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January 7, 2021
Property that exists at the site prior to the commencement of a construction project, such as the building and personal property in the building, is referred to in the insurance world as “existing property.” If existing property is damaged by construction activities, the property owner will likely expect a contractor’s insurance to pay to repair or replace the property. But would it be beneficial to both parties if the property owner considered using their own insurance to pay?
A contractor’s general liability insurance responds to claims for damage to existing property at a project site.
The general liability insurance company’s claim adjustment will include the following steps:
Notably, if legal liability is not clear or if the damages are significant, the general liability insurance company’s claim adjustment can take weeks, if not months, to complete. There is also the possibility that the insurer may deny liability and refuse to pay altogether.
There is an alternative that can provide more certainty and faster payment for the repair or replacement of the damaged property. The owner can use their own insurance, namely their property insurance. After the claim is resolved, the property insurance company can then subrogate (i.e. seek reimbursement) from the contractor that caused the damage. Successful subrogation would leave $0 on the owner’s loss history, leaving the next renewal pricing unaffected.
The property insurance company’s claim adjustment will include the following steps:
The general liability insurance claim adjustment includes a potentially lengthy legal liability investigation and, if legal liability is accepted, only one payment will be made at the end of the process. The owner’s property insurance company, however, will not require a determination of legal liability in order to grant coverage, and payments can be made early, without delay, and throughout the claim adjustment process. This removes the uncertainty of who will pay and when, benefitting both the owner and contractor.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.