Quick answer: General liability usually does not pay to fix or redo a contractor's own faulty work, but it often pays for the damage that faulty work causes to other property. If a bad pipe joint floods a finished floor, the floor, the drywall and the owner's furniture can be covered, while the cost to remake the joint is not. The standard ISO policy gets there through its business risk exclusions, mainly the "your work" exclusion, which has an exception that restores coverage when a subcontractor did the defective work. Courts split on the first question, whether faulty work is even an "occurrence": Texas, Florida and New Jersey have said it can be, while the supreme courts of Ohio and Pennsylvania have held that claims for faulty work on the insured contractor's own project are not. The cost of redoing defective work, design errors and work that simply does not meet spec are usually left to contractor's professional liability, rectification or faulty workmanship coverage, builder's risk for work in progress, or your own warranty.
How a CGL policy decides whether faulty work is covered
Every faulty workmanship claim runs through the same three steps: the insuring agreement, the exclusions, then the exceptions to those exclusions. New Jersey's Supreme Court walked through exactly that sequence in Cypress Point Condominium Association v. Adria Towers (2016), and it is the clearest way to read your own contractor general liability policy.
Step 1: Is there property damage caused by an occurrence?
The standard CGL insuring agreement pays sums you become legally obligated to pay as damages because of bodily injury or property damage caused by an "occurrence." As quoted in Cypress Point, "property damage" includes physical injury to tangible property, with the resulting loss of use, and an "occurrence" is an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Work that is wrong but has not physically damaged anything is often not "property damage" at all, and whether faulty work is an "accident" is where courts disagree.
Step 2: Does a business risk exclusion take it away?
The CGL is built to cover accidents, not the ordinary cost of doing your job right. New Jersey's 1979 Weedo decision, discussed in Cypress Point, put it this way: the policy does "not cover an accident of faulty workmanship but rather faulty workmanship that causes an accident." The exclusions that carry out that idea are known as the business risk exclusions, explained in the next section.
Step 3: Does an exception give it back?
The most important exception for contractors is the subcontractor exception to the "your work" exclusion, and whether your policy still has it often decides a general contractor's claim.
The business risk exclusions, one by one
These are the exclusions in Coverage A of the ISO occurrence form that most often decide a faulty workmanship claim. The wording below for j(5), j(6) and l is as quoted by the Texas Supreme Court in Lamar Homes (2007); the impaired property wording is as quoted by the California Court of Appeal in All Green Electric (2018).
| Exclusion | What it removes | When it bites |
|---|---|---|
| j(5) Damage to property | "That particular part of real property" on which you or your contractors or subcontractors are performing operations, if the damage arises out of those operations | During the job. Your crew damages the section of the building it is working on |
| j(6) Damage to property | "That particular part of any property that must be restored, repaired or replaced" because your work was incorrectly performed on it. It does not apply to the products-completed operations hazard | During the job. The cost of tearing out and redoing the bad section |
| k Damage to your product | Property damage to your product arising out of it or any part of it | Goods you sell or fabricate, such as prefabricated assemblies or cabinets |
| l Damage to your work | Property damage to your work arising out of it and included in the products-completed operations hazard. It does not apply if the damaged work, or the work the damage arises from, was performed on your behalf by a subcontractor | After completion. The main fight in most construction defect claims |
| m Impaired property | Property damage to impaired property, or property not physically injured, arising out of a defect in your product or your work, or your failure to perform a contract on time or as agreed. Exception: loss of use of other property from sudden and accidental physical injury to your work after it has been put to its intended use | Other property that is unusable, but not physically damaged, until your work is fixed |
| n Recall | Damages for any loss, cost or expense tied to a recall of your product or work | A pulled product line or a program-wide replacement |
The k and n descriptions follow the policy language quoted in a 2013 coverage summary by a coverage law firm. Read these exclusions in pairs. During operations, j(5) and j(6) remove only "that particular part" being worked on or redone, so damage your crew causes to other parts of the building can still be covered. After completion, exclusion l takes over and removes damage to all of your work, unless a subcontractor did the work.
