Is Your Risk Management Program Complete? An important question was recently discussed during a meeting: Does general liability insurance protect me in the event of a structural failure? Unfortunately, some builders think that they are insured for all risks because they have purchased general liability insurance. This assumption could cost builders thousands of dollars if they fail to protect themselves with a complete risk management program.
Often misunderstood, general liability insurance protects your business assets from claims for which you are found legally liable. In addition to bodily injury, general liability protects against property damage, advertising and personal injury liability, as well as offering coverage for additional insureds. Liability claims for issues like these can be costly and complex. In the event of a claim, GL insurance will provide defense costs for the insured business. Should a structural failure occur, general liability insurance would become responsible for personal injury, but it does not relieve the builder of damages to the structure. General liability insurance is one of many risk management tools that a builder carries. It also relieves him of responsibility should there be an injury related issue on his jobsite from start to finish. While the builder carries his own general liability policy, he should require that his subcontractors have their own GL insurance policy in place to protect themselves and their employees. General liability tends to be the “reactive” insurance policy.
A form of risk management coverage that is considered to be “proactive” is a structural builder’s warranty. This type of insurance-backed coverage protects both the builder and the buyer in the event of a structural failure. Builder warranties do not insure against personal injuries from a structural failure. Any injuries would be filed under your general liability insurance. Structural warranties are a responsible tool for handling the cost of a structural failure. Each state has a statute of repose which designates a period of time in which a buyer must file a lawsuit for a structural defect, whether it has a warranty in place or not. The statute in your state will clearly define the builder’s responsibility to the homeowner should a structural failure occur. A structural warranty that protects the builder and the homeowner can be purchased at the time of sale and settlement by the builder. Layers of protection typically begin from the date of closing, however, structural warranties and coverage vary with each company. It is the builder’s responsibility to research and join a program that offers the best protection and tools to create a strong risk management program.
Both of these programs are an integral part of a builder’s complete risk management program. Injuries on the jobsite during the construction as well as structural failures before or after construction do occur and are constant reminders of our need for a full course of action. In today’s litigious society, both general liability insurance and structural builder’s warranties are essential ingredients to a Risk Management Program. Is your company protected with the best risk management program available?