Defective Workmanship Insurance
Defective Workmanship Insurance and Sales Indemnity is an extension of the Public Liability Insurance section of a motor trade insurance policy, which is provided specifically for this trade.
Whilst Defective Workmanship Insurance will have an element of cover for Product Liability, the extent of cover given is however not adequate for all types of businesses in the motor trade.
Defective Workmanship Insurance will indemnify you in respect of sums you will become legally liable to pay as compensation, including costs & expenses in respect of accidental bodily injury & accidental loss or damage to property. As with any liability cover, you are covered for resultant damage and not the item that has caused the damage.
How much will you have cover for?
This is largely down to two factors, the choice you make or the choice the insurer makes for you by means of a minimum indemnity limit. If its your choice and there are options from the insurer, we always recommend a minimum of £2m for both defective workmanship insurance as well as public liability insurance, but this is entirely your choice remember.
The insurer on the other hand may have a high minimum limit of indemnity, A number of insurers for instance (at the time of writing) automatically gives £5m as a standard limit. You can of course increase this limit for an increased premium.
Defective Workmanship Insurance can be largely misunderstood, so lets look at what would typically be covered and what would not
Typical examples of Defective Workmanship Insurance
On a routine service you replace the cam belt, whilst the engine starts and all appears initially fine the tensioner hasn’t been sufficiently tightened. The result, the cambelt becomes loose with the obvious resultant damage.
What is covered and what isn’t?
Because cover is provided for “the resultant damage” the damage to the engine is covered but the tensioner is not.
Lets look at another scenario
You are asked to fit an additional electrical item to a vehicle, a nice pair of Dixie air horns lets say, all goes well and the customer drives off a happy bunny. Some hours later happy bunny is no more, he has called to say that the fire service has just finished putting the flames out.
What is covered and what isn’t?
The resultant damage is, ie the car but the item fitted isn’t.
What is Sales Indemnity?
Sales Indemnity under a traders policy is a cover that is essential when you sell vehicles, you will sell a vehicle in good faith, however things can, and do go wrong resulting in loss, damage or injury. Sales Indemnity along with defective workmanship insurance will provide you with protection needed.
Lets look at some of the more technical bits in terms of cover for defective workmanship insurance
Activites that are covered will include :-
– the repair servicing or maintenance or any vehicle including the supply of parts components or accessories relevant to such work.
– the examination of Vehicles in accordance with regulations.
– the pre-delivery check of new Vehicles as required by the manufacturers and the fitting of additional accessories to them.
– the sale of Vehicles and any other Product Supplied.
Provided that the Limit of Indemnity is not exceeded in the aggregate (aggregate is the limit of indemnity – lets say £2m in any one period of insurance).
Significant Exclusions under this section will include :-
– Damage to that part of any property on which you have been working on – this relates to the scenario given above regarding what isn’t covered.
– Loss of or damage to any Product Supplied or for the costs of recall removal repair alteration replacement or reinstatement of such Product Supplied caused by any defect therein or the unsuitability thereof for its intended purpose other than for
a. Vehicles sold or supplied by you
b. Damage to vehicles directly resulting from work undertaken by you or on your behalf.
– any Product Supplied which is in your custody or control.
– the cost or repair reinstatement or rectification of the original repair servicing cleaning inspection testing alteration treatment or maintenance work by or on your behalf which gives rise to a claim.
A few final points on defective workmanship insurance.
As we can see defective workmanship insurance is an essential part of any motor trade insurance policy, and whilst it can have its complexities in terms of what is, and what isn’t covered, the fact remains that without it you will be leaving your business exposed.
Looking for Defective Workmanship Insurance?
Let us look at your requirements for this type of cover, being specialist brokers to the sector we have instant access to all the motor trade insurance markets, we provide fast and competitive quotes tailored to your needs.
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