The subcontractor exception, and how carriers take it away
The subcontractor exception was added to the standard form in 1986. The Cypress Point court quoted an ISO circular from July 1986 confirming the revisions were meant to cover damage caused by faulty workmanship to other parts of work in progress, and damage to, or caused by, a subcontractor's work after operations are completed. For a general contractor who subs out most of the job, this exception is where most of the completed-operations coverage lives.
It can also be removed. The Texas Supreme Court noted in Lamar Homes that ISO has issued an endorsement that eliminates the subcontractor exception, and the New Jersey court observed that an insurer that does not want the risk can amend the policy by dropping the exception or adding a breach of contract exclusion. A good broker reads the endorsement schedule before binding, not after a claim, and tells you in writing if the subcontractor exception is gone.
Rip and tear: paying to reach the damage, not to fix the defect
Rip and tear is the cost of removing and replacing good work to get at the problem, such as cutting a slab to reach a leaking pipe. The question is whether that access cost is part of fixing your defective work, which is excluded, or part of repairing resulting property damage, which may be covered.
Courts are split, and the facts drive the answer. A case chart prepared for the Claims and Litigation Management Alliance groups the decisions this way:
- Access to reach resulting damage, often covered. A Texas appeals court (Lennar, 2006) allowed the cost of removing defective stucco to reach water damage behind it, and the Eleventh Circuit applying Florida law (Carithers, 2015) allowed the cost of removing a defective balcony to reach damaged interiors.
- Access to fix the defect itself, split. Applying Washington law, the Ninth Circuit (DeWitt, 2002) found coverage where replacing defective piles required removing other subcontractors' completed work, and a Colorado appeals court (Colorado Pool Systems, 2012) covered damage to another builder's deck and retaining wall during the fix.
- Access costs not covered. An Arizona appeals court (Desert Mountain, 2010) held that the cost to redo defective soil work, and to cut open floors to reach it, was not covered, though resulting damage to walls was. A federal court in Maryland (2006) denied the cost of damaging concrete pilings to replace defective grout.
Precision Walls (2014) shows how hard the line can be for a sub. In that case, summarized by ConstructionRisk, joint tape behind a brick wall was installed defectively, the general contractor tore out part of an otherwise undamaged wall, and the court held that the defective tape and all costs associated with replacing it fell within the "your work" exclusion. Nothing else was physically damaged, so there was nothing for the policy to pay.
The practical lesson: from the first site visit, document resulting damage separately, with photos, moisture readings and a repair scope that splits access, damaged property and correction of the defect. Your broker's job is to help you present the claim that way and push back when a carrier lumps everything into "your work."
Is defective work an occurrence? Where courts have landed
Before any exclusion matters, the claim has to be an "occurrence." Most courts that have looked at the post-1986 form say unintended defective work can be an accident, but a meaningful minority say it is a breach of contract, not an accident. Here is a sample of the decisions, weighted to states where Aiden Risk is licensed.
| State | Decision | What the court held |
|---|---|---|
| Texas | Lamar Homes, Texas Supreme Court, Aug. 31, 2007 | Unintended construction defects can be an occurrence, and damage to the home itself can be property damage. The limits come from the exclusions, not the definitions |
| Florida | J.S.U.B., Florida Supreme Court, 2007 | A subcontractor's defective soil work that damaged the completed homes was property damage caused by an occurrence; reading it otherwise would make the subcontractor exception meaningless |
| New Jersey | Cypress Point, NJ Supreme Court, Aug. 4, 2016 | Water damage to completed, nondefective parts of a condo building from subcontractors' faulty roofing, windows and siding was an occurrence and covered through the subcontractor exception |
| Maryland (federal) | French, Fourth Circuit, 2006 | Covered moisture damage to the house caused by a sub's defective stucco, but not the cost to replace the stucco itself |
| Colorado | C.R.S. 13-20-808 | By statute, courts presume damage from a construction professional's work is an accident unless the insured intended and expected it |
| Ohio | Ohio Northern University, Ohio Supreme Court, Oct. 9, 2018 | A subcontractor's faulty work was not an occurrence, so neither the completed operations hazard nor the subcontractor exception restored coverage |
| Pennsylvania | Kvaerner Metals, Pennsylvania Supreme Court, Oct. 25, 2006 | Faulty workmanship that damages only the work product itself is not an occurrence; covering it would turn insurance into a performance bond |
Sources: the Texas holding is from the Lamar Homes opinion and Insurance Journal's 2007 analysis; the Florida, New Jersey and Fourth Circuit holdings are as described in the Cypress Point opinion; Colorado's statute is summarized in Colorado Lawyer (August 2025); Ohio's decision is summarized by Simpson Thacher; and Pennsylvania's is from the Kvaerner opinion.
