It’s Raining Inside
December 11, 2019
Reroofing projects are major renovations that can entail hazards for owners and contractors alike. One of the most serious risks for building owners undergoing a reroofing project is what is known as an “open-roof” event. These events are usually the result of a contractor’s crew removing more roof at a time than can be made completely water-tight before risk of a shower or rainstorm develops. Such occurrences are more likely in the summer – especially in the South – as the atmosphere heats up and the relative humidity rises.
In the case of an open-roof event, the owner should demand the contractor temporarily dry-in the roof then bring in a water-extraction/disaster service contractor to begin restoration as soon as possible. Such disaster response companies include ServPro and ChemDry, among others. The contractor should then contact its insurance agent to call in an adjuster designated by the contractor’s insurance carrier. Failure by a contractor to issue timely notice of a claim to its insurance carrier could lead to the contractor’s claim being denied. In the case of a claim denial, the owner looks to the contractor to satisfy the expenses related to the event out of the contractor’s own funds. In the event of a large open-roof claim, some contractors might simply “walk away” from the job or even worse, declare bankruptcy, leaving the owner with several (unpleasant) options:
- Pay for the damages out of the owner’s current (unbudgeted) funds and then file suit against the contractor in an effort to recover those funds
- Have the owner’s insurance carrier satisfy the claim through a process known as subrogation. Subrogation occurs when the owner’s insurance carrier pays for the insured’s loss caused by a third party (in this case the contractor). The insurance company is then “subrogated” – or steps into the shoes of the owner – to sue the contractor for the loss suffered by the owner.
If the owner can get its insurance carrier to take over the claim, this is, by far, the better of the two options. However, the very best outcome is for the contractor to step up, accept responsibility, and make the owner whole.
To help avoid such situations, it’s important to pre-qualify contractors prior to bidding on a project. A key part of the prequalification process is to verify that the contractor has proper levels of all insurance in place. Excess coverage is very important in the event a loss exceeds the limit of a contractor’s General Liability coverage. At a minimum, contractors should maintain $5 million in Excess coverage. The Excess policy (aka Umbrella) kicks in when the limits of the contractor’s underlying insurance are exhausted.