Is there insurance for damages that are discovered years after delivery?
Nov 26, 2021
Question:
Can there be insurance coverage several years after project handover if rust appears on interior walls during plastering (according to the manufacturer’s instructions)?
Answer:
A contractor works insurance policy provides coverage for various damages that occur during the construction period itself (subject to limitations and exclusions). Sometimes, it is possible to include damages that actually occurred during construction but were discovered within up to 24 months after completion of the works, although this involves a significant effort.
After full or partial handover, the policy provides coverage for damages that occur during the maintenance period as a result of maintenance work, but this is also for a limited duration.
question:
Can there be insurance coverage several years after the project is delivered if rust appears on the interior walls during rendering (according to the manufacturer's instructions)?
answer
A construction insurance policy provides insurance coverage for various damages that occur during the construction period itself (subject to limitations and exceptions). Sometimes it is possible to include damages that actually occurred during construction but were discovered within a period of up to 24 months after the completion of the work, but this involves a difficult effort.
After full or partial delivery, the policy provides insurance for damages caused during the maintenance period as a result of maintenance work , and this too for a specified period of time .
As of today , there is no insurance policy in Israel that covers damages related to aspects such as construction defects, product quality and/or construction quality . In a sidebar, it is stated that abroad there are several insurance companies that offer a "product quality" policy, but these are expensive policies that require many conditions, such as engineering support, expensive work processes and the use of high-cost products.
The main insurance solution for the situation described above is to purchase products from large, solid suppliers – preferably directly from the factory – while making sure that they are approved by the Standards Institute. In this situation, in the event of failure, a claim for damages can be filed against the supplier. Another and equivalent option is of course to keep a “financial fund” aside to cover repair costs in the absence of an insurance solution for the quality of construction.
What about a product liability policy? Insurance companies in Israel market "product liability" policies to contractors and developers that provide coverage after delivery for bodily injury and property damage (but not for repairing the construction defects themselves!). The policy comes into effect in the event of physical damage to a third party's body or property as a result of a product defect that causes an unexpected accident (for example, a fire due to a faulty electrical panel or panels and tiles falling from the exterior cladding). For more information on a product liability policy, read here .
As of today, there is no insurance policy in Israel that covers damages related to issues such as construction defects, product quality, or workmanship. By way of note, abroad there are some insurance companies that offer “product quality” policies, but these are expensive and require extensive conditions, such as engineering supervision, costly work processes, and the use of high-cost materials.
The main insurance solution for the situation described above is to purchase products from large, reliable suppliers—preferably directly from the factory—while ensuring they are approved by the Standards Institute. In such cases, if a failure occurs, a claim can be filed against the supplier for the resulting damages. Another complementary option is, of course, to maintain a financial reserve to cover repair costs in the absence of insurance for construction quality.
What about product liability insurance?
Insurance companies in Israel offer product liability policies to contractors and developers that provide coverage after project handover for damages to persons or property (but not for repairing the construction defects themselves!). The policy applies in cases of physical damage to persons or property of a third party caused by a defective product that results in an unforeseen accident (for example, a fire caused by a faulty electrical panel or falling panels or tiles from exterior cladding).
For more information on product liability policies, click here.
