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Oct 02
Love0

Take Caution When Buying a Foreclosure

By Personal Perspective

Most Americans have seen ads on television for get-rich-quick seminars that teach novice investors the secrets of making money from housing foreclosure sales. In spite of all the hype, successfully buying and selling foreclosed real estate requires research, money, knowledge, experience and time. Furthermore, buying foreclosed real estate is not without risk. If you plan to try your hand at this type of investing, you need to be well-versed in foreclosure basics. Foreclosure is the legal recourse lenders or governmental agencies have to recoup money owed them because a property owner failed to make payments. The lender/agency can take the house and sell it to satisfy the debt.

Generally, the reasons for foreclosure include: 

Non-payment of a mortgage/home equity loan.
Inability to meet a balloon payment.
Failure to pay property taxes.
Inadequate insurance coverage for the property.
Inability/failure to maintain the property.

The foreclosure process involves three stages:

Pre-foreclosure – This is the period between the time the homeowner stops making payments and when the land is put up for sale at auction. Investors typically deal with the homeowner during this time.

Auction – This is when the property is taken from the homeowner and sold to the highest bidder. Either the county sheriff or a trustee handles this phase, depending on the state.

Real estate owned (REO) – If no one buys the property at auction or if the lender is the highest bidder, the home becomes “real estate owned” by the bank. Banks usually sell REO properties on the open market through a real estate agent or third-party marketing company.

The most common method of buying a foreclosed property is during a sheriff’s auction or trustee’s sale. These auctions are held on a weekday morning. Investors cannot pay with credit cards, personal checks or IOUs, and they must make a sizable deposit or pay the entire sum for the property on the spot. Typically, potential buyers are not allowed inside the house before bidding begins. The only information prospective buyers have on which to base a purchase decision is what is available through public records searches and a curbside appraisal.

A second risk in sheriff’s auctions and trustee’s sales is that the homes are not guaranteed to come with a clear title. This makes the title search a critical, necessary part of your public records research. If a previous owner with a valid claim surfaces at a later date, you can lose everything you invested.

Also, homes sold at auction sometimes have liens that weren’t erased by foreclosure, such as an IRS debt, that could wipe out any profit you thought you would see from the resale of the property. Procedural errors and court rulings also could stop a foreclosure sale after you have invested time and money. Furthermore, some states have a statutory redemption period, during which time the original homeowner can repay what is owed, regain ownership and leave you with nothing.

Despite all of these potential drawbacks, buying an auctioned home isn’t always a perilous undertaking. Homes foreclosed by reputable lenders who are the first lien holders can be a fairly safe investment. If the deal is completed properly, and you have title insurance, there’s an excellent chance of getting a good title. Properties foreclosed by a government agency, such as the Department of Housing and Urban Development or the Veterans Administration, present less risk. These auctions are conducted online through a marketing company.

Buyers are permitted to examine the homes in advance, conduct inspections and obtain title insurance. The biggest drawback to government auctions is the limited availability of homes. Consequently, available properties attract a large number of interested buyers, which makes it a very competitive market with prices only slightly discounted off current market value.

If you are considering the idea of investing in real estate through buying foreclosed properties, prepare yourself by learning the ins and outs of the process and legal issues, and gathering whatever information you can on the property and parties involved. In doing so, you’ll help to minimize the risk that is inherent with this type of investment.

Oct 02
Love0

Should You Include Your Life Insurance Policy In Your Will?

By Life and Health

Life insurance provides your beneficiaries with financial assistance. In addition to purchasing adequate life insurance coverage, understand if you should list it on your will.

Probate Versus Nonprobate Assets

When you die, your estate goes into probate. Probate is the process through which the executor of your estate files paperwork with the probate court to prove the validity of your will and ensure your final wishes are carried out.

Typically, any outstanding debts are paid. Then money is allocated to survivors. Of course, the executor also ensures that individuals receive any specific assets you want them to have such as real estate, art or heirlooms.

Some of your assets will not go into probate after your death, however. Life insurance is one nonprobate asset. The beneficiaries listed on the policy receive the death benefit whether the policy is listed in the will or not. This occurs because probate courts view life insurance as a contract between you and the life insurance company. You pay premiums, and the life insurance company agrees to give your policy’s beneficiaries the death benefit for which you paid.

Why List a Life Insurance Policy in Your Will

Even though your life insurance policy is a nonprobate asset, you may consider listing in in your will. Listing your life insurance policy makes it easier for your beneficiaries to  discover the policy, tell the company that you have died and receive the financial support they need.

