Common exclusions that could limit a solar contractor's recovery
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Under standard commercial general liability policies, contractors may struggle to recover losses related to defective solar panel systems and modules depending on the nature and physical condition of the defect.
Common exclusions that may thwart a solar contractor's successful recovery include:
Commercial general liability policies generally do not provide coverage for physical damage done to a contractor's own work or property, or for costs incurred by a contractor related to repair, removal or replacement of an insured's defective work or product. However, courts in some states have interpreted the policies to include coverage for damage done to third-party property in the course of repairing or replacing defective work or products.
In most cases, general liability policies do not cover damages for which a contractor has assumed liability via a contract or agreement with a project owner or other third party. When a solar panel system or module, once installed, fails to meet contractually specified performance metrics without having been physically damaged, “there is an overarching concern that a lot of these claim scenarios could be more likely to manifest as breach-of-contract claims,” said Steven Ginsburg, an Atlanta-based partner at Duane Morris L.L.P.
Coverage under standard general liability policies is triggered by an occurrence that results in property damage, typically defined as physical damage to or the loss of use of tangible property. If a defective solar panel module or system has not damaged any real property, or underperformed to the extent it prevents a third party's use of their property, “that's going to be more along the lines of a warranty claim, and those are generally not covered under CGL,” said William Knowles, a Seattle-based insurance coverage and claims attorney at Cozen O'Connor.
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