Legal Definitions - own-work exclusion

The own-work exclusion is a common provision found in many liability insurance policies, particularly those for businesses involved in construction, manufacturing, or service industries. This clause specifies that the insurance policy will not cover the costs associated with repairing, replacing, or correcting the insured's own defective work, faulty products, or incomplete services. Instead, liability insurance is generally intended to cover damage that the insured's work *causes to other property or individuals*, rather than covering the financial consequences of the insured's failure to perform their own work correctly. Essentially, it prevents the insurance policy from acting as a warranty or guarantee for the quality of the insured's own output.

• Example 1 (Construction): A general contractor builds a new commercial office building. After completion, it's discovered that the concrete foundation poured by the contractor was improperly mixed, leading to significant cracking and structural instability. The building owner demands that the contractor demolish the faulty foundation and rebuild it correctly.

  Explanation: The contractor's commercial general liability insurance policy would likely invoke the own-work exclusion. This means the policy would not pay for the substantial cost of tearing out the defective foundation and pouring a new one, as this directly relates to the faulty execution of the contractor's *own work*. However, if the cracking foundation caused damage to adjacent utility lines or a neighboring property, the policy might cover those consequential damages.

• Example 2 (Manufacturing): A company manufactures custom-designed industrial valves for chemical processing plants. A batch of valves is produced with a defect in the sealing mechanism, causing them to leak shortly after installation by customers. The customers demand that the manufacturer replace the faulty valves with new, functional ones.

  Explanation: The manufacturer's liability insurance would typically apply the own-work exclusion. The cost of manufacturing new, correctly sealed valves to replace the defective ones would not be covered because it represents the cost of correcting the manufacturer's *own defective product*. The insurance is not a quality guarantee for the products themselves.

• Example 3 (Professional Services): A landscape design firm designs and installs a complex irrigation system for a large residential property. Due to an error in the firm's design calculations, the system fails to adequately water certain areas of the lawn, leading to significant patches of dead grass. The homeowner demands that the firm redesign and reinstall the deficient parts of the system.

  Explanation: The landscape design firm's professional liability (errors and omissions) policy would likely include an own-work exclusion or a similar clause. This exclusion would mean the policy would not cover the costs for the firm to spend additional time and resources to correct its *own faulty design and installation*. The policy is not intended to pay for the firm to complete or correct its own professional services. However, if the faulty irrigation system caused water damage to the house's foundation, that damage might be covered.