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Why is Faulty Workmanship excluded by Insurance policies?
Faulty workmanship, like poorly laid pavers or poor repairs to a car, can happen.
While insurance policies don’t cover the cost to redo the faulty work, they generally cover loss or damage from faulty work, such as people tripping over pavers and getting injured or damaging a car engine due to faulty repairs.
Here’s a brief overview of what you need to know about coverage for faulty workmanship.
- Public Liability Insurance
Scope: Public liability insurance covers third-party claims for property damage or personal injury caused by faulty workmanship.
Exclusions: the policy does not cover the cost of repairing or redoing the faulty work itself. - Professional Indemnity Insurance
Scope: This insurance protects professionals against claims arising from errors or omissions in their advice or services. Workmanship, including faulty workmanship, generally refers to manual work, not professional work or advice.
Exclusions: generally, professional indemnity insurance does not cover faulty workmanship or the loss or damage caused by it. This will likely be a claim under a Public or product liability insurance policy. - Contract Works Insurance
Scope: Contract works insurance covers construction projects and can include cover for loss or damage arising out of faulty workmanship.
Coverage: the policy does not cover the cost of repairing or redoing the faulty work itself. Contract Works policies vary, so it’s important to find out what is covered and what is not covered.
Key Considerations
Policy Terms: Always check with your professional insurance adviser or read your policy to understand the coverage for faulty workmanship. Different insurers may have varying definitions and exclusions.
The cost to redo the faulty workmanship is generally not covered, only the resulting loss or damage. Understanding your policy cover and limitations is key to managing your business’s financial risks. Talk with your professional insurance adviser to find out more.