top of page

Defective Workmanship Insurance, What Is That?

Updated: Aug 29, 2022


Defective workmanship Insurance | Trade Risks

Defective work, poor workmanship, or faulty workmanship are a bit misleading when describing this insurance section. The policy designed to cover the liability that follows poor workmanship is part of public liability insurance and covers the legal liability that may follow faulty workmanship.


Example of a claim!

My client worked on an engine of a truck, so you can imagine it is a big machine and the process of getting it out of the truck, then opening it up and replacing and doing what you have to do. He somehow forgot a piece of cloth inside the engine when putting everything back together again, and to make a long story short, when he tried to fire up the machine, the whole engine seized up because of the cloth. The damage was significant, and the client filed a claim regarding the defective workmanship.

The insurance company repudiated the claim, and the client was furious. With actual claims, you get to learn how these policies work.



The policy does not pay for your mistakes. It pays for the liability because of your mistakes.

The wording of defective workmanship or poor workmanship policy is concise, and the exclusions are particular.

What you work on or worked on is not covered. Your client has to deliver such work, so whilst you are working on it not covered. Please refer to the contractor's all-risk section.


To get back to the truck engine. The client did not deliver the work yet, so the first and second exclusions you have worked on were not covered, so even if the machine did start but broke later, the policy would not have covered it either.

If the truck made an accident because of his mistake, then the policy would have covered the liability.

Working on an engine is a trade risk, not an insurable event. Most claims I had to deal with were motor related, so this cover is essential for anybody working on vehicles. I have many more claims examples. Let us see how much space I have within the article.



What is public liability insurance?

Purchasing Public Liability Insurance protects your business when a consumer has sustained injury from your negligence. Public liability covers product liability, defects and negligence.

Public liability claims usually come from customers. This platform offers cover on a claim's made basis – the claims made basis covers claims made during the period you hold this policy and will not include coverage once your policy has expired (even if the event occurred while you have this insurance). The other option is the basis the claim must happen in the period the client is covered.


How much cover do I need?

If a company has a Public Liability Insurance plan in place, it must first be aware of its risks and all industry / contractual requirements that it may have.

Identify what kind of legal protection would be necessary if a third party sues your company for public liability. Before you buy any coverage, you should consider whether you have public liability insurance for R1 000 000, R2 500 000, R5m, R10m or R20m.


Who needs Public Liability insurance?

When working with other businesses, taking out an insurance policy that covers your employees' liability is essential. Companies must take reasonable measures to safeguard their customers, suppliers, community and property. Even carefully supervised businesses face the possibility of injuries and damage to others. If you're facing a lawsuit based on a public liability lawsuit, you'll likely need general liability coverage.


Criminal vs civil law

A crime is any offence causing public harm, and offenders are charged in court with an offence that contravenes common law or statute. In civil law, it's a matter of protecting individual legal responsibilities against other people. Civil litigation may take various forms, with contractual or contractual negligence a common cause.



Overview

General & tenants Liability insurance covers covered general risks incurred by business owners and related property owners, including liability for the tenant. Product-defective workmanship liability insurance covers insured liability related to products or services.


General advice. Warning

Before focusing on this issue, the claim for Public Liability, particularly those for defective workmanship, must be evaluated by its merits and assessed individually. Our ability to provide you with a detailed list is limited to identifying specific scenarios to cover.



Questions & Answers


What is defective workmanship insurance?

It is when you become legally liable to pay for personal injury caused by or death to a person or damage to property because of poor workmanship. The work itself never gets covered. It is a liability policy and would cover the defective workmanship liability. The cover is not limited to premises.


Will the policy cover my legal costs?

Yes, if the schedule says legal costs included—the great benefit of having a liability cover in place. Legal fees can spiral out of control, and the insurance company has a legal team that would settle the claim if they feel they may lose, whereas you, as a client on your own, may be forced to continue with a case because of your inability to settle.


How do a business owner know if he should have defective workmanship insurance?

The moment you do any physical work for any client in your place of business or if you go out to a client to do work. That is it. You can argue that your business environment is not risky and you don't need it, but if you deal with employees and there is a tiny chance something can go wrong in your work, instead, add defective workmanship to your policy. Your customer is essential, and although you may not admit guilt according to the policy wording, you would want your customer to be covered.



Who may sell the liability insurance?

An authorised financial services provider who is a licensed non-life insurer according to the financial services board in South Africa




Summary

It is always a part of liability insurance that is very interesting to me and how they came up with the name is also fascinating. If a motor fitment centre fits a new tyre and the wheel nut is not tightened correctly, the client pays for the work and drives off. He had an accident because the wheel fell out a couple of miles away. The liability that may follow of damage to cars and injury to people are covered, but the actual wheel worked on is not covered. When I started seeing clients, I was still very young, and I quickly had to find ways to explain this insurance to clients. I have been using this example for years.


Take action and get your business liability policy reviewed. Follow the link to our contact page and put liability in the description box, and we will contact you.

Remember, you can't buy insurance when you need it.


Albert Schuurman


Like my digital art

Learn from the best online business teacher. Click on picture for the best learning experience
















































Comments


bottom of page