If you are a contractor, you know that even the best intentions can lead to mistakes, and sometimes they can be quite costly to repair. In these scenarios, whose insurance picks up the tab — yours or the homeowner's?
In all likelihood, it will be the contractor's liability insurance that is tapped first to repair any damages. This is why it is imperative for contractors to carry adequate insurance coverage to avoid being named a defendant in a civil suit.
Even if the situation doesn't involve litigation, failing to correct defective workmanship or other flaws can result in negative repercussions, e.g., one-star Yelp reviews or negative comments left on Angie's List. At the very least, a client who must use his or her homeowner's insurance to undo a contractor's damage is likely to bad-mouth the contractor to all and sundry.
Your reputation is everything when you are a contractor, which means that you must do all that you can to make it right after a mistake is made. Generally, it will be to your advantage to see that your client is satisfied even if it cuts into your profit margin a bit. But with sufficient insurance coverage in place, you should not have to come out-of-pocket much, if even at all.
Contractors should review their liability insurance coverage annually to make sure that it will cover any errors or omissions. You may need to add coverage if it has been several years since you have put your plan in place.
If despite your best efforts you wind up embroiled in litigation with a homeowner over a job, it is always a good idea to get professional legal advice on how to best manage the matter.
Source: Succeed with Contractors, "Who Pays for Construction Mistakes in Your Home Project?," accessed Nov. 10, 2017