“If I put new cabinets in a kitchen, and four months [after completion of the job] they fall off the wall and hurt someone, then the injury is covered,” Simmonds says. But it is important to remember that, in this situation, the cabinets them selves would not be covered — only the resulting damage. “Insurance won’t pay to fix a job done improperly,” he explains.
Completed operations lawsuits are the most commonly filed, says Mark Leininger, agent and broker with NEK Insurance in Northern California, because the statute of limitations on lawsuits is so long.
“There is a 10-year statute on completed operations lawsuits for property damage [in most states],” he says. “But many remodelers are not aware that there is no time limitation for bodily injury lawsuits,” meaning a remodeler can be sued for injuries resulting from his past work long after he has retired. “This is why I usually recommend keeping a trimmed-down policy in effect after retirement,” Leininger says.
The other alternative, aside from discontinuing insurance and hoping for the best, is to sell your business and all its liabilities to another party, he adds.
PLUGGING THE HOLES To ensure predictability and consistency in policy coverage, there is a standard general liability insurance form used by most insurance carriers in the U.S. This standard list of coverages can then be either expanded or restricted depending on how much risk the insurance company is willing to absorb (and how much the remodeler is willing to pay in premiums).
Amendments to the standard form that restrict coverage are called “exclusions.” Exclusions may restrict coverage for work in a certain geographical location, a certain type of work, or damage by mold or water, among other things. Here are some exclusions that in recent years have become common in general liability policies.
Mold, mildew, and bacteria. Nearly all policies now restrict coverage for moisture-related incidents. “You can buy additional coverage for mold if you want, but the important thing is knowing [the exclusion] is there,” Messier says. “You might even be able to sign something in your contract [with the homeowner] that says you’re not responsible for it.”
Care, custody, and control. This exclusion removes coverage for items considered to be temporarily under care or control of the contractor. For example, Leininger says, “if a contractor is working on a bathroom sink and his wrench slips and takes a chunk out of a marble tub, the carrier could make the case that the tub was under the contractor’s care, and could exclude coverage.” These property-damage exclusions “are where people are most surprised to find they have no coverage,” Leininger says.
Insuring trades. When a trade contractor damaged several windows in a home being remodeled by Chris Shaheen, of Shaheen & Sons, in Gainesville, Fla., the remodeler felt inconvenienced, but not worried. “[The trade] had been insured by the same carrier I was with,” he says. “I thought it was a straightforward liability claim.” But upon investigation, Shaheen learned that his trade contractor’s policy had lapsed. When he took the claim to his own insurance carrier, it initially said the claim would not be covered, leaving him to foot the bill for the repairs.
Though his insurance company eventually remitted payment for his trade’s mistake, remodelers can take away a number of lessons from Shaheen’s experience. The first rule — which would have spared Shaheen his mess, had he adhered to it — is to make sure that all trades show a certificate of insurance before performing any work.