Is Faulty Workmanship Covered by Insurance?

Homeowners often face concerns about whether their insurance policies will cover damages resulting from faulty workmanship. Navigating insurance coverage for faulty workmanship can be challenging, as policies have specific parameters for what they will and will not cover. Understanding these distinctions is important for policyholders seeking to protect their property and financial well-being. This article explores how insurance typically addresses faulty work.

Understanding Faulty Workmanship and Covered Damages

Faulty workmanship refers to work performed incorrectly, resulting in a flawed product or outcome in construction or repair projects. This can include improper installation of materials, poor-quality construction, or failure to adhere to building plans and specifications. A distinction in insurance is between the faulty workmanship itself and the damage that results from it. For instance, a poorly installed roof is faulty workmanship, but the water damage inside the house caused by that roof is considered resulting damage.

Insurance policies are designed to cover sudden and accidental damage, not the cost to correct the original faulty work or materials. If a contractor installs flooring improperly and it buckles, requiring replacement, this is seen as a business risk rather than an insurable event. However, if the improperly installed flooring causes damage to other property, such as a wall or a ceiling below, that resulting damage might be covered. The principle is that insurance aims to protect against unforeseen losses, not to act as a warranty for construction quality.

Homeowner’s Insurance and Faulty Workmanship

Standard homeowner’s insurance policies do not cover the cost to repair or replace faulty workmanship itself. These policies are designed to cover damage caused by specific “perils” like fire, wind, hail, or water damage, provided the damage is sudden and accidental. For example, if a plumber’s faulty installation leads to a burst pipe, the homeowner’s policy would likely cover the water damage to the property, such as ruined flooring or walls. However, the policy would not cover the cost to fix or reseal the improperly installed pipes.

The damage must arise from a covered peril, even if the root cause was faulty workmanship. If faulty wiring from an installation causes a fire, the fire damage would be covered, but not the cost to correct the faulty wiring itself. Similarly, if a construction defect leads to water intrusion that damages walls or personal belongings, the resulting damage might be covered, even if the defect itself is excluded. Homeowner policies are not intended to guarantee the quality of construction or repair work.

Contractor’s Insurance Policies

Contractor’s insurance policies, particularly Commercial General Liability (CGL) insurance, are designed to cover property damage or bodily injury to a third party caused by the contractor’s operations or completed work. While a CGL policy will not pay for the contractor to redo their own faulty work, it can cover the cost of damage to the homeowner’s property if it resulted from the contractor’s negligence or faulty workmanship. For example, if a contractor’s poor roofing work causes water damage to the interior of a home, the CGL policy may cover the interior damage.

The distinction between negligence and faulty workmanship is important in CGL policies. If a contractor improperly secures materials causing injury or their failure to follow building codes results in structural failure, CGL policies provide coverage because these involve unintentional acts causing damage to third-party property. Some specialized endorsements, known as “faulty workmanship coverage,” are emerging in the market to cover certain damages, including the cost to repair or replace faulty work, which are excluded from standard CGL policies. For design-related issues, such as design flaws by an architect or engineer, professional liability (Errors and Omissions or E&O) insurance provides coverage for claims arising from professional negligence.

Common Insurance Exclusions for Workmanship Issues

Insurance policies, both homeowner’s and commercial, contain various exclusions that limit coverage for faulty workmanship or related issues. A common exclusion is for “wear and tear,” which denies coverage for damage resulting from normal deterioration or a lack of proper maintenance over time. For example, an aging roof or rust on pipes would fall under this exclusion. Insurers aim to cover unforeseen events, not predictable deterioration.

Another exclusion is for the cost to repair or replace the faulty work itself. This means policies will not pay to correct a defect in the initial construction or repair. Additionally, damage due to defects in design or materials is excluded, unless a specific endorsement provides coverage for resulting damage. Policies may also exclude damage that is not sudden and accidental, such as gradual deterioration, or known defects and pre-existing conditions. Some policies might also exclude damage caused by a contractor who is not properly licensed or insured.

Actions to Take After Discovering Faulty Workmanship

Upon discovering faulty workmanship, immediate documentation is important. Homeowners should take clear photographs and videos of the damage from various angles, noting the date and specific details of the issues. This visual evidence provides a record of the problem’s scope and nature. It is also important to gather all relevant documents, including contracts, invoices, and any written communications with the contractor.

Next, homeowners should take reasonable steps to mitigate further damage, such as turning off water to a leaking pipe or covering exposed areas to prevent additional weather intrusion. However, extensive repairs should not be undertaken until advised by the insurer, as this could complicate a claim. The contractor who performed the work should be notified in writing about the issues, as they may be responsible for making corrections or have their own insurance that could apply. Finally, homeowners should contact their own homeowner’s insurance company to file a claim for any resulting damage, providing all collected documentation and adhering to their specified claim process and deadlines.