The Faulty Workmanship Problem: Why GL Doesn't Cover Your Own Bad Work — and What Does

A concrete contractor pours a slab that cracks six months after the project is complete. The property owner calls demanding the contractor fix it. The contractor calls their insurance company expecting GL to pay. The insurance company declines — the defective work itself isn't covered. The contractor is now arguing with their client, questioning their broker, and wondering what they're paying for.

This scenario plays out across every trade in Texas construction. The faulty workmanship coverage question is the most misunderstood issue in contractor insurance, and the confusion leads contractors to make claims that will be denied, structure programs that leave real gaps, and sometimes walk away from valid claims because they assume their insurance won't respond.

Here's a clear explanation of where the line is, why the standard GL policy draws it there, and what options contractors have to cover the exposures that fall on the wrong side.

The Direct Answer (in Plain English)

General liability insurance covers property damage and bodily injury you cause to others. It does not cover the cost of redoing or repairing your own defective work. This is called the "your work" exclusion, and it's a standard feature of every commercial GL policy — not a gap particular to cheap policies or certain carriers.

But GL does cover damage that your defective work causes to other property. If your bad work stays contained to the work you did, it's not covered. If your bad work damages something beyond the scope of your work, that resulting damage is covered. Understanding this distinction is what determines whether a claim is paid or denied.

How the "Your Work" Exclusion Works

The ISO CGL policy (the standard form most admitted carriers use) includes an exclusion in Coverage A (bodily injury and property damage) that eliminates coverage for damage to "that particular part of any property that must be restored, repaired, or replaced because 'your work' was incorrectly performed on it."

There's also a separate exclusion for damage to "your work" — property damage to the work you performed that arises out of the work itself or any part of it. This is the completed operations exclusion, and it normally has an exception: the exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor. We'll come back to that exception.

The practical effect: if you install a roof and the roof leaks, GL does not cover the cost of replacing the roof. If the leaking roof causes water damage to the building's interior — flooring, walls, ceilings — GL covers that interior damage. The roof is "your work." The water-damaged interior is someone else's property that your defective work damaged.

Claim Scenarios That Illustrate the Line

Scenario 1: Electrical contractor wires a panel incorrectly

An electrician runs circuit wiring to a commercial tenant buildout. The work passes inspection but the wiring has an intermittent fault. Two months after completion, the fault causes an arc, which starts a fire that damages the tenant's equipment and surrounding structure. The cost of rewiring the panel that caused the fault: not covered by GL (that's repairing your own defective work). The cost of replacing the tenant's damaged equipment and the surrounding structure: covered by GL (that's property damage caused by your defective work).

Scenario 2: Plumber installs a fitting incorrectly

A plumber installs a compression fitting on a supply line. The fitting fails under pressure, causing a slow leak behind a wall that goes undetected for several months. The result is significant mold damage throughout a section of the building. The cost of replacing the fitting: not covered (repairing your own defective work). The cost of the mold remediation, drywall replacement, flooring, and contents: covered by GL (property damage resulting from the defective fitting).

Scenario 3: Concrete contractor pours a defective slab

A concrete contractor pours a parking lot slab that develops premature cracking due to incorrect water-cement ratio. The property owner demands the contractor replace the slab. The cost of the replacement slab: not covered by GL (repairing your own defective work). The only GL coverage that might apply is if the defective slab caused damage to something else — if, for example, the deteriorating concrete damaged an adjacent underground utility line. That resulting damage would be covered.

Scenario 4: Painter applies the wrong primer to a surface

A painting contractor applies an incompatible primer to metal trim, which causes the finish coat to fail within a year. The property owner demands repainting. The cost of repainting: generally not covered (repairing your own defective work). If the incompatible primer caused staining or corrosion of the underlying surface, damage to that surface might be covered as property damage caused by the defective application.

The Subcontractor Exception

The "your work" exclusion in the standard CGL form includes an exception: the exclusion does not apply if the damaged work was performed on your behalf by a subcontractor. This matters enormously for general contractors who are responsible for the entire project but delegate portions to subs.

If a GC's painting sub does defective work that damages the GC's other finished work — say, overspray that ruins a flooring contractor's completed floors — the GC's GL policy may cover the floor damage under the subcontractor exception, even though a strict reading of "your work" would exclude it. The reasoning is that work performed by your subs on your behalf is considered your work for exclusion purposes, but the exception carves out coverage for damage arising from that sub-performed work.

The subcontractor exception is why GCs who use subs need to maintain their own completed operations coverage with robust limits, even when every sub on the project carries their own insurance. If a sub's defective work damages other parts of the completed project and the sub's policy has gaps or insufficient limits, the GC's policy may be the backstop.

What About Completed Operations Coverage?

Completed operations is the part of your GL policy that covers bodily injury and property damage claims arising from work that has been finished and left. The "your work" exclusion interacts with completed operations in a specific way.

When you're still on a job site (operations phase), your GL covers property damage you cause to others in the course of the work. When you've left and the project is complete (completed operations phase), your GL covers bodily injury and property damage that arise from what you did. In both phases, the "your work" exclusion eliminates coverage for the cost of repairing your own defective work. But in both phases, damage to other property caused by your work is covered.

