Limitations of Construction Liability Insurance

When hiring a construction crew to renovate homes, it is critical to have the proper insurance coverage. For instance, liability insurance policies do not provide coverage for injuries or property damage caused by altering structures, new building construction, or demolition. If an individual wants coverage for these kinds of risks, they need a construction insurance policy. However, this type of coverage has its own restrictions as well.

One policyholder is learning this the hard way. He purchased a foreclosed home with the intent to perform extensive renovations. During a routine roof replacement, a piece of plywood injured a construction crew member. The crew member sued and the policyholder sought defense from his insurer. The policy included an exclusion for injuries caused by demolition. The insurer argued that because the policy does not provide coverage for injuries caused by demolition, the crew member’s original claim was null.

However, the definition of demolition cast doubt on this argument. The insurer argued that tearing down the roof to the original decking amounted to a demolition job. The court, however, maintained that roof removals do not constitute demolition. The fact that the home was under renovation and that the crew was repairing the roof shows the intent was not to demolish the structure. Furthermore, previous court cases define demolition as a complete tear down or destruction of a building. Because this was a renovation, the demolition injury exclusion did not apply.

The court also explained it fell on the insurer to show the exclusion met three requirements:

  • That the policy detailed the exclusion in distinct and unambiguous language
  • That the exclusion did not require additional interpretation
  • That the exclusion was applicable to the case at hand

The court maintained the insurer did not meet this burden. This particular case illuminates the intricacies of construction insurance policies. To learn more about the different types of construction insurance, contact us.