Construction Defect Claims

Construction Defect is a phrase contractors do not like to hear.

Construction defect claims can be defined as damages resulting from faulty work or workmanship. Court decisions and state regulations make managing the risk of construction defects more than just prevention.

Construction Defect Insurance

The CGL policy underwent a major revision in 1986. The changes sought to clarify and to simplify the “property damage” exclusions. The changes were not, however, intended to change the exclusions meaning or effect.  Not every policy is created equal.  Make sure your contractor’s insurance does not have defect exclusions.

“Now, an ‘occurrence’ is typically defined under a CGL as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” In other words, a threshold coverage question is whether the Homeowners’ lawsuit alleges property damage caused by an occurrence.”Property

Legal battles will continue over whether construction defect claims are covered by commercial general liability policies. This will cause increases in the cost of contractors’ insurance.

Construction Defect Risk Management

  • Call us for a coverage review.
  • Limit sub-contractors, if possible.
  • Require sub-contractors to have the same coverage as you do.
  • Document all conversations and changes.
  • Repair any problems when you see them.

Construction companies should make sure they protect themselves by identifying the applicable state laws, reviewing all the risks, identifying any insurance gaps under state laws, and then taking steps to resolve any coverage issues.

DSM Insurance was formed in 2008 by insurance professionals with over 50 years of combined experience in the insurance industry….experience includes; senior officers of regional insurance companies & wholesalers, reinsurance brokers, personal & commercial insurance production agents, agency owners, underwriting managers & agency directors. DSM has the capability to place virtually all lines of business insurance.