insurance

Work Product Exclusion

An insurance policy exclusion that denies coverage for defects, errors, or problems in the insured's own work or products. This clause prevents contractors and manufacturers from using liability insurance to cover the cost of fixing their own defective work.

Example

“The roofing contractor's liability policy included a work product exclusion, so when his defective installation leaked, he had to pay for repairs out of pocket while the policy covered damage to the homeowner's furniture.”

Memory Tip

Remember 'You can't insure your own mistakes' - the exclusion means you're responsible for fixing your own work, but insurance covers harm to others.

Why It Matters

This exclusion can leave contractors and manufacturers with significant out-of-pocket expenses when their work or products fail. It's crucial for businesses to understand this limitation and consider additional warranty insurance or set aside funds for potential work-related repairs.

Common Misconception

Many contractors believe their general liability insurance will cover the cost of redoing defective work. However, work product exclusions typically only cover damage the defective work causes to other property, not the cost of correcting the work itself.

In Practice

ABC Plumbing installs pipes that burst due to poor workmanship, flooding a customer's basement. The work product exclusion means ABC's liability insurance won't pay the $5,000 to replace the defective pipes, but it will cover the $15,000 in water damage to the customer's basement, furniture, and electronics. ABC must pay for replacing their own faulty work while insurance handles the consequential damages to the customer's property.

Etymology

Developed in commercial liability insurance in the 1970s to distinguish between covering liability to others versus covering the quality of one's own work products.

Common Misspellings

work product exlusionwork-product exclusionworkproduct exclusionwork product excusion

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