Ah, the age old question, What does my insurance really cover? A federal court in Georgia recently weighed in on this issue in Standard Contractors, Inc. v. National Trust Insurance Company, and ruled that a contractor’s commercial general liability insurer did not have to pay for damage caused by a subcontractor.
Standard Contractors was hired to renovate the pool on an army base. Standard hired a subcontractor to for design and installation work. The subcontractor’s work was subpar in that the subcontractor omitted a number of parts, installed the wrong parts, and caused more than $400,000 in damage to the pool. Standard submitted a claim to its insurer seeking coverage for the loss under its commercial general liability policy.
The insurer investigated the claim and determined that there was no coverage for the claim. Standard filed suit against the insurer, alleging breach of the insurance contract and bad faith.
The court analyzed the policy and generally found that the insurer was generally obligated to pay for damages caused by the contractor’s faulty workmanship. But, the policy exempted from coverage:
Any liability for property damage to your work if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.
The court concluded that because Standard claim was based on the subcontractor’s negligent performance of its work on the pool, the exclusion applied and the insurer was not obligated to cover Standard’s claim.
Take away: What exclusions and exemptions does your insurance policy contain? Do you have insurance coverage for your subcontractor’s work?