What it means
Residential exclusions are insurer specific endorsements that exclude claims arising from work on certain residential properties. The scope varies. Some exclude all residential work, while others target condominiums, townhomes, condo conversions or new tract housing.
Insurers use them because residential construction defect claims can be frequent and expensive. California has specific construction defect laws for new residential construction, which makes careful underwriting of this work common.
Contractors who do any residential work should read the exclusion carefully. A policy priced for commercial work may leave a single residential job uninsured.
An example
Ironwood Concrete mostly pours commercial slabs but accepts a driveway job for a townhome association. Its policy excludes work on condominium and townhome projects, so a later claim from that job may not be covered.
Names in this example are fictional.
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Get a free contract checkResidential exclusion, answered
Does a residential exclusion apply to single family remodels?
It depends on the wording. Some exclusions remove coverage for all residential work, including remodels of single family homes. Others target only multi unit projects, condos or new construction. Read the definitions in the endorsement, and if any residential work is planned, confirm in writing with the insurer how the exclusion applies.
Why do insurers exclude condo and townhome work?
Multi unit residential projects can produce construction defect claims years after completion, often involving many owners and long litigation. Insurers manage that exposure by excluding the work, pricing it separately or writing it through specialized programs. Contractors who do this work usually need a policy designed for it.
General information only. It is not legal or insurance advice. Only issued policy documents and endorsements describe actual coverage.