Are General Liability and Builder’s Risk Property Damage Claims the Same?

Have you ever had a property damage claim or liability claim filed against your contractor business? Bet you were glad of your General Liability coverage. But, as great as it is, your General Liability doesn’t cover all property damage claims.

Yes, it is true.

Claims can be tricky, especially when property is involved. Insurance policies differ on the coverage they give.  Do you know which ones give coverage for the repair and replacement of lost, damaged, or stolen property?

Before investing, you must know your business risks. It is essential. Only then can you find the policy with the right coverage.

Why you should note the differences before signing on the dotted line?  Here are the top 2 reasons.

• Don’t pay for what you don’t need.
• Be sure to get what you do need.

What is a property damage claim?

Firstly, what is property damage exactly? It is when real things are damaged, and this damage results in the loss of use.  The most common forms of property damage result from fire, theft, vandalism, natural disaster, and auto accidents.

It is worth noting that, when a claimant files a property damage claim , repair and replacement are reliant on the policy terms.

In this article, we take a look at the difference between the property damage coverage you get from Contractors Liability and Builder’s Risk insurance.

Property damage scenarios

Imagine this scenario. One of your employees accidentally runs your company truck into a wall. The wall collapses onto the neighbor’s car. The car is wrecked and can no longer function. The owner files a liability claim for property damage against you.

Here’s another scenario. You are working on renovating a building when the scaffolding collapses, damaging both the scaffolding and the building materials it fell onto. Your business has suffered these property damage. The thing is, you cannot sue your own business for this financial loss.

So, what is the difference between these two types of property damage?

General Liability vs Builder’s Risk 

Firstly, General Liability is protection against third party claims. On the other hand, Builder’s Risk is for damage to your own property during the course of your work.

Secondly, General Liability is a day-to-day policy that follows you from site to site,. It provides coverage on all the sites you are working on. Builder’s Risk, on the other hand, is project-specific, and only offers coverage for a specific project.

Repair or replace?

So, the property is damaged (either that of a third-party or your own), now what? Is it repaired or replaced?

1.  Property repair

Property repair restores damaged property to its pre-loss condition with the same degree of functionality. Repair should:

• Restore the functionality, reliability, and safety of the property.
• Be done quickly and efficiently to prevent the claimant from losing revenue.

If a claimant files a simple liability claim, repair may take place immediately. However, complex claims call for assessment and often involve a claims adjuster who reviews the damage.

Temporary repairs may be necessary to protect the rest of the property. But remember, these costs are part of the total settlement, so keep them minimal.

2.  Property replacement

Property replacement entails replacing destroyed, lost, or stolen property with a similar one. Replacement cost is the money spent to replace the property. Depending on the policy, the replacement value is determined as follows:

• Replacement cost. The damaged property is replaced with a property of the same value that matches its specifications closely.
• Actual cash value. The insurer will pay the property owner the replacement costs less depreciation. If the vehicle was 15 years old, the replacement cost factors in depreciation.
• Extended replacement costs. The insurer will cover costs exceeding the limit if replacement costs have gone up.

Replacement costs vary. Reasons for this include:

• Increase or decrease in the market value of the asset.
• Age and condition of the property before the damage.
• Additional costs of preparing the asset for use.

The downside of property replacement

Unlike property repair, the property owner gets their damaged property replaced. This can be problematic since items that are rare or unique are impossible to replace. Sentimental value is lost upon replacement.

So, if one of your employees breaks a valuable antique vase that has been handed down in the homeowner’s family, your liability insurance will replace the value of the item, but will never replace the sentimental value of the item for the heirs.

Property damage claims are not the same

The bottom line is that both repairing and replacing damaged property is expensive. Builder’s Risk Insurance is for property damage and so is Contractor’s Liability, but the kind of property damage differs.

General Liability and Builder’s Risk property damage claims are not the same.

Whether you are facing a liability claim for third-party property damage or you are claiming for damage to your own property, you should be aware of your policy terms.

Ask these 3 questions before you invest in coverage:

1. Do you have the right policy for your contractor business needs?
2. Are you covered for the right amount?
3. Should you invest in both General Liability and Builder’s Risk insurance?

Get answers to all your insurance questions from the experienced agents at Builder’s Risk insurance company. Protect your business from property damage claims. Contact us on 877 960 0221. Keep your property safe.