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When something goes wrong on a construction project, contractors turn to their commercial lines insurance programs to help protect them from financial loss. Whether a piece of machinery broke through a newly-built wall, a team member took a wrong step and left a hole in the roofing of an apartment building in progress or faulty wiring caused a fire in a brand new kitchen, contractors general liability (CGL) insurance will cover the damages. Or will it?
Builders Risk or General Liability: Which Policy Covers Worksite Damage?
To better understand which policy is the best fit for worksite damage, let’s examine each one a little further:
Coverage Under a CGL Policy
CGL is designed to cover damages caused to third-parties rather than any named insured parties. Coverage under a CGL policy commonly includes:
- Property damage;
- Bodily Injury;
- Personal Injury.
When filing a claim under a CGL policy, the insured party is indicating that they were the cause of the damage, and that the damaged property belongs to someone else. However, before a CGL claim is filed, agents may want to remind their clients about the common exclusions of this type of policy.
The following exclusions are commonly found in a CGL policy:
- Property damage to the insured’s own products, such as materials and supplies;
- Property damage to the insured’s own property on which they are performing operations;
- Property damage to the insured’s completed work.
While a CGL policy is meant to cover damage to a third party’s property caused by the insured, it doesn’t necessarily make it the best policy for contractor’s workplace damage claims.
Coverage Under a Builder’s Risk Policy
Builder’s Risk Insurance is a form of property insurance that covers a building or insured building area that is under construction or renovation. This type of policy covers all property on a project during construction, installation or repair. Coverage that may be included is:
- The building or structure;
- Temporary structures such as shoring, scaffolding or underpinning;
- Fixtures, materials and supplies that are predetermined to become a part of the finished building;
Typically, the responsibility for obtaining builder’s risk coverage falls either on the project owner, developer or general contractor. Usually the owner of the property purchases the insurance and the Contractor will ask to be named as an Additional Insured. A builder’s risk policy is written for the duration of the construction project, with coverage ending once the project has been completed.
Common exclusions of a builder’s risk policy may include:
- Mechanical breakdown;
- Wear and tear;
- Workplace/employee accidents and injuries;
- Employee dishonesty or illegal acts;
- Error in design;
- Faulty workmanship or materials;
- Loss of use.
- Theft of building materials (unless coverage is added back by endorsement)
When coverage overlaps, it can be difficult to decide which type of claim to file. Insurance agents should ensure their contractor clients are well-informed about the differences between builder’s risk and CGL policies, so that they can make the decision that best protects them financially, both during a construction project and well into the future.
About Mavon Insurance
At Mavon Insurance, we pride ourselves on our unique approach to insurance. We focus on integrity, communication, professionalism, respect and gratitude to help our clients succeed and place business in specialized markets. For more information about our products, or to become an agent, contact us today at (855) 248-1480.