Restoration Insurance: Damage to Property Exclusion
The standard general liability policy for restoration contractors has a number of often misunderstood exclusions. Coverage for most of the listed exclusions can be found on different policies, but it is important to know what these exclusions are and how they can affect your coverage. The exclusion we want to review for this post is the Damage to Property exclusion.
Damage to Property
There is no coverage for property damage to the following types of property:
Property owned, rented to, or occupied by the named insured.
Example: A tenant allows water to damage the portion of the landlord’s building occupied by the tenant for the past 3 years. The CGL excludes coverage for property damage to property occupied by the tenant, who is the named insured in this example.
Important exceptions to this exclusion should be noted—the exclusion for property damage to premises occupied or rented to the insured does not apply to damage by fire. Further, if the premises are rented to the named insured for 7 or fewer consecutive days (such as renting a hotel room), this exclusion does not apply to the premises and the contents of the premises. In both cases, a sublimit (Damage to Premises Rented to You) applies.
Premises sold, given away, or abandoned by the named insured if the property damage is caused by a condition of the premises.
Example: After a distributor sells a warehouse, it burns down. The fire marshal determines that the cause of the fire was faulty wiring installed several months before the sale by the distributor/seller. The claim made against the distributor/seller by the buyer is not covered by the CGL of the distributor/seller.
Property loaned to the named insured.
Example: A contractor negligently damages scaffolding that was borrowed from the general contractor. The CGL policy will not pay the contractor’s liability for property damage to the general contractor’s scaffolding as it is property loaned to the named insured.
Personal property in the care, custody, or control of the insured.
Example: An auto repair shop has a fire that was caused by an employee’s careless smoking, destroying 10 customers’ cars being held by the shop pending repair work. As the customers’ cars are in the care, custody, or control of auto repair shop, the CGL provides no coverage to the repair shop for its liability for property damage to the customers’ cars.
That particular part of real property if the property damage takes place while the named insured (or a subcontractor of the named insured) is in the process of performing work on the part of the property that is damaged.
Example: A masonry contractor is engaged to perform some minor repairs to the chimney of a commercial building. While using a scissor lift, the contractor accidentally extends the lift too fast, colliding with and knocking down the chimney. The property damage to the chimney is not covered by the masonry contractor’s CGL as that particular part of real property (the chimney) was damaged while performing work on the chimney.
That particular part of any property (real or personal) that must be fixed because the named insured’s work (or the work of the named insured’s subcontractor) was incorrectly performed on the property. If the job is finished when the property damage takes place, this exclusion does not apply.
Example: Halfway through the job of replacing a floor, the contractor discovers that the new wooden floor panels have been installed upside down, requiring tearing out and replacing the floor panels with new panels. The cost of repair, including the property damage to the wooden floor tiles that have to be ripped out as well damage to the subflooring caused by the improper installation, is not covered by the flooring contractor’s CGL.
As can be seen there are a number of scenarios where the property damage exclusion can affect a restoration contractor. If you would like to find out how and where your restoration company can protect itself from the above-listed scenarios, please feel free to contact our office.