Faulty Workmanship Construction Claims and General Liability (GL) Insurance

It amazes me to this day the number of contractors who believe that their general liability insurance will cover them for a faulty workmanship claim. Until recently (I’ll get to that), insurance carriers specifically exclude faulty workmanship. When contractors take short cuts in order to save time and money, it often results in a faulty workmanship claim. Why would an insurance company cover that? They wouldn’t, just like they wouldn’t cover any other type of negligence. Remember, the PRODUCTS/COMPLETED OPERATIONS AGGREGATE limit on your General Liability (GL) policy is the maximum that the policy will pay within that policy period for the total of all "products/completed operations hazard" occurrences. When this limit is exhausted by payment of such claims during a specific policy period, coverage ceases. It covers losses arising out of a manufacturer, merchant, or distributor’s liability due to injury or damage to a third party resulting from the use of a covered product. Also covers contractors for damage or injury to third parties resulting from something the contractor made, repaired or installed. The loss of damage resulting from the service would be covered, not the contractor’s actual finished product. As a licensed contractor, you are expected to know how to perform your job safely, accurately, to your state codes, and with great care. So, in the past the only way a homeowner might receive some type of compensation was to either go after your business (bypassing an insurance claim), or go after your Contractor’s License Bond which is $12,500 in the State of California. $12,500 is not much in comparison to the total monetary loss stated in many construction claims, especially those that involve framing (if framing is bad, then everything can be bad), foundations, roofing etc. Well, there’s some shocking good news here in California. Our agency now has access to an exclusive program that provides you with the option to purchase faulty workmanship coverage. Why this carrier is offering it, beats me! This coverage could keep a contractor from having to file bankruptcy in the event of a large faulty workmanship claim. What does the faulty workmanship endorsement do? A normal GL policy excludes your product, your work, and the particular part of property you are working on. This endorsement provides up to $10,000 of coverage for faulty workmanship after a $500 deductible for a minimal additional premium. This is not a standalone product, it is an endorsement to a general liability policy offered by one of our premium carriers. No other product in the marketplace is providing this. If you are interested in obtaining a quote for your general liability insurance, including faulty workmanship coverage, please contact me at 1-877-257-1652 or mluckner@orrandassociates.com for your no obligation quote.

Tags: faulty workmanship construction insurance general liability

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