Construction projects involve numerous stakeholders and complex processes. Despite careful planning and execution, construction defects can still occur. There are four common grounds for a construction defect lawsuit, including a design defect, substandard materials, faulty workmanship, and code violations. In such cases, understanding the role of insurance is crucial.
Various insurance policies come into play, each serving a unique purpose in protecting the interests of owners and contractors.
Types of Insurance Coverage
- Commercial General Liability (CGL) Insurance
In the context of construction defects, CGL can provide protection if a defect causes property damage or bodily injury. In some states, in the absence of other property damage or bodily injury, construction defects are recognized as an occurrence, thereby affording defense coverage. - Builder’s Risk Insurance
In the case of construction defects, this coverage may extend to repairs or replacements necessary to rectify defects that emerge during construction. - Professional Liability Insurance
It covers claims arising from professional negligence, including design errors that may lead to construction defects.
Although some construction defect claims may trigger defense coverage, standard exclusions in insurance policies might not cover indemnity. Understanding both the scope and limitation of your policy in the applicable jurisdiction where the loss occurs is critical. Some common exclusions may include faulty workmanship. Policies may prohibit coverage for damages resulting from faulty workmanship. Contractors should prioritize quality control measures to minimize the risk of this exclusion.
When a construction defect surfaces, a prompt response is crucial. Navigating the claims process effectively involves the following steps:
- Notify Insurers Promptly
Owners and contractors should promptly notify their insurance carriers when a potential defect is discovered. Failure to timely notify your insurance may result in a full denial of defense or indemnity. - Document the Defect
Thorough documentation of the defect is essential. This includes photographic evidence, expert assessments, and any relevant correspondence. A detailed record can strengthen the defense to a claim and facilitate a prompt resolution. - Work with Professionals
Engage professionals such as attorneys, contractors, and experts in construction defects. Their expertise can help guide you through the intricacies of the claims process and help build a compelling case. - Cooperate with Insurers
Open communication with insurance representatives and your broker is critical. Cooperation facilitates a smoother claims process and increases the likelihood of a favorable outcome.
In conclusion, understanding the intricacies of insurance coverage for construction defects is vital for owners and contractors. By being aware of the types of coverage available, common exclusions, and navigating the claims process effectively, you can protect your interests and mitigate the financial impact of these claims. Consulting with one of our construction professionals can provide you with guidance based on your specific circumstances.
