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Is Defective Workmanship Covered by Insurance?


In construction, whether residential or commercial, the stakes are high. There is a lot of money at stake and a lot of parties. Owners, Contractors, Engineers, Architects, Banks and Subcontractors to name some. When a dispute arise regarding one workmanship, the term defective workmanship or poor workmanship may be alleged. In the back of your mind, you aren’t concerned because you have purchased insurance that covers any mistakes.

Are Defective Workmanship Claims Covered by Insurance?

Let’s start by defining defective workmanship. Contractor’s defective workmanship is generally defined by work that falls outside the building plans and specifications. For example, if window manufacturer instructions call for certain installation and they are installed incorrectly, the owner has a claim for defective workmanship.

How do Court Handle Defective Workmanship Claims?

The Louisiana Supreme Court holds that a commercial general liability (CGL) policy is not written to guarantee the quality of its insured’s work or product.  Why is that important?  Because it means that your buildings collapse or other defects which are due to defective workmanship may not be covered by insurance.

How Does this Impact Me?

The central argument against coverage for defective construction claims is that poor workmanship is not an accident. Many insurers will argue, and some courts have agreed, that failure to satisfy a contractual obligation or warranty is by its very nature intentional and therefore is not an accident.

The argument for coverage is that faulty workmanship can be the result of unintentional negligence, which would constitute an accident unless the contractor intended to do substandard work or could have reasonably foreseen it. While these exceptions sometimes apply, they are not unconditionally true, and unless the insurer has evidence of such circumstances, coverage should apply.

While no one could reasonably predict the outcome of a construction defect claim, there are some general conclusions. Where a contractor intentionally and willfully breaches its contract or warranty, no “occurrence” has taken place, and no coverage is provided under the CGL policy. However, if the insured contractor did not intentionally perform substandard work, if the substandard work was performed by the insured’s subcontractor, or if the damage extends to property other than the faulty work, it is reasonable to conclude that the “occurrence” condition has been satisfied.

Should you have any questions or you would like to discuss this issue in further detail, please do not hesitate to contact us to schedule a free consultation.

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