You will also want to include your life insurance policy in your will if your estate is the beneficiary. In this case, the policy’s death benefit will to into probate and be distributed according to your wishes.

How to Choose Life Insurance Beneficiaries

You may choose whomever you wish to be your life insurance beneficiary. The policy’s beneficiary can be the same person you list in your will or someone totally different.

Popular beneficiaries include:

  • Spouse
  • Children
  • Parents
  • Charity or foundation
  • Estate

You can change your life insurance beneficiary at any time. Simply contact your life insurance company and complete the beneficiary form. Remember that because your policy is a legal contract, you cannot use your will to change the beneficiaries on your life insurance policy. Be sure to update your beneficiaries as needed to ensure your final wishes are carried out.

Life insurance is a valuable estate management tool. It can provide financially for your family or fund a charity after you die. Decide today if you will list it in your will or not, and be sure to update the beneficiaries.

Oct 02
Love0

Five Retirement Risks

By Life and Health

Retirement has always been a tough undertaking but in today’s tumultuous economy, it sometimes seems like an impossible task. There’s no question that countless risks go hand in hand with retirement. However, even during a recession, you can manage these risks. Here are the top five most common retirement risks and the best ways to deal with them:

Risk #1: Outliving Your Money. 

Running out of money is not only a scary prospect it’s also one of the biggest risks that all retirees and soon-to-be retirees face. In the retirement planning world, this is known as “longevity risk.” According to the Society of Actuaries (SOA), Americans are living longer, which means the risk of outliving their money is much higher. The SOA estimates that the average life expectancy for 65-year-old Americans is 17 more years for men and 20 years for women. However, 30% of women and 20% of men aged 65 will live until they’re almost 90 years old. That means many people might live up to 25 years or longer after they retire.

How to deal with it: 

As long as you save up enough money for retirement, avoid overspending and invest wisely, you should be able to avoid this problem. You might also consider taking on a part-time job after retirement or even delaying retirement a while so you can earn income for a few more years.

It’s also critical for soon-to-be and current retirees to properly manage their assets. You might consider investing in payout annuities, managed payout plans or “longevity insurance” – an annuity that does not start paying benefits until an advanced age, such as 85. Many retirees also apply for a reverse mortgage to protect against longevity risk.

Risk #2: Skyrocketing Inflation. 

Unfortunately, none of us are immune to inflation – all retirees will be affected by it. The trouble is that the rate of inflation can be difficult to predict. According to the SOA, annual inflation in the U.S. varied from 1.1% to 8.9% from 1980 to 2007 quite a large range. However, the average inflation rate throughout these years was 3.5%. Based on that percentage, a product that cost $1 in 1980 cost $2.82 in 2007. And the rate of inflation can have an even bigger impact on retirees, especially for things like health care an expense that becomes a growing portion of a retiree’s budget.
As a matter of fact, studies show that health care represents only 5% of the average person’s budget before retirement, but it grows to 10% for retirees ages 65 to 74 and increases to 15% for retirees 75 and older. On top of that, health care expenses generally increase much more rapidly than other goods and services. According to the Bureau of Labor Statistics, the cost of medical care is nearly four times higher than it was in December 1982. In other words, health care that cost $100 in 1983 would now cost $387.

How to deal with it: 

To prepare for the effects of ever-growing inflation, the SOA says that retirees and soon-to-be retirees should invest in assets that grow in times of inflation, such as common stocks, inflation-indexed Treasury bonds (TIPS), inflation-indexed annuities, and commodities and natural resources. Retirees might also consider taking a “semi-retirement” for a couple of years before they officially retire so they don’t drain their retirement assets too soon.

Risk #3: Unpredictable Interest Rates. 

Although many consumers are thrilled about today’s low interest rates, retirees and soon-to-be-retirees aren’t too happy about it. That’s because when interest rates are low on both short and long-term investments, retirees might be forced to re-invest their money at lower rates. Plus, many soon-to-be retirees who are investing in fixed income will have to save more to build up a big enough retirement fund. While the SOA points out that government spending, inflation and business conditions all affect interest rates; it’s difficult to predict what the future holds.

How to deal with it: 

To manage the risk of interest rates, the SOA says retirees and would-be retirees could invest in immediate annuities, long-term bonds, mortgages or dividend-paying stocks.

Risk #4: Stock Market Fluctuations. 

Because it’s practically impossible to forecast what will happen to stocks, many retirees fall prey to major stock market losses. One major stock market downturn, and your nest egg could disappear in the blink of an eye.

