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Contractors are under a lot of pressure to complete jobs on-time, on-budget, and at the highest quality. They operate with such low margins that one misstep can turn into a costly mistake. The contractor might not have enough money reserved to remedy their mistake, leading to an angry client, lost business, and a tarnished reputation. Contractors Errors & Omissions (E&O) coverage is designed to protect contractors from this exposure.
Let’s look at two general claims scenarios that demonstrate the importance of this coverage.
Example #1: A flooring contractor installed the wrong carpet in a customer’s home. The contractor had to remove the incorrect carpet and replace it with the correct product, costing the contractor $5,000. These expenses were not covered by the contractor’s General Liability coverage. However, Contractors E&O would have covered the contractor’s expenses up to the E&O limit of liability.
Example #2: An electrician was hired to do all the electric work in a new home. The contractor failed to ground the electrical panel, causing a fire that consumed the entire structure. The contractor’s General Liability policy covered the resulting fire damage; however, the policy excluded coverage for the electrical components installed by the electrician. Contractors E&O would have covered the electrician’s cost of replacing the $20,000 in components, up to the E&O limit of liability.
In both of these examples, Contractors E&O coverage would have paid the expenses incurred by the contractor to remedy the mistake. The situation could have escalated into a contentious legal dispute with the customer if the contractor didn’t have this important coverage.
There is no standard Contractors Errors & Omissions coverage in today’s marketplace. Each carrier offers different coverage with varying options for limits and deductibles. Your United Agent is here to help evaluate the options available to you. Please give us a call today to get a quote.
This article is provided for informational purposes only. Not all insurance coverages or products are available in all jurisdictions. Coverage is subject to actual policy language. Please refer to your specific insurance contract for applicable terms and conditions.