Insurers increasingly are cutting back on construction defect coverage offered under contractors' liability insurance policies, excluding items that routinely were included in standard umbrella policies as recently as five years ago, say industry sources. They claim that insurers sometimes respond to recent claims and losses by trying to back out of promised coverage in a signed binder before issuing the final policy. The cuts in construction defect coverage have become more profound in recent years as defect litigation exploded and plaintiffs' attorneys began mining new areas, such as mold. Insurers now generally exclude it from new policies. But they also have been cutting back more on coverage of residential work and are limiting endorsements that allow prime contractors to provide coverage for subcontractors.
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