Homeowners, building owners, general contractors, and sub-contractors often hope to rely on commercial general liability policies to protect everyone from problems with faulty construction work or materials. Although insurers try to exclude such damages from coverage, North Carolina law does provide some protection to the insured contractors and the damaged property owners through their insurance policies.
The general rule is that faulty workmanship by a contractor is not protected under a commercial general liability (CGL) policy. There is also no coverage under a CGL policy for repairs to property where the insured fails to properly construct the property to begin with. Courts have declined to treat liability insurance policies as a form of performance bonds. Parties can recover against the negligent contractor, but not against their insurer.
A common exclusion in North Carolina commercial general liability insurance policies is the “your work” exclusion, which generally notes that the insurer does not pay for property damage to the specific part of any property that must be restored, repaired, or replaced because of faults in your work, whether the damage is physical injury, destruction of property, or loss of use and where the work is actions, materials, supplies, equipment, or warranties. This broad exclusion will be relied upon by insurers to deny coverage.
However, if there is damage to items which were not part of the work product, for example improper remediation of mold leading to injuries, or damaged flooded property resulting from a failure to repair a leak, there may well be coverage under the CGL policy of the prime contractor or subcontractor. Failure to obtain coverage is limited to that specific part of the property damaged by the insured which they were charged to repair. Coverage under the CGL policy is actually good for the homeowner/building owner as the limits of these policies generally allows the insured to pay off the damages incurred.
If you have damaged property or if you are a contractor facing a lack of coverage under your CGL policy for claims of negligence against you, contact the construction law and insurance coverage lawyers at Maginnis Law, PLLC. Maginnis Law is a Raleigh civil litigation firm with civil lawyers handling cases in Cary, Apex, Durham, Wake Forest, Morrisville, Clayton and the rest of the Triangle area. Contact the firm at 919.526.0450 or submit a new case inquiry at our contact page to discuss your construction or insurance coverage business litigation issues.