What is an example of a situation that would be covered under a contractor’s general liability policy?

A contractor's general liability policy is designed to protect businesses against claims resulting from injuries and damages that occur during the performance of their work. This includes coverage for personal injuries or property damage that may occur to third parties as a result of the contractor's operations, products, or work.

The correct answer illustrates a common scenario where a contractor might be held liable. If a contractor accidentally damages a neighbor's property while performing work or construction, the general liability policy would provide coverage for that claim. This ensures that the contractor can meet financial obligations arising from such incidents without devastating consequences to their business.

In contrast, injuries to employees would be covered under workers’ compensation insurance, loss of tools would typically be addressed by a separate property insurance policy, and accidental damage to the contractor's own property may be covered under different policies, such as business personal property insurance. Therefore, the scenario where damage is caused to another's property aligns perfectly with the protective purpose of a contractor's general liability insurance.