A Michigan contractor discovers a material defect in work completed 8 months ago. The original contract value was $85,000. Under Michigan law, what is the minimum general liability insurance coverage required to address potential claims?
Correct Answer
B) $500,000
Michigan requires contractors to maintain minimum general liability insurance of $500,000 per occurrence to cover potential defect claims and property damage.
Why This Is the Correct Answer
Michigan requires licensed contractors to carry a minimum of $500,000 per occurrence in general liability insurance. This threshold applies regardless of the specific contract value; the $85,000 contract figure in the stem is a distractor. The $500,000 floor is established to ensure meaningful coverage for bodily injury and property damage claims arising from construction defects.
Why the Other Options Are Wrong
Option A: $1,000,000
$1,000,000 exceeds the statutory minimum. While many contractors carry this level voluntarily or when required by a project owner, Michigan law does not mandate it as the minimum threshold.
Option C: $100,000
$100,000 is well below the statutory minimum of $500,000. Carrying only $100,000 would leave a Michigan contractor out of compliance with Act 299 insurance requirements.
Option D: $250,000
$250,000 is half of the required minimum. It may sound like a plausible figure, but it does not match the $500,000 per-occurrence requirement under Michigan law.
Memory Technique
Associate 'Michigan GL minimum' with the number '500' — half a million, half a million, Michigan GL minimum. The 'half' cue helps distinguish it from the $1M figure that appears on many commercial policies.
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