Last year we posted a blog called BEWARE OF THE SUBCONTRACTOR GAP. We said “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?”* This is so important it is worth revisiting. First, why do some insurance companies not want to insure the work done for you by your subs? The answer is simple. They don’t want to pay claims resulting from faulty work over which you had no direct control. An example of a common type of construction defect claim will help illustrate:
You hire a well-established window and door company to install the windows on several single family spec homes you’re building. You’ve worked with them before. They have a great reputation and have never given you any reason to doubt the quality of their work. A couple of years after these homes were sold you are presented with suit papers from one of the homeowners who alleges water damage because no flashing was installed around any of the windows. Over time rain water seeped in and eventually caused the storm side of the house to sustain considerable dry rot and mold damage. Of course, you immediately call your general liability insurance company to advise them of the pending lawsuit only to be told there is no coverage for such claims if they are caused by a subcontractor. Your company representative points to an exclusion that clearly shows they are correct. Puzzled, you point out the charge for products and completed operations on your policy and ask, if there is no coverage, why are you being charged for it? The company rep replies this is coverage for the work you do yourself. With your anger rising you say the only work you do yourself is for punch list items. Everything else is subbed out. Doesn’t your insurance company know that you are a general contractor? This question is met with silence.
Too late you discover your window sub had let his general liability policy lapse shortly before you hired him. That’s why you’ve been sued. As you make arrangements to cover the cost of repairing the damage to your customer’s home and wonder if there is flashing around the windows of the other homes your now former sub worked on, you make a mental note to find an insurance company who recognizes the coverage needs of general contractors.
At the RWC Insurance Advantage, general contractors are our only business. If you are a member of Residential Warranty Company, LLC, or Home of Texas you are eligible for our general liability program underwritten by Western Pacific Mutual Insurance Company, a Risk Retention Group, rated A-, Excellent by A.M. Best. And you don’t have to worry if you are covered for work performed by your subcontractors.
We also offer umbrella and excess liability, builders risk and contractors equipment coverages in most states to eligible member builders. Call us today at 1-866-454-2155 to discuss your coverage needs.
*(Please note: Terms, exclusions and conditions of various insurance policy forms vary. Not all competitors’ general liability policies exclude the work done for you by your subcontractors. This article is intended to alert you to a gap in coverage that may exist in your policy and to encourage you to read your policy to determine if you have the coverage you need.)