GCs routinely require subs to maintain completed operations coverage for one to ten years after project completion. For trades where defects can cause significant consequential damage — concrete that fails and damages a structure, electrical work that causes a fire, plumbing that causes water damage — the tail risk extends well beyond the project closeout date. The Texas statute of repose limits construction defect claims to ten years from substantial completion, which means completed operations claims can arrive a decade after the job is done.

For a deeper look at completed operations coverage and the time period it needs to cover, see our guide to construction insurance in Texas.

What the GL Policy Doesn't Offer — and What Does

For the coverage that standard GL doesn't provide — the actual cost of redoing defective work — contractors have limited options through insurance, and it's worth being honest about why.

Contractor's errors and omissions (contractor's professional liability)

Some carriers offer a product called contractor's professional liability or contractor's E&O that can cover claims arising from design-build work where the defect traces to a design error as well as a workmanship error. This is different from traditional E&O — it covers contractors performing design functions, not just pure design professionals. It can address some of the coverage gap where a defect involves both a workmanship component and a design or specification component. It is not a substitute for GL coverage of resulting damage.

Surety bonds

Performance bonds guarantee that you'll complete the work according to contract. If you fail — including by doing defective work that you refuse to fix — the surety can step in to finance completion or compensate the project owner. This is a contract remedy and a risk-transfer mechanism, not insurance in the traditional sense. The surety has full recourse against you (unlike insurance where the carrier absorbs the loss). But for project owners, a performance bond is often the most reliable protection against contractor default and defective work, because it creates a direct financial obligation rather than relying on a coverage dispute.

Warranty reserves

The honest answer for many contractors is that the "your work" gap is a business risk that can't be fully transferred to insurance. The cost of remedying your own defective work is a business expense that comes out of your warranty reserves, your profit margin on the job, or your cash flow. Some contractors explicitly build a warranty reserve — a portion of project revenue set aside to fund warranty work — as part of their financial management. This isn't insurance; it's self-insured retention against your own workmanship exposure.

How the "Occurrence" Requirement Interacts with Faulty Workmanship

GL policies cover property damage that is caused by an "occurrence" — defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. Some insurers have argued that faulty workmanship is not an "occurrence" because it is the result of intentional acts (the contractor chose to install the work a certain way) rather than an accident.

Texas courts have generally not been friendly to this argument. Texas courts have found that property damage caused by a contractor's faulty workmanship can constitute an "occurrence" when the damage was unexpected and unintended — that is, the contractor didn't intend the damage, even if the work itself was intentionally performed. The argument that no work could ever be accidental — since construction is always intentional — has not prevailed as a basis for denying occurrence status in Texas.

This matters practically because it means the fight over faulty workmanship claims in Texas is usually about the exclusions (does the "your work" exclusion apply to this damage?) rather than the occurrence trigger (was there an accident at all?). Knowing which battle you're in helps you focus the right arguments.

The Practical Checklist for Contractors

Given how the "your work" exclusion works, here's what contractors should verify about their GL program:

• Your GL includes completed operations coverage with an adequate aggregate limit. If the completed operations aggregate is low or shared with the general aggregate, large tail claims can exhaust it.
• The completed operations coverage period matches the tail risk of your work. A roofer who might face water intrusion claims for five years needs completed operations coverage for at least five years.
• The subcontractor exception is preserved in your policy form. Some non-standard or endorsement-modified policies narrow the subcontractor exception. Confirm yours hasn't been eroded.
• You understand what "your work" means under your specific policy. Some policies have modified endorsements that broaden or narrow the standard exclusion. Read the endorsements, not just the base policy form.
• If you do design-build work, ask whether contractor's professional liability applies to your operations. GL alone may not cover design-related defects.

Frequently Asked Questions

My GL policy says it covers "property damage." Why doesn't that include the cost of fixing my defective work?

The "property damage" coverage is limited by the "your work" exclusion, which carves out coverage for damage to your own completed work. The GL policy was designed to protect you from liability to third parties for damage to their property — not to cover the economic loss of having to redo work you've already been paid for. That's a business risk, not a third-party liability.

If I install something incorrectly and the product fails, is that covered?

Possibly, under the products-completed operations coverage. If the product itself was defective and caused damage, product liability coverage may apply. If the product was fine but you installed it incorrectly, the faulty workmanship analysis above applies. If both the product and installation had defects, coverage can get complicated, particularly when there are multiple parties in the chain (manufacturer, distributor, installer).

What if the defective work causes bodily injury?

GL covers bodily injury caused by your work, even if the underlying cause was faulty workmanship. The "your work" exclusion applies only to property damage, not bodily injury. If someone is injured because your work failed — a structural collapse, a slip from improperly installed flooring, a burn from incorrectly installed wiring — that's a covered bodily injury claim under your GL policy.

Does workers' comp cover injuries to my crew from defective work?

Workers' comp covers work-related injuries to your employees regardless of fault — including injuries that occur while fixing defective work. If your crew is repairing a mistake and someone is injured in the process, workers' comp responds. The nature of the work (repair vs. new installation) doesn't change the workers' comp analysis.

For more on how liability limits work for contractors and when $1 million isn't enough, see our guide to general liability insurance. For workers' compensation specifics in Texas, see workers' compensation in Texas.