Is Faulty Work Covered by General Liability?
Contractors must have tailored insurance coverage to keep up with the risky nature of their operations. They must carry the right general liability insurance to pay for claims and lawsuits that might arise from dissatisfied clients or third parties.
Coverage requirements for faulty work claims
In order for your general liability insurance policy to cover faulty work, the policy usually needs to list the specific type of mishap (say, third-party bodily injuries or property damage). Claims of faulty work may include results that don't meet industry standards or pose a physical danger or financial loss to the client. Such faulty work can be summarized as a breach of contract due to poor workmanship. However, if a lawsuit is based only on a breach of contract and not bodily harm or property damage, it's not covered by a general liability policy.
Types of claims that general liability insurance won’t cover
Faulty work claims are only covered under general liability insurance if no exclusions apply.
Exclusions are examples of incidents that are not covered by an insurance policy. Such exclusions might include the cost of hiring a second contractor to redo the work of the first.
Other types of claims that aren't covered under general liability include:
- special parts that are damaged during installation
- damages that occur after the work is completed
- other damages on the job site where the contractor is operating
- cost of replacing material or an installation that has already been completed before the faulty work unless you hired a subcontractor for it
Exceptions to exclusions
In some cases, there may be exceptions to exclusions listed on an insurance policy. Your general liability insurance, for example, may cover damage caused by a subcontractor conducting work on your behalf.
Errors and omissions (E&O) coverage
Unintended mistakes on the job site can be costly for all parties involved. Also, the definition of a defective part or faulty performance might be debatable, which is how some cases end up in court. So, it's helpful for contractors to carry errors and omissions (E&O) coverage in addition to general liability insurance, which covers negligence, design errors, and the selection of defective materials.
Note that E&O isn't already included in a general liability plan, so you have to pay extra to avail of the coverage.
Consult with Amity Insurance Group
Every contractor needs some form of general liability insurance. Nonetheless, it’s best to consult the experts before making any major insurance purchase decisions. Contact us at Amity Insurance Group for more information on securing custom-tailored commercial insurance in McKinney, Texas.