Residential Exclusion
Residential exclusions are rare, so it’s important to read such exclusions carefully and compare them with the type of work done in the past and now. Single-family homes, townhouses, condos, and other similar developments are exempt from certain requirements. Many states specifically exclude apartment buildings from residential requirements. In addition, there are other exclusions that may mean that buildings such as assisted living facilities, hotels, and dormitories are not covered. In some endorsements, all operations on residential properties are excluded, while other endorsements leave coverage intact as long as only repair or remodeling is done on the property.
Commercial or industrial properties that are converted to residential properties are another type of exclusion. Take ABC Contracting as an example: They built an office building a while back. Today the building will be converted into residential condominiums. ABC may not even know the renovation plan is in the works, but this type of exclusion could result in a loss of coverage on the original work from ABC.
This exclusion can generate lower insurance rates for the named insured subcontractor. However, a policy that doesn’t align with the subcontractor’s work scope could nullify the additional insured’s coverage.