06/02/2022
WHAT WILL MY INSURANCE POLICY DO IF MY CUSTOMER DOESN'T PAY AND WANTS THEIR MONEY BACK?
So, a Contractor (Ktor for short... K stands for Contract) client called and said they had installed a fence for a customer. There were a few small touchups that needed to be done, but the customer said they didn't want the fence repaired and wanted the Ktor to remove the fence completely instead.
Is this something the liability insurance would cover? If not, what should be done?
To answer this, first of all, what is a GENERAL LIABILITY insurance policy for? In short, it covers property damage or bodily injury (attorneys call it personal injury) to third parties - meaning not the insured or their employees (employee injury is covered under a Workers Compensation policy).
The main issue here is probably a Breach of Contract problem rather than a liability problem. You have an agreement that says you promise to install a fence at the customer's residence, and the customer promises to pay $10,000 for the installation. The Contract (K) or the law will provide most of the necessary K terms if missing.
Note, liability policies generally do not cover contract disputes (see PERFORMANCE BONDS) or the insurer would have to review every Contract (K) you made and approve all terms - nobody wants that.
Once the K is substantially performed by the Ktor, the duty of the Customer to pay $10,000 becomes due. However, in our case, there were a few minor repairs that needed to be made. So, if this case went to court, the court would have to determine the value of the repairs (possibly from another Ktor's bid to make the repairs) and deduct that from the $10,000 amount due from the Customer.
Most likely the court would award the $10,000 to the Ktor less the value of repairs and both parties would have to pay their own attorney's fees unless the Ktor was savvy enough to put a 'payment of attorneys fees by the prevailing party' clause into the Customer contract.
The Liability Policy WOULD come into play if the fence fell over and damaged other property or injured someone, but is not meant to replace work that was done incorrectly. Under the "your work" exclusion in liability policies, if the only damage is to the work of the Ktor itself, then replacement would fall on the Ktor to take care of.
