When our contractor clients turn in General Liability claims for covered property damage arising from past work, they often want to perform their own repairs on behalf of their insurance carrier because they are already familiar with the job and believe they can do the work for a lower cost. However, their Contractor General Liability Insurance carrier may balk at paying the portion of the work attributable to overhead and profit.
Claims adjusters and case law are split on this issue. Insurance carriers often refuse to pay for contractor overhead and profit in this situation because they allege it violates the principal of indemnity; that an insured (contractor performing repairs) should be indemnified for actual loss sustained and not profit from a loss.
Contractors performing their own repairs counter that:
- They don’t actually profit since they suffer an opportunity cost of not being able to perform work on another job at the same time where they would earn overhead and profit.
- If another contractor were to perform the work, they would certainly charge for overhead and profit.
Since the insurance carrier claims departments and courts are split on this issue, it is safer for such contractors not to repair their own damages covered under their General Liability policy unless they agree in writing up front with the claims adjuster that they are entitled to overhead and profit.
Source: IA Magazine