Beware of the Subcontractor Gap

Your RWC Sales Representative has told you all about the RWC Insurance Advantage.* By now you know that we offer General Liability coverage that goes hand-in-hand with the RWC warranty program. Being a general contractor, almost all of your work is performed by subcontractors. You only work with those that have their own general liability and name you as additional insured. You’d expect your insurance company to cover you if your sub’s policy has insufficient limits wouldn’t you? Unfortunately, that doesn’t always happen.  Here’s an example:

The framer you hired for a rancher you were building was supposed to use a single main support beam. Somehow there was no beam on the day it was to be installed. Rather than delay the project, your framer screwed together several four by eights in place of the single beam the plans called for. Three years later the irate homeowner calls you to complain that his interior doors won’t close, the kitchen cabinets have pulled away from the wall, the baseboard has popped off in several rooms, some floor boards have cracked and he can place a child’s marble on the floor and watch it roll toward the center of the room without being pushed.  That makeshift beam has begun to sag badly and is in danger of giving way.  

You head to the home with several jacks to shore up the beam. You give the homeowner the bad news that his home isn’t safe. He and his family will have to leave until the beam can be replaced. Then you call your insurance company. Their claims adjuster tells you there is no coverage. Your policy has an endorsement that excludes property damage caused by work performed for you by a subcontractor.  Who’s going to pay for all the damage and reimburse the homeowners for their hotel and other expenses?  You call your framer. Unfortunately his policy is already paying for two other claims similar to this one. There probably won’t be enough left to protect you.  So, who’s going to pay? Who do you think?

The RWC Insurance Advantage does not exclude claims arising out of the work done for you by your subcontractors. If your current General Liability company won’t cover the work your subs do for you, what do they cover? While the exclusion in this example is not universal, we urge every builder to review their policy to make sure there is no subcontractor gap lurking in their coverage.  

*The RWC Insurance Advantage is underwritten by Western Pacific Mutual Insurance Company, a Risk Retention Group Rated "A- Excellent" by A. M. Best Company, the leading insurance rating organization. We’ve been insuring only RWC member builders throughout the continental United States for a dozen years.

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