Contractors: Your Work is NOT Covered
I recently came across a great example in the Insurance Journal of the Business Risk Exclusion included in almost every contractor insurance policy. Often I receive facial expressions of disbelief when I explain this exclusion to new business clients.
The business risk exclusion of a general liability policy reads (this is specific language to the carrier involved in this example. However, the language is similar to most carriers): “This insurance does not apply to ‘property damage’ to: [t]hat particular part of real property on which you or any contractor or subcontractor working directly or indirectly on your behalf is performing operations, if the “property damage’ arises out of those operations.”
===> Basically, a Contractors Work is not covered under general liability until the job have been completed in its entirety. <===
Example
Your Work May Not be Covered
Let’s say you are an Electrical Contractor working on a Fuse Box and wires. In the course of replacing the wires there is a spark and the entire house burns down. Your insurance will cover the house and its contents (up to your limit of insurance) EXCEPT for the fuse box and wires. The real property considered your “work” in this example is the fuse box and wires and is thus excluded by the Business Risk Exclusion. All the collateral damage, (the rest of the house), was not your work and is covered by your general liability policy.
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What about after I finish the job?
In this scenario you are the same Electrical Contractor working on the same fuse box and wires. However, this time you complete your work and move on to the next job. A month later there is a spark from one of the wires you replaced and the entire house burns down. Now your Products/Completed Operations liability takes over. The Business Risk Exclusion does Not apply and the entire loss is covered including the fuse box and wires (up to your limit of insurance).
The Juice
Be aware of the exclusions on your Business Policies. Just because a coverage “Makes Sense” or “Seems Logical” to you does not mean that the loss is actually covered. Sit down with your insurance professional and discuss your exposures. “Knowing is Half the Battle” -G.I. Joe
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Ryan H.
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