. What in-home plumbing franchises need is third-party crime coverage against theft from a customer's home during a job. These are different insuring agreements. A policy written without third-party coverage leaves the most likely exposure in this trade uninsured.