Most contractors, architects, engineers, design professional etc. are asked the same question by their insurance brokers every year..Do you want a deductible or a self insured retention (SIR)? Most contractors do not worry about what this means to their bottom line until it is too late….after they are in a lawsuit!!!

The California Supreme Court just made it more expensive not to know about this important part of your insurance policy.

The Court recently held that coverage under a contractor’s insurance policy was not triggered until after the $10,000 SIR was paid for every “claim,”. Claim meant that the the contractor had to pay out of pocket expense (attorneys fees) of $10,000 for each and every home that was in the lawsuit before his insurance policy would apply!!

The Court ruled this way because the insurance policy stated that the SIR applied “to each and every claim made against you [contractor], regardless of how many claims arise from a single occurrence or are combined in a single suit.”

Evanston Ins. Co. v. North American Capacity Ins. Co., 2014 U.S. Dist. LEXIS 92682 (E.D. Cal. July 8, 2014)

This could mean a contractor is out of pocket $100,000 on a 10 home case.

It is always best to have a strategic review of your insurance options with both your insurance broker and attorney each year. It could literally save you $1000s in the future.