The maintenance period in the contractor's policy – when is it valid (and when is it really not)?
Feb 5, 2025
By: Ganit Michaeli
Contractors' insurance often also includes insurance coverage for a "maintenance period" after delivery. What is that "maintenance period", when is it valid and when (really) not? These questions are not asked in a vacuum, and experience shows that many contractors and entrepreneurs do not (really) understand what the maintenance period is as defined in the contractor's insurance policy, and what coverages are included in it.
As a result, many of them may find themselves without insurance on the day of the ordinance.
What do these things mean and what is the law regarding "special" damages, such as damages discovered during the maintenance period but whose triggering event was during execution? All of these and more, briefly, in the article before you (including examples from cases that actually occurred).
By: Ganit Michaeli
Contractors' insurance often also includes insurance coverage for a "maintenance period" after delivery. What is that "maintenance period", when is it valid and when (really) is it not? These questions are not asked in a vacuum, and experience shows that many contractors and entrepreneurs do not (really) understand what the maintenance period is as defined in the contractor's insurance policy, and what coverages are included in it.
As a result, many of them may find themselves without insurance on the day of the ordinance.
What do these things mean and what is the law regarding "special" damages, such as damages that were discovered during the maintenance period but whose triggering event was during the execution? All of these and more, briefly, in the article before you (including examples from cases that actually occurred).
What is the maintenance period in a contractor's work insurance policy?
First, we need to understand how the maintenance period is defined in a contractor's insurance policy and what its actual "role" is. The short answer is that a contractor's policy usually includes a maintenance period of 12 or 24 months, and that this is coverage designed to deal with insurance events related to the maintenance work that is actually being performed. That is, Those works that are performed by the contractor's employees or subcontractors after the project is delivered to the client/purchasers/users due to required repairs, tenant complaints, etc.
For example, if a contractor's employee is required to go to a building that has been delivered in order to replace some of the tiles for the entrance to the building, the coverage in the contractor's policy provides a solution for bodily injuries that may be caused to the employees themselves or for bodily and property injuries that may be caused, God forbid, to third parties. If, for example, during the work, one of the tenants walked near the repair area and encountered a work tool that was placed there and as a result fell and was injured, the insurance coverage under the maintenance period will cover the injured party's claim.
Warning sign! The maintenance period must be defined and listed explicitly within the policy. If the period is not listed in the policy, it sometimes means that it does not exist. Make sure in advance that the period appears and is clearly defined and remember - do not take anything for granted. If in doubt - do not doubt.
First, we need to understand how the maintenance period is defined in a contractor's insurance policy and what its actual "role" is. The short answer is that a contractor's policy usually includes a maintenance period of 12 or 24 months, and that this is coverage designed to deal with
For example, if a contractor's employee is required to go to a building that has been delivered in order to replace some of the tiles for the entrance to the building, the coverage in the contractor's policy provides a solution for bodily injuries that may be caused to the employees themselves or for bodily and property injuries that may be caused, God forbid, to third parties. If, for example, during the work, one of the tenants walked near the repair area and encountered a work tool that was placed there and as a result fell and was injured, the insurance coverage under the maintenance period will cover the injured party's claim.
Warning sign!
Insurance coverage during the maintenance period is only valid during the actual performance of maintenance work . At our insurance agency, we often illustrate this to our clients as a kind of "power button" that goes "On" when workers enter the site, and switches to "Off" when the latter leaves.
It should be noted that coverage during the maintenance period applies from the date of completion of the work. When performing a partial delivery, it will apply to those parts that have been delivered or for which use has begun, whether it concerns apartments, commercial properties, or infrastructure works.
The question is rightly asked, what about damage that occurred during construction and was discovered during the maintenance period? Is their repair included in the maintenance period? First, it should be understood that there is no insurance for construction defects . Insurance during the maintenance period is basically supposed to cover only the bodily and property damage caused as a result of performing the maintenance work.
Going back to the previous example, the insurance coverage is not intended to cover the costs of repairing the driveway, but only the damages that may be caused to employees or third parties while repairing it. However, in some cases, there is also coverage for the cost of the repair itself when two cumulative conditions are met:
1. The damage occurred during the period of execution of the work/project insurance period.
2. The damage was discovered during the "maintenance period."
In other words, if damage is discovered after the project is delivered while it is already in the maintenance period. For example, cracks that are discovered in retrospect were caused by a burst water pipe that was not detected during construction, and water leaked from it and caused damage to the structure. This may be physical damage that is recognized as having occurred during construction.
Such situations are common, but it is important to note that even in the case of insurance coverage, there may be very high deductibles. Amounts that may make it unnecessary to activate the policy because they start at NIS 100,000 and even beyond. In complex or large projects where the insurance coverage involves the involvement of reinsurers from abroad, deductible amounts may even climb to NIS 250,000-500,000 or even more, depending on the case and the specific insurance offer.
Insurance begins when workers enter and ends when they leave.
Let's start from the basics - no work is done without insurance. In the construction industry, Murphy's Law applies to overtime work, and even a worker who just arrived to tighten a screw in an air conditioner rack could, God forbid, lose concentration and fall to his death.
In the absence of insurance for the maintenance work itself, the problem can be solved by purchasing a policy to insure small contractor work (such as a policy for renovation contractors). Whenever possible, it is advisable to purchase an annual policy according to the desired cycle for the contractor.
What do we do to insure work after the maintenance period has expired?
In conclusion:
- Coverage during the maintenance period is for damage resulting from their performance only - the maintenance period applies to damage caused as a result of the work and does not concern the cost of the repair itself.
- No insurance for construction defects - There is no insurance for construction defects in Israel and the maintenance period is not a solution for this.
- The insurance is valid only while the work is being performed - the insurance is "activated" only while the workers are on site to perform maintenance work (and not continuously 24/7).
- There is no connection between the maintenance period and the warranty and inspection under the Sales Law - There is no connection between the "maintenance period" as defined in the contractor's insurance policy and the contractor's liability under the inspection and warranty periods under the Sales Law. There is no coverage for the cost of the repairs themselves. Similarly, there is no correlation between the inspection periods and the duration of the maintenance period in the policy. While the maintenance period is valid for 12 or 24 months, the warranty under the Sales Law and the Building Regulations extends to as long as 20 years.
- There is a possibility of covering damages that were discovered during the maintenance period and caused during the actual execution phase of the work (during the project insurance period) - if it is proven that the damage was discovered during the maintenance period but was caused during execution, there may be coverage, but there may also be a significant deductible that makes filing a claim unnecessary.
- Do nothing without insurance – At the end of the "maintenance period" as defined in the policy, ensure that all work performed on site is insured with a relevant contractor's insurance policy.
Do you have any further questions? Contact us and we will be happy to answer.
Coverage during the maintenance period is for damage resulting from their performance only
No insurance for construction defects
The insurance is valid only while the work is being performed
There is no connection between the maintenance period and the warranty and inspection under the Sales Law
There is a possibility of covering damages that were discovered during the maintenance period and caused during the actual execution phase of the work (during the project insurance period)
Do nothing without insurance
Do you have any further questions? Contact us and we will be happy to answer.
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