How to deal with it: 

First of all, the SOA says retirees and older workers should limit their stock market exposure. If you do invest in the stock market, be sure to diversify your stocks and spread your money among different investment classes and individual securities. This will greatly decrease your risk. You might also consider investing in financial products that invest in stocks, but guarantee against the loss of principal, such as mutual funds.

Risk #5: Disappearing Retirement Funds. 

If your employer declares bankruptcy, what happens to your pension? If your annuity insurer becomes insolvent, where does that leave you? Many terrible things can happen to your retirement funds but there are ways to manage these risks.

How to deal with it: 

Before you invest your money do your homework. Find out your employer’s credit rating to determine if they might be at risk for bankruptcy. Look into your insurance company’s claims-paying ability rating. Of course, you are already protected from many of these risks. If your employer does go out of business, the Pension Benefit Guaranty Corp. will insure your defined-benefit pension plan (up to certain limits.) Annuity companies are covered by state insurance guaranty funds up to specified limits which means if the insurer becomes insolvent, the claims will still be paid.

Oct 02
Love0

10 Way Your Pharmacy Can Make You Healthier

By Life and Health

Pharmacists spend at least six years in college learning about medicine and health. Take advantage of 10 services your pharmacy offers as you get healthier.

1. Health Screenings

Many pharmacies offer a variety of health screenings, including:

  • Anemia
  • Blood pressure
  • Cholesterol
  • Glucose
  • Prostate
  • Skin cancer
  • Thyroid

After you get the results, visit your primary care physician for an official diagnosis and treatment plan.

2. Sexual Health

Sexual health is important now and into the future. Your pharmacist can offer advice about safe sex, recommend contraceptives, provide pregnancy tests, give you emergency contraception and talk about important vaccines.

3. New Medicine Service

A new medication that treats asthma, high blood pressure or another chronic condition can be confusing. The New Medicine Service ensures you’re taking the medicine properly and understand what it does and any side effects.

4. Medication Therapy Management (MTM) Services

If you take more than five medications per day, sign up for Medication Therapy Management. During your 30 to 60 minute session, your pharmacist will review your medication to ensure each one is essential, taken correctly and  affordable. Ask your health insurance company if they will cover your MTM session.

5. Diabetes Classes

One of the most prevalent diseases in the United States, diabetes affects 25 million Americans. At your pharmacy, you can receive diabetes management and education, medication counseling, blood-glucose meter training and glucose testing.

6. Vaccinations

You may be familiar with the flu shot given at your pharmacy. However, you can also receive other vaccinations such as:

  • Gardasil (HPV vaccine)
  • Hepatitis A and B
  • Meningitis
  • Pneumonia
  • Tetanus
  • Zostavax (Shingles vaccine)

While your primary care physician will need to give you a prescription for these vaccines, you can also talk to your pharmacist about which vaccines are right for you.

7. Unwanted Medicine Disposal

Instead of tossing your unwanted or expired medication in the trash or toilet, give it to your pharmacist. He or she will safely dispose of it.

 8. Minor Ailments Advice

When you’re suffering from a cold, rash or earache, visit your pharmacist. Get medication recommendations and other tips to help you feel better and heal quickly.

9. Health Lifestyle Advice

While you will want to see your primary care physician for ongoing health issues, your pharmacy team can offer a variety of advice. Gain healthy eating tips, weight loss advice, smoking cessation tools and information about chronic conditions.

10. NHS Health Check

Only your doctor can diagnose diabetes, dementia or another chronic condition. However, your pharmacist can screen you for certain conditions if you’re between the ages of 40 and 74.

Your local pharmacy offers these 10 beneficial services. Use them as you get healthier.

Oct 02
Love1

Safety Tips: Planning Workplace Team-Building Activities

By Employment Resources

In recent years, team building has gained a foothold in corporate America as a fun and effective management tool. To be successful in the business world, employees must be able to effectively plan and execute programs as a team, communicate clearly, use resources efficiently, and be able to adapt to changing circumstances.

Team building is designed to do utilize these skills, in a fun environment. It can encourage out-of-the box thinking and enhance group dynamics, breaking down barriers that prevent employees from working together as a team. Activities foster decision-making, challenge resolution and leadership skills.

Exercises can be designed to encourage individuals in a group to entrust their safety in one another or to experience the exhilaration of overcoming a physical challenge. Participants return to work infused with renewed vigor. The goal is to transfer the collaborative effort, positive energy and learning that take place during a team-building activity back into the workplace.

