Contractors frequently discover that their general liability policy will not pay to redo work that failed. The exclusion is deliberate, and it follows from what liability insurance is designed to be.
Liability insurance covers accidents, not performance
Commercial general liability responds to bodily injury and property damage caused by an occurrence, which policies define as an accident. Faulty workmanship is a business risk the contractor controls.
Insuring the quality of one's own work would make the insurer a guarantor of the contract. Pricing that risk is a different business, and it is done through surety bonds and warranties.
The exclusions expressing this appear in the business risk group, addressing your work, your product and impaired property. They are standard rather than insurer-specific.
The distinction is damage to other property
If defective plumbing has to be replaced, the cost of the replacement plumbing falls within the exclusion. If the defective plumbing floods the floors and cabinets below, that damage is to other property.
That resulting damage is generally the part a liability policy is intended to reach. The line runs between the work itself and everything the failure harmed.
Disputes therefore focus on how broadly the work is defined, particularly where the contractor supplied an integrated system. Courts have reached different conclusions on that question.
Completed operations coverage and its timing
Damage arising after a job is finished falls under products and completed operations coverage, which carries its own aggregate limit. That limit is separate from the general aggregate.
The exclusion for your work often contains an exception where the damaged work was performed by a subcontractor. General contractors rely on that exception heavily.
Whether the exception applies depends on precise policy wording and on which party did the work. Endorsements sometimes remove it entirely.
What fills the gap
Surety bonds guarantee performance to a project owner and operate on a different legal basis, with the surety entitled to recover from the contractor. They are credit instruments rather than insurance.
Contractual warranties and callback obligations are funded by the business itself. Reserving for rework is an operational decision.
Professional liability covers errors in design or professional judgment, which is distinct again from workmanship. Design-build firms often need both forms.
Managing the exposure through contracts
Subcontract agreements typically require insurance, additional insured status and indemnity flowing upward. Those requirements are what make the subcontractor exception meaningful.
Certificates confirming coverage should be collected before work begins, since obtaining them afterward is unreliable. Expired certificates are a recurring problem on long projects.
Because indemnity provisions, anti-indemnity statutes and additional insured rules vary by state and change over time, an attorney and a licensed commercial agent are the right resources when structuring these contracts.