There’s an old saying that “a journey of a thousand miles begins with a single step.” While the cliché might initially appear to be accurate, California construction industry contractors and subcontractors know that before ribbons are cut or foundations poured, careful and detailed planning takes place, including a thorough analysis of insurance contracts required for a project. That review should include an assessment of the types and limits of insurance coverage to protect the interests of the various participants in the construction of the project.
While companies can save time and expense by skipping an analysis and simply sign what’s handed to them, they run the risk of learning about coverage gaps, insufficient limits, unexpected exclusions and, ever more commonly, unusual conditions for coverage after a loss occurs.
Policies and problems
Most contractors and subcontractors are required to carry at least Commercial General Liability (CGL) policies for protection in case of an incident causing property damage or personal injury.
A couple of the most common construction insurance disputes involve the following:
- Construction defects: these are often due to design deficiencies, flawed materials, or construction process problems. A frequently litigated dispute: does a CGL policy cover an insured contractor’s defective work and any resulting damage.
- Delays: often due to effects on the project by bad weather, flawed project planning, or fire. Litigation in this area can involve disputes over who or what caused the delay, whether the resulting loss or damage is covered by a CGL and, in the event multiple policies are triggered, deciding on which policy should apply first.
Unfortunately, legitimate claims are sometimes rejected, though policyholders have paid substantial premiums. Denial of legitimate and substantial claims often makes insurance recovery efforts necessary. And, because of the distinct possibility of an insurer’s wrongful evaluation of coverage, it is often advisable to seek counsel before presenting the claim to the carrier (or at least early in the claim process).