In the world of construction, be it residential or commercial, the stakes tend to be high. One reason for this is that most people who take on a home repair or remodel have invested a lot of money in the project.
Contractors, owners, engineers, banks, architects, and subcontractors are significant players in these projects. When a dispute arises regarding the quality of the work done, a charge of poor or defective workmanship may be alleged. In such cases, people often believe they have purchased the right kind of insurance to cover an issue like this. However, it’s not easy to determine what kind of insurance covers poor workmanship.
Does Insurance Cover Poor Workmanship Claims?
When it comes to poor workmanship insurance, it is essential that you first understand what the term means. According to experts in the industry, a contractor’s poor workmanship is generally defined as work that falls outside the scope of building plans and specifications.
For instance, if a flooring project calls for the use of certain materials like tiles but the flooring company installs them incorrectly, the homeowner may file a claim for defective or poor workmanship.
What Insurance Covers Poor Workmanship?
A Commercial General Liability or CGL policy does not cover poor workmanship on the part of the contractor’s employees, but it does cover poor workmanship on the part of a subcontractor. According to state laws, the CGL policy was not intended to guarantee either the work done by the insured or the quality of products sold by the insured.
The purpose of a CGL policy is to protect the contractor from some types of damage and injury caused by the contractor’s employees. But sub-par work on the part of the contractor or their workers is not one of the covered damages or injuries.
A home insurance policy does not cover poor workmanship either, although it would most likely cover damage caused by this kind of work. For example, if an electrician’s defective wiring causes a fire, the homeowner’s policy would cover the fire damage.
How This Applies To Individuals
The main issue against coverage for defective construction claims is that faulty or poor workmanship is not an accident. Most insurers argue, and some courts have agreed, that failure to meet or satisfy contractual obligations or warranty is in its very nature intentional. It therefore, cannot be viewed as an accident. This may also apply when suing a flooring company or other type of contractor.
The argument in favor of such coverage is that poor workmanship most likely results from unintentional negligence, which would mean that any damage would actually be the result of an accident. This is actually the most likely cause of shoddy work unless the contractor willingly intended to perform sub-standard work for some reason.
However, a contractor who does poor work is not likely to grow their business due to a lack of customer referrals and recommendations, so the notion that a contractor is going to risk the future of their business on purpose makes no sense. Therefore, the ‘accident’ of poor workmanship should be covered by a contractor’s insurance just as any other type of accident would be.
While no one can reasonably predict the outcome of a poor workmanship claim, there are some general assumptions. When a contractor knowingly and willfully breaches a contract or warrant, then one would say no ‘occurrence’ has taken place.
Therefore no coverage can be offered by an insurance company under the CGL policy. On the other hand, if the insured contractor did not intentionally perform shoddy or substandard work, or if their subcontractor did it, it would be reasonable to assume that the ‘occurrence’ condition had been met.
To Conclude
Finally, contractors have the option of obtaining coverage for poor or faulty work claims by acquiring contractors and omissions coverage. It is designed to cover damages made because of negligence, errors, or omissions the contractor may have caused.
Some insurance providers will add this kind of coverage to a business owners’ or liability policy through an endorsement. This is why it is important to familiarize yourself with some of the things one should know before signing a contract with a builder.