The Importance of Building Defects or Faulty Workmanship Cover for Businesses
Building insurance protects businesses from financial losses resulting from damage to their physical property. This type of insurance can cover a wide range of events, from natural disasters to theft, fire, and vandalism.
However, one aspect of building insurance that many businesses may overlook is coverage for building defects or faulty workmanship. In this blog, we will discuss the importance of this coverage and how it can benefit businesses.
What are building defects or faulty workmanship?
Building defects are structural issues or design flaws in a building that can cause damage or reduce the building’s value. They can occur in any type of building, from residential homes to commercial properties. Building defects can include issues such as foundation problems, water damage, cracks in walls or ceilings, and faulty plumbing or electrical systems.
Faulty workmanship refers to problems caused by poor quality or inadequate work done during construction or renovation. Examples of faulty workmanship include improper installation of roofing or siding, poor-quality concrete or masonry work, or incorrectly installed HVAC systems.
Why is building defect or faulty workmanship coverage important?
Building defects or faulty workmanship can cause significant financial losses for businesses. These issues can lead to costly repairs, lower property values, and even legal liabilities if injuries occur due to defects or faulty workmanship. Building defects can also cause business interruptions, which can result in lost revenue and productivity.
Without proper insurance coverage, businesses may be left with significant financial losses due to these issues. Building defects or faulty workmanship coverage can help businesses mitigate these risks and protect their financial interests.
What Does Building Defects or Faulty Workmanship Coverage Include?
Building defects or faulty workmanship coverage can be obtained in a construction insurance policy. This type of insurance typically covers the costs of repairing or replacing damaged property resulting from building defects or faulty workmanship.
The amount of coverage provided by this type of insurance can vary depending on the policy and the needs of the business. It is important for businesses to work with an experienced insurance broker to ensure that they have the appropriate coverage for their specific needs.
Is faulty workmanship covered under public liability insurance?
A tradesman’s public liability insurance will cover some aspects of faulty workmanship. The specifics of each situation will differ, but the general principle is that costs related to property damage or injury due to faulty workmanship should be covered.
Public liability insurance policies generally do not cover repair costs, even if the faulty work was performed by you or another company.
Faulty Workmanship Exclusions – What Are They?
There will always be some margin of error in any business, no matter how well organised it is or what procedures your employees follow. With better risk management and more stringent processes in place, there is a smaller margin. However, no business is 100% free from the risk of making an old-fashioned mistake. What kind of errors are we referring to here?
- Mechanical Workshop: Fitting the wrong parts to a car during a regular service
- Truck Body Builder: Building truck bodies whose dimensions failed the roadworthiness test at the time of registration.
- Glazier: Replacing glass in a way that is not what was requested by the customer
- Signwriter installed signage on a car with a spelling mistake
So, what happens here? It can get very complex, but, in most cases, it is straightforward from a legal liability perspective.
A public and product liability insurance policy will exclude the costs associated with fixing an error. The following is an example of a faulty workmanship exclusion in a public and products liability policy:
“Faulty workmanship: we do not cover any liability for the cost of performing, completing, correcting, or improving any work undertaken by you.”
Insurers don’t want the burden of paying for work or correcting mistakes that they could have avoided. It seems reasonable to understand that the purpose of liability insurance is to protect against third-party injuries and damage. However, when adding another layer where the mistake results in injury or damages to others, your policy will respond.
There are also examples of situations where the policy is not triggered by an injury or damage, but the client suffers a loss because you made a mistake. You now have an extension for “Errors & Omissions”.
How to Reduce the Risk of Building Defects or Faulty Workmanship
While building defects or faulty workmanship coverage can provide financial protection for businesses, preventing these issues from occurring in the first place is always the best approach. Here are a few steps that businesses can take to reduce the risk of building defects or faulty workmanship:
Work with reputable contractors
When choosing contractors for construction or renovation projects, businesses should thoroughly research their reputations and experience. It is important to choose contractors who have a proven track record of quality work and who are licenced and insured.
Conduct regular inspections
Regular inspections of buildings can help identify potential issues before they become major problems. Businesses should have their properties inspected regularly by qualified professionals to identify any building defects or faulty workmanship.
Proper maintenance
Regular maintenance of buildings is essential for preventing building defects and faulty workmanship. This includes tasks such as cleaning gutters, replacing worn or damaged roofing, and repairing plumbing or electrical systems.
Training and education
Providing employees with training and education on building maintenance and safety can help prevent issues from occurring. Employees should be trained on proper maintenance techniques and safety procedures to reduce the risk of accidents or damage.
Commercial Structural Defects Liability Insurance
A commercial structural damage insurance policy is specifically designed for licenced builders to cover any potential legal liabilities that could arise from a structural fault in a completed building.
Structural damage covered includes:
- The cracking of a warehouse concrete slab that requires reconstruction of the slab
- Deterioration in the fixing points of tilt slab factory walls requiring rectification and/or replacement
- Collapse of a roof structure due to insufficient reinforcement or design
- Incorrect specification of the concrete poured, or the mortar used on block wall construction
- Movement or heaving in a slab due to incorrect design or construction of the footings; and
- Concrete cancer is caused by the deterioration of the steel reinforcement.
As a commercial builder, a commercial structural defects policy can be incredibly valuable to you and your insurance plan. It could protect you against financial strain.
Building insurance is an essential type of insurance for businesses that own or lease property. However, many businesses may not be aware of the importance of building defects or faulty workmanship coverage within their policy. Building defects or faulty workmanship can cause significant financial losses for businesses, which can be mitigated through proper insurance coverage.
Trident Insurance offers a variety of business insurance options, including building insurance with coverage for building defects or faulty workmanship. Our experienced insurance brokers work with businesses to identify their specific needs and provide tailored insurance solutions.
In addition to having the appropriate insurance coverage, businesses can also take steps to reduce the risk of building defects or faulty workmanship. Working with reputable contractors, conducting regular inspections, providing proper maintenance, and providing employee training and education can all help prevent issues from occurring.
At Trident Insurance, we are committed to providing our clients with comprehensive insurance solutions and expert guidance. Contact us today to learn more about how we can help protect your business with building insurance and other types of business insurance.