But team building can also be a risk manager’s nightmare when activities include dangerous physical elements. Companies must consider the risks involved in such hazardous activities. They can lead to an increase in the frequency and severity of employee injuries, leaving the company vulnerable to higher workers’ compensation costs – not to mention employee lawsuits.

If team-building activities are part of your company’s management philosophy for bringing employees together to work cohesively as a group, make certain that safety is part of the equation. Consultants brought in to design such programs should know your expectations and concerns and abide by them. A company in Miami that hired a consultant for team building found that a dozen or so of its 100 employees suffered 1st and 2nd degree burns when they were forced to engage in a firewalk. The consultant called the injury rate “acceptable.”

Activities such as white water rafting, rock climbing, and paintball might not be suitable for all employees. Besides the physical hazards, planners need to consider whether or not an activity might be embarrassing for some employees. An activity that requires participants to wear a bathing suit, for example, might make some employees self-conscious and inhibit their ability to fully engage in the collaborative effort.

To promote safe team building:

Include team-building activities as part of any formal risk management program.

Emphasize the need to exercise caution on the job and in any physical team-building exercise.

Define your needs clearly to management consultants, hired to design a team-building program.

Ensure team-building activities are properly supervised.

Stop any activity if an unsafe situation is observed.

Team building has an important place in business. Activities should focus on bringing employees together. Make team building a safe experience that everyone can participate in and enjoy.

Oct 02
Love0

Nine Tips To Use As You Advocate For A Flexible Work Schedule

By Employment Resources

A flexible work schedule can help you achieve work-life balance, maximize your circadian rhythm or prepare for retirement. You may need to convince your boss that it’s a good idea, though. Use nine tips as you advocate for a flexible work schedule.

1. Reference companies that successfully offer flexible work schedules.

Several companies successfully implement flexible work schedules, so share these success stories with your boss.

  • Best Buy – decreased turnover by 90 percent, and increased productivity by 35 percent.
  • Cisco – gained $195 million because of increased productivity.
  • Deloitte – cut turnover costs by $41.5 million.

2. Show your boss what the company will gain.

While a flexible work schedule helps you personally, your boss needs to know that it will also benefit the company. Show evidence that proves it will improve performance, productivity and retention. Also, indicate how it will meet a current need, such as reducing budget constraints, increasing available customer service hours or reducing turnover.

3. Discuss details about how the arrangement will work.

Do your homework and figure out how your flexible work will work. Do you wish to telecommute, work a compressed schedule or job share? What equipment will you need? How will you report your professional achievements?

4. Describe the compensation schedule.

Because benefits like your paycheck, vacation time and insurance coverage can change when your work schedule changes, describe your expected compensation schedule. Demonstrate your willingness to be compensated fairly.

5. Address a contingency plan.

Your proposal should address how you will handle challenges. Examples could include busy seasons, power outages at home or meetings on your days off.

6. Share how your performance will be measured.

Your boss will need to ensure that a flexible schedule delivers everything you promised. Will you undergo weekly performance reviews, ask your clients to evaluate your performance or poll co-workers to measure morale?

7. Be prepared to counteract negative impacts.

Despite the benefits, there are drawbacks to a flexible work schedule. Describe how you will handle busy seasons, ensure you meet productivity goals and communicate with clients.

8. Recommend a trial period.

A trial period gives you time to decide if a flexible work schedule is right for you and your company. At the end of the trial period, you and your boss can evaluate your future schedule.

9. Put your proposal in writing.

Because your boss may need time to evaluate your proposal, put it in writing. Then schedule a follow-up appointment to review his or her decision.

A flexible work schedule is beneficial for you and your company. With these nine tips, you can successfully advocate for your own flexible schedule.

Oct 02
Love0

Employee Wellness Programs

By Employment Resources

According to the forth-quarter 2010 Principal Financial Well-Being Index, 43% of American workers cite the achievement of better overall health as the number one reason they would or do participate in a wellness benefit program. In second place, with 33%, was the reduction of personal health care costs. In third place, with 31%, was the increased chance of living a healthier and extended life.

The Principal Financial Well-Being Index is released by the financial services provider, Principal Financial Group. This is a quarterly survey of American workers from American businesses with between 10 and 1,000 employees. The findings of the fourth-quarter 2010 survey involved data from 528 retirees and 1,159 employees.

Some key points from the survey included: 

When offered by an employer, blood sugar screenings had an 84% utilization rate. This was an 18 point increase from 2009 statistics.

