Understanding Insurance Exclusions in Construction-Related Property Damage
When Your Neighbor’s Renovation Causes Damage: Navigating Insurance Coverage and Exclusions
Imagine your neighbor is undertaking a roof replacement, and during the process, subcontractors set up their work platform directly on your property’s roof. Unfortunately, this results in substantial damage to your building. Now, you find yourself caught in a dispute where everyone points fingers—your neighbor’s contractor claims it’s someone else’s fault, and your insurance company refuses to cover the damages. The question is: does your insurance policy truly exclude such incidents?
The scenario highlights a common challenge for property owners dealing with construction-related damage caused by third parties. While it might seem straightforward to seek coverage, insurance policies often contain specific exclusions that can complicate claims.
The Core Issue: Exclusions for Construction-Related Damage
Most property insurance policies explicitly exclude coverage for damages resulting from construction, renovation, or repair activities. The language typically covers issues like poor workmanship, defective materials, or design flaws—effects that arise from the planning or execution of work performed on the insured property itself.
In the case at hand, the damage was caused by subcontractors working on a neighboring building, not directly on your property. You may wonder whether this distinction means your insurance should be liable. The insurer’s explanation hinges on the policy language, which states that damages stemming from planning, design, or construction defects—whether on your property or off—are excluded.
Analyzing the Policy Language
Here’s an excerpt of the typical exclusion:
“Faulty, inadequate, or defective:
(1) Planning, zoning, development, surveying, siting;
(2) Design, specifications, workmanship, repair, construction, renovation, re-modeling, grading, or compaction;
(3) Materials used in repair, construction, renovation, or remodeling; or
(4) Maintenance;
of any part of the property, on or off the premises.If a cause of loss listed above results in a covered loss, we will pay for damages caused by that loss.”
This wording explicitly excludes damages originating from construction or renovation activities, regardless of whether the damage occurs on or off your property.
Is Your Damage Truly Excluded?
Your insurer suggests that because the damage resulted from the neighboring contractor’s work, it falls squarely within the exclusion. They also clarify that if a third-party vehicle, such as a truck, accidentally damages
