Do Plumbing Contractors need E&O Insurance?
What is Contractors E&O insurance?
Plumbers E&O Insurance
In this video and post, I’m going to discuss a specialty form of insurance known as E&O, or Errors & Omissions Insurance for Contractors, looking specifically at Plumbing Contractors and associated trades such as:
- Heating & Air-Conditioning – HVAC
- Sheet Metal Work
- Mechanical Contractors
- Pipe Fitters
- Drainage System Contractors
- Boiler Installation and Repair
- Sprinkler System Contractors
Let’s start with what E&O insurance is and how it differs from the General Liability Insurance you already have.
Your general liability insurance covers claims which arise from three main areas or hazards: bodily injury, property damage, and finally personal injury.
These are claims that come from third parties – such as your customers, the general contractors you work for, or others outside of your company.
E&O insurance, on the other hand, will cover claims which arise from faulty designs, faulty workmanship, and defective products or materials.
Initially, these claims may begin as a customer complaint about some dissatisfaction which can escalate into a legal dispute.
Since these types of complaints are not covered in your GL Policy that means you’re paying for a lawyer to defend you in court and settle claims out of pocket, which can be expensive.
Contractors E&O claims typically allege negligence in:
- Your work,
- Your product or
- Impaired property
These three elements are specifically excluded in your general liability policy, so you’ve got a pretty significant gap here.
Here are two examples of what I’m talking about:
In the first case, a plumbing contractor installed all of the supply and drain lines in a new home’s basement.
But they failed to follow the blueprints and the installed pipes were lower than desired, preventing the homeowner from installing a drop ceiling and finishing the basement due to limited headroom.
As a result, all the plumbing needed to be removed and reinstalled at a cost of $7,500.
The second case involves an HVAC contractor installing a large A/C unit on the roof of a commercial building, but they failed to properly install foundation support for the unit.
Several months later the heavy unit broke through the roof and smashed into the building causing significant damage to the A/C unit, the building, and the tenant’s property below.
While the contractor’s GL policy paid for some of the property damage claim much of it was excluded under the “your work” “your product” exclusions and the HVAC contractor paid $25,000 out of pocket.
Here, if these contractors had E&O insurance it would have paid to have the work re-done saving them thousands of dollars.
The only out-of-pocket cost is the contractor’s deductible.
In addition, if those disputes went to court as some do in larger projects the settlement for damages and defense costs would have come out of pocket
Who Needs Contractors E&O Insurance?
Just about all types of plumbing contractors need E&O, especially those working on larger installation-type projects.
Beyond plumbing, heating HVAC, and related contractors, other trade artisan-type contractors that perform installation and repair work may also need E&O coverage.
Want to learn more? Why not contact me for a conversation.
I promise, no hardcore selling or gimmicks – just some conversation so I can answer the questions you may have and see if we might be a good fit for you and your firm’s insurance.