Understanding the 'Your Work' Exclusion in a General Liability Policy - PrimeRisk Insurance Solutions

When you purchase a General Liability (GL) policy, you’re protecting your business from a wide range of risks. But like all insurance, these policies come with exclusions—areas where coverage doesn’t apply. One of the most misunderstood exclusions is the “Your Work” exclusion, especially for contractors and tradespeople.

So, what is it, and why should you care?

What Is the “Your Work” Exclusion?

The “Your Work” exclusion essentially prevents a business from claiming damages caused by its own faulty or defective work. In simple terms, if something goes wrong with the work you did and the client wants it repaired or replaced, your GL policy will not cover the costs associated with fixing that mistake.

For example:

• You’re a painting contractor, and you paint the exterior of a client’s building. Six months later, the paint begins to peel and chip due to improper preparation or poor materials. If the client files a claim to have you repaint the building, the “Your Work” exclusion will apply. The cost to redo the job is on you—not the insurance company.

Why Does This Exclusion Exist?

The logic behind the “Your Work” exclusion is that General Liability insurance is designed to cover third-party property damage and bodily injury. It’s not intended to act as a warranty for the quality of your work.

If insurers covered the costs of repairing or replacing defective work, it would encourage poor workmanship and corner insurance companies into paying for subpar jobs. This exclusion pushes businesses to take responsibility for the quality of their work and ensures they bear the cost of fixing their own mistakes.

What About Subcontractor Work?

Here’s where it gets a little more complicated. In many GL policies, there’s an exception to the “Your Work” exclusion when the work was performed by a subcontractor. So, if you hired a subcontractor to handle a portion of the project and their work is defective, your GL policy may cover the damage caused by that subcontractor’s work.

However, this exception varies depending on the specific wording in your policy, so it’s crucial to understand how subcontractor work is handled in your coverage.

How to Protect Yourself

So how do you protect your business from potential claims involving defective or faulty work?

1. Quality Control: The most obvious answer—do good work. Avoid cutting corners, and make sure you’re using materials and techniques that meet the required standards.
2. Get a Professional Liability Policy: Unlike a GL policy, a Professional Liability policy (also known as Errors & Omissions insurance) covers claims of negligence, errors, or failures related to the services you provide. This type of policy can protect you from situations where you are accused of delivering poor work.
3. Consider a Performance Bond: For larger projects, consider securing a performance bond. This bond guarantees that the project will be completed to contract specifications. If it’s not, the bond will pay for the necessary corrections.
4. Document Everything: Make sure you document every step of the job, including client requests, materials used, and the work process. This can help defend against any claims that the work was defective due to negligence.

Final Thoughts

The “Your Work” exclusion is often misunderstood, but it’s there for a reason. It’s important to understand that your GL policy isn’t there to act as a warranty for your workmanship. Instead, it’s there to protect you from third-party claims related to accidents, property damage, and injury.

If you’re in a trade like contracting or construction, make sure you’re aware of how this exclusion works and whether you’re vulnerable. It’s also crucial to have a conversation with your broker about getting the right mix of coverage for your specific needs—because not all policies are created equal.

At the end of the day, taking ownership of your work and protecting your business with the right insurance will save you a world of hurt down the line.

Here are a few additional resources:

What is General Liability Insurance? – Link to a detailed explanation of General Liability Insurance for contractors:

• https://www.thehartford.com/business-insurance/general-liability

Understanding Insurance for Contractors – A comprehensive guide on contractor insurance basics:

• https://www.nextinsurance.com/small-business/contractor-insurance/

Your Work Exclusion in Detail – An article that explains the ‘Your Work’ exclusion in greater depth:

• https://www.insureon.com/blog/your-work-exclusion-explained