Damaged property is the typical result when there are construction accidents. Faulty wires scorch the walls, collisions damage equipment and the list goes on. If anything bad happens, contractors must look at their Contractor General Liability Insurance policies to see what is covered. The policy will typically cover the replacement or repair of damaged items. However, these policies do not necessarily cover every single incident.
For a Commercial General Liability Policy to provide coverage for claims similar to the ones previously listed, there are three things that must exist. First, the contractor must be considered legally obligated to pick up financial responsibility. This type of insurance covers torts, which are negligent acts. If the injured party says that the contractor was negligent and caused damage because of it, the CGL policy may cover the incident. However, for claims about incomplete work, there will be no coverage.
The second issue that must exist is that the incident has to happen out of an occurrence, and this is defined in the policy. A typical General Liability Insurance policy labels an occurrence as an accident. This may include repeated or continual exposure to the same harmful conditions. Damage must be considered accidental in this case to be covered. When insurance companies believe there was no accident, they will not cover any damages related to the incident.
The third requirement is that the accident must cause property damage. Insurers define this as injury to tangible property, and this includes loss of use to the property. For example, loss of access to computer information would not be covered because it is not tangible. However, loss of access to an office is covered because the office is tangible.
If an incident results in property damage and the contractor is found to be liable, the policy may not provide coverage if the cause is faulty workmanship. This means that if a contractor or a worker under the contractor damages an item on the property of the work site by poor workmanship, it may not be covered. For example, if a contractor repairs a fixture on a ceiling but knocks it down and damages the floor, the fixture itself would not be covered by the contractor general liability insurance policy. This is because it is the particular part of property the contractor was performing work on. However, the damaged floor would be covered.
Policies may not be very clear when defining what a particular part is. The best way to determine this is to discuss any specific concerns with an agent. There is one policy provision that provides more clarity. If a particular part must be repaired, restored or replaced due to the contractor performing work incorrectly, coverage will not apply. If the fixture in the previous example did not work after being damaged, the policy would not cover replacement costs.
Contractors should always ask their agents about insurance coverage questions. There are inland marine insurance policies available to cover additional losses that are not typically covered by liability insurance. Some types of losses must be covered out of pocket by the contractor. Knowing what to expect in advance is a good way to avoid any unexpected expenses.
VGW Insurance has many years of experience writing and servicing Contractor General Liability Insurance clients. We would love to help you navigate this complex policy and help you protect against unexpected losses. Please give us a call at 800-553-8102 or visit our website at www.vgwtexas.com and one of our experienced contractor insurance specialists will be happy to spend as much time as necessary, discussing your insurance needs.