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Deadly Endorsement #1 - The Sunset Clause

A general contractor completes a new home in 2008.  He carried a $1,000,000 general liability policy at the time the house was built and has continued to renew his coverage ever since.  In 2011, the contractor is sued for a construction defect on the 2008 home.  He files a claim with his insurance carrier.  The carrier denies coverage and refuses to provide any defense for the contractor.  Why?  The policy had a sunset clause.

A sunset clause limits the amount of time after a policy expires that a claim can be filed, usually two to five years.  This endorsement is typically seen in policies written for construction related risks.  Considering the fact that most construction defect losses arise years after a project is completed, this endorsement is dangerous for contractors. 

If you are a contractor shopping for general liability insurance, take a second look at your proposal before buying coverage.  The experts at Red Hot can analyze your coverage to find this and many other key exclusions that are bad for contractors.  For more inforamation please contact Tarah Gruber at 619-487-0376 or   

Sunset Clause

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