Residential and commerical construction disputes - sm

What Types of Insurance Exist? 

There are four main types of insurance that come into play  in contract law cases.

1. General Liability Insurance.
This covers instances where an ordinary accident occurs,  such as a slip and fall on job site relative to a construction  contract. If, for example, the mail man falls when delivering  mail to commercial building under the partial control of  contractors, the contractors have to think about liability for  their own conduct as it relates to the owner’s conduct.

2. Errors and Omissions.
Another type of insurance is for professional errors and  omissions. These cover a party’s negligence in failure to  perform adequately. However, there are limitations to this  sort of coverage in the construction and renovation law  setting.

Typically, an insurance company will only cover “resulting  damage” from the error or omission, but not work that was  performed incompletely or needs to be re-done without it  having caused any damage. Why is this so? Insurers look to  avoid paying to completely or re-do contractor’s work. If  such coverage existed, the contractor could rely on insurance  to pay to compete or re-do a rush job at a time when  contactors are often double-booked.

WHAT IS RESULTING DAMAGE? The classic example is  where a contractor tips over paint can, causing extensive  damage to the physical property. This type of damage  involves actual damage to property as a result of negligence.  Thus, it does not involve an insurance company paying to  complete incomplete work. That said, resulting damage  claims can run in the millions depending on the value of the  property involved. It is not unusual at all for a minor error to  one part of a structure to cause far reaching effects, such as a  poorly designed roof causing mold and water damage inside  the structure. Over-heated tar on a roof top can burn an  entire building to the ground, and so on.

Note that for residential construction, the Home  Improvement Act requires that contractors carry at least  $50,000 of general liability coverage and $50,0000 of errors  and omissions coverage for each job.

3. Property Owner’s Insurance.
The property owner / home owner may have coverage that  exists above and beyond the above-referenced coverage.  Property owner insurance may provide duplicate or addition  coverage beyond the contractor’s coverage. A close review of  the policy must be made.

4. Title Insurance.
Upon purchasing a home, title insurance often exists,  which insures that the nature of title and that is free from  certain encumbrances. Although title insurance may not  provide a warranty about how a property is (or should e)  zoned, the policy should be reviewed any time there an issue  over whether the title is clear or whether the property can  be utilized a certain way.

Insurance Denials
In our experience, we see insurance company’s deny claims  regularly only to change their mind quickly in response to a  lawsuit or appeal of the denial. In most instances, the denial  will be overcome and money will be paid.

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