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 contractors 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 be) 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.