Michigan shows how quickly the rule can move. In Skanska (2020), its Supreme Court held that a subcontractor's backward-installed expansion joints that damaged the heating system could be an occurrence even though only the insured's own work was damaged, reasoning that otherwise the subcontractor exception would have no effect, per Simpson Thacher's summary.
The same claim can be covered in Texas and denied in Ohio, and even in favorable states the cost of correcting the defect itself is rarely paid. If you work across state lines, your broker should know which rule applies to each project. Contract terms also shift this risk; the contractual liability exclusion explains how indemnity and warranty promises interact with the policy, and counsel should review the warranty and indemnity language itself.
Faulty workmanship scenarios: what usually pays
These are common patterns, not coverage promises. The outcome depends on your policy form, its endorsements and the state.
| Scenario | General liability | What usually fills the gap |
|---|---|---|
| A plumbing sub's defective pipe joint floods finished floors after the job is done | Damage to floors, drywall and owner's property can be covered, including the GC's own work through the subcontractor exception, in states that treat it as an occurrence. Remaking the joint is not | Your contract's warranty for the joint itself; rip and tear may be disputed |
| Your own crew's defective joint floods the same floors | The owner's furniture and other property can be covered. Damage to floors you built is likely excluded under "your work" because no sub did the work | Faulty workmanship coverage for self-performed work, where available |
| Wrong-spec material installed; nothing has failed yet | Usually nothing: no physical injury means no property damage, and impaired property exclusion m applies to loss of use | Warranty or rework at your cost; rectification coverage in some professional policies |
| Design-build HVAC system is undersized and the building will not cool | Usually nothing: the system performs badly but nothing is physically damaged | Contractor's professional liability for the design error |
| An electrician leaves a bolt loose and a client's medical equipment cannot run | In All Green Electric (Cal. Ct. App. 2018) the court applied the impaired property exclusion and found no duty to defend | Professional or faulty workmanship coverage, depending on form |
| During construction, a sub's work damages the GC's completed sections | j(5) and j(6) exclude the particular part being worked on; damage to other parts can be covered | Builder's risk for physical loss to the work in progress, subject to its own faulty workmanship exclusion |
| Other trades puncture a new roof membrane before turnover | Possible claim against the trades who did it, under their policies | Builder's risk, but see the BSI Constructors case below |
Trade matters. A roofing contractor sees leak claims like the first row, a plumbing contractor that self-performs lives in the second, and an electrical contractor is exposed to the loss-of-use pattern in All Green Electric. A broker should map what you self-perform and what you sub out to these patterns before quoting.
What fills the gap: professional liability, rework cover, builder's risk and bonds
Contractor's professional liability (contractor E&O)
Once you take on design responsibility, your exposure starts to look like an architect's or engineer's. Chubb's contractors professional liability product, for example, is aimed at firms doing design-build (self-performed or not), delegated design, construction management at risk or agency, and self-performed design. It is written claims-made with a circumstance reporting provision, a 60-day automatic extended reporting period and a three-year optional one. Chubb's illustrative (not actual) claims include an under-designed slab on a biopharma facility costing over $600,000 to replace, and a construction manager's change-order failure producing $570,000 in contingent business interruption damages, the kind of economic loss a CGL is not built to pay.
