The Seven Deadly Endorsements – Part 6 General Liability Endorsements That Are Bad For Contractors

Endorsement #6 – The Manifestation Provision

Although there is not a standard manifestation provision, this type of wording has been adopted by many insurance carriers as a way to restrict coverage for losses resulting from long term exposures like construction defects.    The manifestation provision restricts coverage to occurrences that “first manifest” during the policy period.  Therefore, an occurrence is deemed to have happened when the damage is first discovered. 

Example of Standard Wording

Example of Manifestation Wording

So why is manifestation wording so bad for contractors?  Here’s a scenario: 

A general contractor builds a house in 2008 when he has a manifestation policy.  He continues to renew his coverage for the next two years.  In 2011 he lets his coverage lapse because he is unable to find work.  Late in 2011 there is a claim resulting from a construction defect on the house he built in 2008.  The contractor will have no coverage due to the fact that the damage was first discovered in 2011. 

Some insurance professionals will argue that manifestation wording provides sufficient coverage for contractors as long as the policy doesn’t have a Prior Work Exclusion and it is renewed year after year.  While there may be some validity to this argument, the fact remains that carriers are able to deny more claims with this wording than without it.  That is why some carriers offer discounts of up to 40% to have this wording added to your policy. 

The experts at Orr & Associates can review your current policies and uncover manifestation wording and other endorsements that you should know about.  We can give you the knowledge and tools to make the right decisions about your insurance.  For more information, please contact Tarah Gruber at 619-487-0376 or Tarah@redhotinsurance.net.    Or visit www.redhotinsurance.net.

Check back tomorrow to read about Deadly Endorsement #7.