When offered by an employer, weight management programs were utilized by 53% of employees. This was a 25 point increase from 2009 statistics.

When offered by an employer, personalized action plans for conditions considered high-risk were utilized by 68% of employees. This was a 21 point increase from 2009 statistics.

Some credit rising health care costs and more public awareness about diseases such as heart disease and diabetes with American workers being more ready to take action toward their own health. None the less, as evidenced by the substantial increase in how many workers are taking advantage of wellness benefits, there is clear indication that there’s a growing element of employees taking more personal responsibility for their health.

Employers Can Benefit From Wellness Programs Too 

Personal responsibility might drive employee participation in wellness programs, but employees have much to gain from offering wellness and encouraging its usage. During the index, workers said the following occurred as a direct result of the wellness program offered by their employer:

Forty-three percent felt they were motivated to perform better and work harder.

Twenty-eight percent said they were absent fewer days from work.

Thirty-eight percent said they experienced improved productivity and energy while at work.

Forty-eight percent said that the offering of wellness benefits encouraged them to remain with their current employer.

In closing, this research is echoed by countless other studies showing employers that invest in the wellness of their employees by offering them the means and the educational resources they need to control their own wellness not only gain physically healthier employees, but also productivity and cost-saving increases.

Oct 02
Love0

Keeping Defects Low on Green Building Projects

By Construction Insurance Bulletin

As concerns grow about the potential effects of global warming and people pay more attention to reducing their carbon footprints, green construction is becoming a larger part of the solution. A McGraw Hill study found that in 2008 the value of green construction starts might have been as high as $49 billion, and it could reach $140 billion by 2013.

Building owners are attracted by energy cost savings, tax incentives, and the good publicity that comes from using an environmentally-friendly facility. Although green construction has become a lucrative business for contractors, it carries some risks that conventional construction methods do not have or have to a lesser extent.

Much of the difference between green construction and conventional methods is in areas of emphasis and materials. Green construction, because it is relatively new, uses new materials that might not have a proven long-term track record. The focus of a green building is energy conservation; objectives such as moisture control to prevent mold growth receive less attention.

Also, compared with conventional buildings, green buildings allow more air in from the outside, with potential impacts on building occupants’ health. Before construction begins, contractors must work with the project owner to identify the specific green objectives the owner wants to accomplish. With that knowledge, the contractor can determine how much additional risk the objectives present and create risk management plans to deal with it.

Price pressures can also be an issue. Green construction can be more expensive than conventional construction, yet project owners might be unwilling to pay a large premium for it. Contractors will be under pressure to hold costs down. This might cause them to take shortcuts that could increase the risk of creating defects in the building. The owner and contractor must work together to create a plan that balances cost savings with sound construction practices.

Green buildings carry a risk that their components might not perform as well over time as do those of conventional buildings. Because they stress innovative techniques and materials, green buildings use materials that have not undergone the years of testing that conventional materials have. Green construction favors using renewable resources and emphasizes insulation to reduce energy use.

Conventional buildings use materials with a history of good performance and emphasize keeping water and other elements out. To reduce performance risks, contractors should arrange for peer reviews that predict how materials will interact with other materials and building systems, predict how the building will hold up in actual use, and analyze waterproofing and humidity control capability.

Although green buildings are a relatively new concept, building owners expect them to perform at least as well as conventional buildings over the long term. Contractors who erect them might be vulnerable to lawsuits if a building fails to meet the U.S. Green Building Council standards. The USGBC offers its LEED certification to buildings that meet standards; the council can also revoke certification if it finds that a building is not performing as expected. Losing certification can harm a contractor’s reputation.

The peer reviews of materials and systems should help to reduce this risk. The green construction business is almost certain to grow rapidly during the next several years, and contractors will naturally want to take advantage of that. To reduce their risks, they should work with organizations such as the USGBC to get education and training on materials, construction techniques, and risk management. Together with peer review of materials and collaboration with project owners, these measures should help contractors complete quality and environmentally sound buildings.

Oct 02
Love0

How to Estimate an Accurate Remodel Bid

By Construction Insurance Bulletin

Bidding on residential remodeling projects requires accuracy. With an accurate bid, you show your competence and make a viable living. Consider five//// tips that help you estimate an accurate remodel bid.

1. Become familiar with the client’s house.

Whether you’re bidding on your first or fiftieth remodel project, you must do a thorough walk-through of the home. You’re better equipped to give an accurate bid when you know exactly what the house looks like and what the job entails.

