Understanding the Work Product Exclusion under a BOP Policy
A business owner’s policy is a great way to combine coverage for property and liability risks in one insurance policy. However, it is important to remember that liability coverage is not a warranty of an Insured’s work. The policy will not compensate an aggrieved party for the Insured’s faulty work or products, but it may cover bodily injury or property damage resulting from that faulty work or product.
When thinking about the work product exclusion, it is important to keep in mind the Insured’s scope of the work. If the alleged damage is part of the Insured’s scope of work that job (i.e. the job it was hired to do), coverage would not be afforded, as providing coverage would be a warranty of the work. However, if the Insured is performing within its scope of work and it causes damage beyond the scope of its work or bodily injury to a third party (who is not an employee), coverage may be afforded under the policy.
So, what does that mean? Let’s look at some common scenarios to illustrate the Work Product Exclusion under a BOP Policy…
- Scenario 1: The Claimant realizes “Yikes, the paint color does not look the same on the swatch as it does on my walls.”
In this scenario, the Claimant hired the Insured, a painter, to paint the inside of her home. Once the work is done, she realizes that she does not like the way it looks. Does the BOP policy provide coverage for the Insured, or another contractor, to re-paint the walls? No, the BOP policy is not a warranty of the Insured’s work. Given that the painting of the walls was within the scope of work for this job, there would not be coverage.
- Scenario 2: The Claimant does not like the paint color and tells the Insured to “put down the brush!”
In this scenario, the Claimant or Insured, for whatever reason, decides to stop work before the job is completed. Would the Claimant recover damages for incomplete work? No, the BOP policy does not provide coverage for a delay or failure by the Insured or anyone acting on its behalf to perform a contract or agreement pursuant to its terms.
- Scenario 3: The Claimant tells the Insured “I love the new paint color but not on my brand-new hardwood floors!”
In this scenario, the Claimant is unhappy because the Insured accidentally dripped paint on her new hardwood floors while performing the agreed-upon interior painting work in her home. Would there be coverage under the policy for damage to the hardwood floors? Possibly! Given that the Insured was not hired to paint the new hardwood floors, but they were damaged while the Insured was performing within the scope of its work, it is possible that the damage to the floor could be covered.
- Scenario 4: The Claimant is raving about the new paint color to a friend when “Whoops!” … she slips on spilled paint and sustains an injury.
In this scenario, the Claimant sustains an injury as a result of the Insured’s accidental spill on the floor while he was painting her home. Would there be coverage under the policy for the bodily injury resulting from the fall? Possibly! Given that the Insured was performing within its scope of work and accidentally spilled the paint which resulted in the Claimant’s fall, it is possible that this could be covered under the policy.
Simply put, the job itself is not covered, but the resulting peripheral damage or bodily injury to a third party may be covered under the business owner’s policy. Understanding these scenarios and the Work Product Exclusion under a BOP Policy will help you to better advise your clients when common occurrences arise.