General liability insurance, as a rule, does NOT cover poor
workmanship. However, it DOES cover the property damage resulting from negligence
or poor workmanship. For example, a plumber mounts a sink on a wall and drills
through the water line during the installation. Later, the water leak causes
damage to the wall and floor. A claim is filed with the plumber’s insurance
company. The company pays for the repair to the wall and floor but does not
cover replacing the pipe.
Exclusions are events or occurrences (losses) that are NOT
covered by the insurance policy. There are policies to cover some exclusions,
but not all. Common exclusions are intentional acts, negligence, “exterior
installation and finish systems” (EIFs), asbestos, lead-based paint, subsidence
(cave-in or sink), garage door installation, and window installation. The outer
envelope and vapor/moisture barrier risks are generally excluded or limited in
coverage. An agent experienced in construction insurance can explain what is
covered and not covered.
Oregon’s statute of repose lasts for 10 years from the date
of the last completed project. It is highly recommended to carry general
liability insurance for the 10-year period following the final project. This
will ensure that if a claim is filed, the contractor has coverage for defense
costs involved with sorting out who (often which subcontractor) has the
completed operations coverage for the work in question. A minimum liability policy will cover defense costs,
subject to a deductible.
The CCB requires contractors to carry completed operations
insurance. This is an occurrence type of policy that covers losses based on the
date the loss occurred, even if this is years after a project is completed.
In contrast, a claims-made policy requires that specific
policy to be in force at the time of the loss. Claims-made policies are NOT the
best option for the construction industry and require a special (tail coverage)
policy to be purchased to avoid a gap in coverage if changing to an occurrence
policy.
If an individual changes companies with occurrence-type coverage,
there is no concern. The companies will subrogate to resolve a claim, meaning they
will work out payment between them.
Absolutely. Roofing has its own exposures, and many insurance companies do NOT like the roofing
exposure. A qualified agent can walk a contractor through the roofing
exposures, and the insurance carriers that will accept that exposure. To avoid
claim denials or increased premiums, you must disclose all the types of
construction work you perform to your agent. If you change anything in your
operations, your agent needs to know.
All insurance carriers are required to send notice of
cancellation 30 days prior to a cancellation. In many cases, the agency also
sends a delinquent notice to the contractor.
Certificates of insurance are simply proof that an
individual has insurance coverage to conduct the business they are conducting.
General contractors require certificates of insurance from subcontractors to
make sure their subs are insured and that the subcontractors insurance is
primary in the event of a claim for the subcontractors work/damage.
Additional insured are individuals or companies that have a
financial interest in the project and want to have the other parties’ (general
contractor’s, subcontractor’s, supplier’s) insurance as the primary insurance in
the event of a loss. They are named as covered (additional) insureds on the
insurance policy. This is standard
business practice in the construction industry.
Many insurance companies require the general contractor to
only contract with subcontractors that carry the same limits of insurance as
they do. If the general contractor fails to follow through, a claim could be
denied. Or, contractors that don’t meet that requirement might get paid less on
a claim because the insurance company will adjust the settlement based on the difference between what the subcontractor actually carried and
was supposed to carry based on terms of the contract.
If the subcontractor does not having general liability
insurance, the general contractor could be obligated to pay the claim or pay a
bigger premium for liability insurance. It is IMPERATIVE that general contractors verify their subs have adequate
coverage.
A surety bond is secured by the financial assets of the
contractor obtaining the bond.. Bonds are designed to assist homeowners in
getting claims resolved although employees, suppliers and others can also access
the bond if they are not paid. Once a bond is exhausted, the bonding company
will go to the contractor to recover its
funds. If the contractor does not repay the bonding company, the contractor may find it VERY difficult to obtain a new
bond, which is required by the CCB for a
contractor’s license.
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