During your walk-through, look for details like the room dimensions, desired materials and job scope. You should also consider any complications like an older heating system or the possibility of mold.

2. Be clear about the homeowner’s expectations.

Talk to the homeowners to ensure you understand exactly what they want and expect. When you’re on the same page, you can create a bid that includes everything they want.

3. Calculate all costs related to the project.

It’s easy to forget important details when preparing a remodel estimate. Consider these often underestimated or overlooked expenses.

Materials – Does the homeowner want high-end or recycled materials? How many materials will you need for the project?

Labor – How long will the job take, factoring in inevitable delays? Will you do all the work yourself or hire independent contractors?

HVAC system – Will the home’s existing HVAC system interfere with the project or need to be reworked in any way?

Electrical – Are any electrical updates or changes required?

Home maintenance – What are the costs associated with removing dust and dirt from the home during the remodel project?

Demolition and hauling – How extensive is the project’s demolition and hauling?

Special equipment – What types of tools do you need to rent for the project?

Overhead fees – What types of filing, copying or accounting fees will the project entail? How much will insurance and any required construction bonds cost?

4. Ensure the bid is profitable for you.

Remodel jobs can include a profit margin of as much as 20 percent, but if your bid is too low, you could earn as little as three percent. Crunch the numbers at least twice to ensure you can stay in business and provide for your family.

5. Submit your bid personally.

Show that you’re dependable and hands-on when you submit your bid in person. This step also gives you a chance to discuss the bid with the homeowners. You can explain charges and answer any questions as you equip the homeowners to make an informed decision.

With these five steps, you submit bids for remodel projects that are accurate. You can then build a successful construction career.

Oct 02
Love0

Risks of Removal of Undamaged Property

By Construction Insurance Bulletin

An electrical contractor runs miles of wiring through what will be a three-story office building. Following completion, the contractor tests the wiring, finds it satisfactory and leaves the job. After other subcontractors hang and paint the walls and do other finishing work, the general contractor tests all systems.

This time, the electrical system fails. The GC summons the electrical contractor back; after more testing and diagnosis, the contractor concludes that there are faults in two segments of the system on different floors and adjacent sides of the structure. Fixing the problem will require tearing out the finished walls and a few appliances attached to them (a dishwasher in an office kitchen area, computer network equipment, etc.).

Tearing these things out, repairing the faulty wiring, and reinstalling the walls and finishing them so they look flawless will cost much more than simply fixing the electrical problem. The cost is far beyond what the contractor can afford to pay out of pocket. Will its Commercial General Liability insurance help? The answer depends on the state where the building is located.

The ISO CGL policy covers the insured contractor’s legal liability for physical damage: 

To tangible property, including all resulting loss of its use, or loss of use of tangible property that is not physically injured; and Caused by an occurrence, which is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

In addition, the policy states that it does not cover the insured’s liability for property damage: 

To work or operations the insured performed or which a subcontractor performed on the insured’s behalf, if the damage arises out of any part of the work and it occurs after the work’s completion; and To other tangible property that is unusable or less useful to the owner because it includes the insured’s work that is known or thought to be defective, deficient, inadequate or dangerous, if fixing the insured’s work will restore the property to usefulness.

Some courts have ruled that the CGL policy covers the cost of tearing out and reinstalling undamaged property when that is necessary to fix the defective work. A 2002 federal appeals court ruling in a Washington state case said that the removal and destruction of other subcontractors’ work due to the insured’s defective work is property damage, as the CGL defines the term. The court also said that the insured’s performance of defective work met the policy’s definition of “occurrence.”

A 2010 decision from Washington state reached a similar conclusion — unintentionally providing defective products to an installer was an “occurrence,” and removal and replacement of other suppliers’ products and work was “property damage.” Courts in Alaska and Oklahoma have ruled that the policy provision that excludes coverage for unusable tangible property did not apply because of a second provision that gives coverage back for loss of use resulting from sudden or accidental injury to the insured’s work. The courts felt that installing defective components was done accidentally.

Conversely, courts in Arizona, Maryland and South Carolina have held that tearing out and replacing undamaged property is not physical damage caused by an “occurrence” because it is not an accident. Rather, the courts saw it as a cost associated with a project.

Since the courts differ so much from one state to another, it might be helpful for a contractor to know in advance what a particular state requires. The contractor’s insurance agent might also know which insurance companies have a history of paying for these types of claims. The contractor could find that it is worthwhile to buy coverage from these companies even if they charge higher premiums.

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