Short answer
Standard GL policies often exclude damage to your work after it is finished, so the cost to fix the defect itself may not be covered under the your work exclusion. Damage the defect causes to other parts of the property may be covered. The exclusion often does not apply when a subcontractor did the damaged work. Florida’s Supreme Court addressed this in U.S. Fire v. J.S.U.B. (2007), and whether a policy responds depends on its wording and the facts.
What is the difference between a defect and the damage it causes?
A defect is the faulty work itself. Damage is what the defect does to other property. Picture a leaking roof membrane. The membrane is the defect. The ruined ceilings and floors below it are the resulting damage.
GL is generally built to respond to the resulting damage, not to the cost of repairing the faulty work. This is why clients are often surprised when insurance doesn’t pay to fix the roof. Setting that expectation early helps avoid frustration later.
How does the your work exclusion work?
The your work exclusion removes coverage for damage to work your firm performed, once that work is complete. In plain words, the policy isn’t designed to pay for repairing or replacing your own finished work. The IRMI definition of the your work exclusion offers general background.
Exact wording varies by policy form, so read the exclusions section of yours.
What is the subcontractor exception to the your work exclusion?
When a subcontractor did the damaged work, the exclusion often does not apply. This is why design-build firms that use subcontractors may have more GL coverage than they expect. Some policies change or remove this exception, so the wording matters.
Example: a hypothetical slab and water damage claim
A design-build firm receives a defect claim after a subcontractor’s slab work leads to water damage in finished rooms. The owner expects the insurer to pay to rebuild the slab. The agent explains that the cost of fixing the slab itself may fall outside GL, while the water damage to other property may be a different question.
In this hypothetical, the agent also checks whether the subcontractor exception is intact on the firm’s policy. How the policy responds depends on its terms, exclusions and underwriting.
What did the Florida Supreme Court say?
In U.S. Fire Insurance Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007), the Florida Supreme Court addressed defective work by a subcontractor that damages other property. The court concluded that this kind of damage can be an occurrence under a GL policy. The case turned on its own facts and policy language, and other states may treat the issue differently. Ask your attorney how it applies to your situation.
Where does professional liability fit?
If the defect came from a design or oversight error, professional liability may be the relevant policy. A single defect claim can touch both policies, so many firms report to both and let the insurers sort out which one responds.
Which endorsements can change the answer?
Some GL policies remove the subcontractor exception or add residential or other exclusions. Ask your agent to review your policy before a claim, since endorsements can shift the answer considerably.
What to check
- Does your GL include the your work exclusion, and what does it say?
- Is the subcontractor exception intact, or did an endorsement remove it?
- Does your policy add residential or other project-type exclusions?
- Did a subcontractor perform the work involved?
- Do the allegations involve design or oversight that could touch professional liability?
Questions to ask your attorney
- Does the claim describe the defect itself, resulting damage to other property, or both?
- Did a subcontractor perform the damaged work?
- How does Florida law, or the law of our state, treat this situation?
This article is general education, not legal advice. Hardcover is an insurance agency, not a law firm.
Related questions
Does general liability cover faulty workmanship?
Generally not the cost to fix the work itself. It may cover damage the faulty work caused to other property, subject to policy terms.
What is the subcontractor exception?
It is part of the your work exclusion and often restores coverage when a subcontractor did the damaged work.
Can my GL policy remove the subcontractor exception?
Yes, some endorsements do. Ask your agent to review your policy.
Why would insurance not pay to fix the roof?
GL is generally built to respond to damage the faulty work caused to other property, not to repair the work itself. Whether a policy responds depends on its wording and the facts.