Problem General Liability Exclusions For Contractors
2008 December 18
Most General Liability insurance carriers are wary of insuring contractors as a result of a high frequency and severity of construction defect claims that have occurred nationwide. As a result, many insurance carriers, especially those in the excess & surplus lines marketplace, are frequently using the following exclusions that take away much needed coverages:
* Residential Construction Exclusion: Believe it or not, residential construction is riskier than commercial construction due to the the frequent class action lawsuits filed within certain subdivisions.
* Tract / Row / Condo / Town Home Exclusion: These types of project are considered risky since they seem to invite class action lawsuits as well as lawsuits from home owners associations looking for a deep pocket to fund normal maintenance and wear and tear issues just prior to the running of a statute of repose for construction defect lawsuits.
* Subcontracted Work Exclusion: Many policy forms actually exclude lawsuits arising out of work performed by subcontractors.
* Product And Completed Operations Exclusions: Some carriers that want to eliminate almost all of their risk for construction defect claims will insert this exclusion.
Why would insurance carriers and agents that cater to contractors even offer a policy with these exclusions to their clients that would be negatively impacted? This is a good question that defies logic. As a general rule, only insurance agents that are inexperienced would set up their contractor clients with such deficient policies. An insurance agent that is knowledgeable and specialized in contractors would know how to find carriers that don’t have these problem exclusions.
Furthermore, these problem exclusions are just the tip of the iceberg when designing quality coverages for contractors.
Source: Trina Swartz, Beware Of Leaky Contractors Coverage, Agent Market Source, Fall/Winter 2008-2009