The Importance of Understanding Coverage Limitations Part 2
In the second half of this article, we will expand on the importance of contractors understanding their insurance coverage limitations. It’s highly recommended that contractors seek the counsel of their construction lawyers in Florida to assist them with making sure they are properly insured and covered by their construction contracts. To view the first half of this article, please visit Part 1.
What Are CGL Policy Exclusions?
In a contractor’s CGL policy, one can find “business risk exclusions,” meaning that the uncertainty of defective workmanship is a business risk that is dispensed by the contract between the contractor and client. The business risk exclusions block coverage for property damage to the insured’s own work or property during the construction project, among other things.
Minimizing The Risk Of Claims
In the construction industry, claims for defective work are fairly common, and with the claims can come litigation or arbitration. To avoid these lengthy and costly disputes, there are measures a contractor can take to minimize the risk and costs of these claims. Contractors must understand that there are certain limitations to their basic liability coverage. Contractors can limit their liability by having a well-drafted contract with the assistance of a construction attorney in Florida.
All contractors should be aware that though their CGL policies typically excludes coverage for damage to the insured’s own work, there is an exception for work that is done by subcontractors. This exception, the “subcontractor exception,” states that the “your work” exclusion does not exclude coverage for claims against a general contractor for defective work that was done on behalf of the contractor by a subcontractor. This exception can be very beneficial to a contractor that is facing an expensive claim for faulty work done by a subcontractor who might not have the ability to fix or pay for the defective work.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.