Claims-made matters here. Coverage depends on the policy in force when the claim is made and on the retroactive date, so switching carriers or letting a policy lapse can strand years of finished projects. Our guide to claims-made versus occurrence policies covers the mechanics. Value engineering and delegated design on bid-build jobs are easy to miss, because they do not feel like design until a claim says they were.
Rectification and faulty workmanship coverage
Rectification, sometimes called mitigation, is first-party coverage inside some professional policies that pays to fix a design error before it becomes a claim. A 2012 Construction Business Owner article described it as often sub-limited and subject to a self-insured retention and coinsurance, and indemnity-based, so you pay first and are reimbursed once the loss is proven.
A newer variant targets self-performed work directly. In 2020 the Big I's IA Magazine reported a specialty market launching a faulty workmanship insuring agreement, attached by endorsement to a professional and pollution policy, that covers the cost to repair or replace faulty work the contractor performed itself, triggered by a third-party claim that does not have to allege negligence. Eligible trades included electrical, mechanical, drywall, finish carpentry and site preparation, with a $5,000 minimum premium. Forms differ widely on what they pay, whether labor is included and what retention applies, so the wording needs a line-by-line review.
Builder's risk for work in progress
Builder's risk covers physical loss to the project while it is being built, but it carries its own faulty workmanship exclusion. In the BSI Constructors case (Eighth Circuit, January 31, 2013), other trades failed to protect a finished roof, which ended up with several hundred hole patches and was replaced for $174,000. The court applied the policy's exclusion for "defective, deficient or flawed workmanship" and held the ensuing loss exception only covered damage to other covered property, not the roof itself. Builder's risk is valuable, but it is not rework insurance.
Warranties, retainage and performance bonds
Most of what is left is handled by contract. Your warranty is your promise to come back and fix the work, and no liability policy is designed to fund it. A performance bond is a separate product: the Congressional Research Service describes performance bonds as guaranteeing that the contractor will perform the contract according to its terms, with a surety, the contractor and the owner as the three parties. That is why the Pennsylvania court in Kvaerner said covering faulty work would convert a policy for insurance into a performance bond. Aiden Risk does not sell surety bonds; your surety provider handles that side, and your broker makes sure the insurance program lines up with what the bond and contract assume.
How Aiden Risk Solves Each of These Problems
Faulty work claims are usually lost on paper long before anything leaks: an endorsement nobody read, a design-build job the policy never contemplated, a warranty promise with no insurance behind it. Aiden Risk is an AI-native independent commercial insurance broker that pairs an AI risk engine built for commercial insurance with licensed brokers, so those gaps are found before you bind and tracked as your work changes.
| The problem | How Aiden Risk solves it |
|---|---|
| Assuming general liability pays to redo bad work | Your licensed broker reviews your policy with you and explains in plain terms which parts of a faulty work claim it was built to pay and which it was not. |
| The subcontractor exception was removed by endorsement | Your broker reads the endorsement schedule as part of a coverage gap analysis before binding, flags any endorsement that removes the subcontractor exception, and negotiates with carriers to keep it where possible. |
| Rip and tear costs lumped in with the cost of correcting the defect | Your broker reviews the policy wording on resulting damage with you and, after a loss, helps you present a repair scope that separates access, resulting damage and correction. |
| Projects in states that treat faulty work differently | Aiden Risk is licensed in 16 states, and your broker advises on limits and coverage options with each project's state in mind. |
| Wrong-spec work or loss of use with no physical damage | Your broker shops faulty workmanship and rectification options across 100+ carriers, including admitted and surplus lines carriers, where your trade qualifies. |
| Taking on design-build, delegated design or construction management | Our AI monitors your risk year-round and flags changes like a first design-build contract, and a licensed broker acts on every flag, including placing contractor's professional liability before the work starts. |
| Claims-made professional coverage lapsing or losing its retroactive date | Your broker reviews retroactive dates and extended reporting options at every placement and renewal so finished projects are not stranded. |
| Builder's risk treated as rework insurance | Your broker reviews the builder's risk faulty workmanship exclusion and its resulting loss wording with you before the project starts. |
| Warranty and indemnity promises in contracts with no insurance behind them | Your broker reviews the insurance and indemnity clauses in your contracts and subcontracts with you, and your counsel reviews the warranty terms; the free COI checker grades a sub's certificate against your subcontract requirements from your answers. |
Aiden Risk charges no fee to work with it, with no platform fee or subscription; it is paid through standard carrier commissions. Intake takes about 5 minutes, the engine analyzes 140+ signals about your business, and most straightforward businesses are placed in as little as 48 hours. We are licensed in 16 states, listed on our licenses page.
