By Alexander Barthet

Insurance is a “what if” product that goes hand in hand with construction work. Whether you’re building a single family home or an office high rise, there are a lot of different players and plenty of moving parts, all of which don’t necessarily always fit together correctly. Insurance can provide protection from loss due to construction defects, accidents, and natural disasters. It might even cover the cost of defending against claims. Most people appreciate the peace of mind that comes with knowing they’re protected. But what happens if you ever need to file a claim?

Each policy has rules regarding when and how policyholders must file a claim. Many insurance companies give their customers a maximum deadline by which to file formal claims and present damage estimates. Regardless of your insurer’s timeline, however, it’s good practice to put your carrier on notice as soon as you discover damage or evidence of a loss. It provides your insurer with a chance to conduct inspections and evaluate the damage.

Sometimes those counting on being paid for a loss are unpleasantly surprised when their insurer denies coverage. Whether you’re an individual homeowner submitting a claim for a construction defect or a subcontractor, developer, or builder filing a claim for liability coverage, insurance companies don’t always pay up. Even with a comprehensive policy in place, there may be exclusions which result in a limitation of coverage, or no coverage at all.

As an example, suppose a homeowner discovers a leaky roof, which causes water damage and a subsequent mold problem. The homeowner files a construction defect claim, and the contractor files a claim for coverage with its liability provider.  The Florida Supreme Court has held that although a liability policy might exclude the cost of repairing a defect, the insurer must pay for any consequential damages.  So in the leaky roof example, this means that the insurer might not have to pay for the roof repair, but it must offer coverage for the water damage and mold that occurred as a result.

Even with its coverage quirks, insurance remains an important ingredient on every construction project – mandatory on just about every job.  You wouldn’t want to do business without it.

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