Understanding The “Your Work” Exclusion
Your General Liability policy is not intended to be a “warranty”. This is true of any ISO occurrence form policy that almost every contractor has for their liability coverage. Most contractors are shocked to hear this. This probably because you can remember some claim having been paid in the past, either when you worked at another company, or perhaps you had the insurance company pay out for a claim you may have had. Here is why:
General Liability pays for your “Liabilities” to other people. It does not pay you. For example, if you install a roof on a building and the roof begins to leak, the insurance company will pay to repair the damage caused by your leaky roof. This could include damage to ceilings, drywall, and wooden flooring. The insurance company will not pay for you to remove the old roof you put on and install a new one.
If you are a General Contractor and you subcontract most of your actual “work”, then many policies have a coverage “give-back” That says essentially “your work is excluded unless the work is performed on your behalf by a subcontractor”. This is normally where most GC’s get protection for work that was performed incorrectly by their subcontractor. This is because most likely the sub-contractors policy is excluding their work using the same “your-work” exclusion. This means in effect this is the only way to usually get coverage for faulty work when you are a GC.
If you have exclusion CG 2294, then you DO NOT have any coverage for work performed on your behalf by your subcontractors.
Most GL policies require you to have proof that your subcontractors have insurance AND a written contract with this subcontractor to “trigger” your General Liability policy to respond to these types of claims. Although you SHOULD already be doing this, experience shows that many contractors do not, and therefore may unknowingly excluding claims from being covered by their policy. ALWAYS GET A SIGNED SUB AGREEMENT!!!
Some policies will include a “re-work sublimit”. This may afford “warranty like” coverage in very specific situations. Although most policies do not include this feature, it does exist and can be very helpful in certain claim situations.
There is such a thing as “New Home Warranty” insurance or similar coverages that may accomplish the warranty that you would like to actually have. If you want to obtain this coverage for projects you build, please let us know because it IS NOT included with your General Liability insurance.
Sometimes Bonds can be used to act as a type of “warranty” but this is only to guarantee that the project is completed according to the “terms and conditions of the contract”. Although this may appear to be the same thing, it isn’t.
Please rely on your specific policies terms and not this brief page to understand the specific coverages you may or may not have. When in doubt, ALWAYS rely on your policy!