Key Takeaways
- General liability is built to pay for damage your faulty work causes to other property, not to redo the faulty work itself.
- During the job, exclusions j(5) and j(6) remove only the particular part being worked on; after completion, the "your work" exclusion removes damage to your work unless a subcontractor did it.
- Rip and tear costs are disputed; keep access, resulting damage and correction separate from day one.
- Courts split on whether faulty work is an occurrence: Texas, Florida and New Jersey lean toward coverage, while Ohio and Pennsylvania do not, and Colorado presumes it by statute.
- Design errors, wrong-spec work and loss of use with no physical damage belong to contractor's professional liability, rectification or faulty workmanship coverage, and your warranty.
- Aiden Risk's licensed broker reviews your exclusions, endorsements and contract terms before binding, shops professional and rework options across 100+ carriers, and our AI flags when your work changes so your coverage changes with it.
FAQs
Does general liability cover faulty workmanship?
Usually not the cost to fix or redo the faulty work itself, but often the damage that work causes to other property, such as water damage to floors, walls or an owner's belongings. The business risk exclusions remove your own work, and the subcontractor exception can restore coverage for damage tied to a sub's work. State law on whether faulty work is an occurrence also changes the answer.
What is the "your work" exclusion?
It is exclusion l of the standard CGL form, and it removes property damage to your completed work arising out of that work. It does not apply if the damaged work, or the work the damage arose from, was performed on your behalf by a subcontractor. Some policies remove that exception by endorsement, so check your endorsement schedule.
What are rip and tear costs, and are they covered?
They are the costs of removing and replacing good work to reach a defect or the damage it caused. Courts are split: some treat access to resulting damage as covered, while others treat any access needed to fix the defect as part of the excluded repair. Documenting each category separately gives you the best chance.
What is contractor's professional liability insurance?
It covers claims arising from professional services a contractor provides, such as design-build, delegated design and construction management, including economic losses a CGL does not pay. It is usually written claims-made, so retroactive dates and continuous coverage matter. Some forms add rectification or faulty workmanship insuring agreements.
Is contractor E&O the same as professional liability?
The terms are often used interchangeably, but products differ. Some are full professional liability policies built for design and construction management, while others are narrower faulty workmanship agreements for trades, so compare the insuring agreements, not the name on the quote.
Does builder's risk cover faulty workmanship?
Generally not the faulty work itself. Builder's risk covers physical loss to the project during construction, and most forms exclude defective workmanship while giving back resulting loss to other covered property. In the BSI Constructors case, that exclusion barred a $174,000 roof replacement.
Does a performance bond cover faulty work?
A performance bond guarantees that the contractor performs the contract according to its terms, which can include correcting defective work. It is a surety product, not insurance. Aiden Risk does not sell surety bonds.
Can a subcontractor's faulty work be covered under the general contractor's policy?
Often, yes, for resulting damage. The subcontractor exception to the "your work" exclusion was added in 1986 to cover that risk, and courts in Texas, Florida, New Jersey and Michigan have relied on it. Ohio's Supreme Court went the other way in 2018, holding the faulty work was not an occurrence in the first place.
Not sure what your policy pays when the work itself is the problem? Start at our contractor insurance hub. A licensed broker will review your exclusions, endorsements and contract terms, run a coverage gap analysis before binding, and shop professional and rework options across 100+ carriers, while our AI watches for changes in your work all year. Check a sub's certificate anytime with the COI checker.
