My Contractor Didn’t Have Insurance — Who Pays for the Damage?

Hiring a contractor for a home renovation, repair, or improvement can be exciting. You’ve imagined the finished project — maybe a new kitchen, bathroom, or even a deck. But what happens if something goes wrong? One of the most overlooked risks is hiring a contractor without proper insurance. In Georgia, this can leave homeowners exposed to financial and legal consequences if damage occurs.

In this guide, we’ll break down the scenario, explain what your homeowners insurance may cover, highlight Georgia-specific rules, and provide insider tips most homeowners don’t know — so you can protect yourself before your next project.

Why Contractor Insurance Matters

Many homeowners assume that if a contractor causes damage, it’s the contractor’s responsibility — period. Unfortunately, that’s not always the case, especially in Georgia.

Contractor insurance typically includes:

1. General Liability Insurance – Covers property damage or bodily injury caused by the contractor during work.

2. Workers’ Compensation – Protects workers if they are injured on the job. Without it, injured workers could sue you, the homeowner, if they’re hurt on your property.

3. Subcontractor Coverage – Covers damages or injuries caused by subcontractors the contractor hires.

Insider Tip: Many homeowners don’t realize that even licensed contractors sometimes let their policies lapse between projects. Always verify that the insurance is current — not just that the contractor has insurance on paper.

Always verify that contractor policies are active by calling and verifying the coverage and dates on their certificate of insurance (COI).

Homeowners Insurance: What You Might Not Know

Your homeowners insurance can sometimes cover contractor-caused damage, but there are limits:

• Accidental Damage – If a contractor accidentally damages your property (like breaking a window or puncturing a water line), your homeowners policy may cover it. You will likely pay the deductible.

• Exclusions for Negligence – If the damage is caused by negligence or poor workmanship, your insurance may deny coverage. For example, if a contractor installs faulty wiring that later causes a fire, the fire damage might be covered, but the cost to fix the wiring usually isn’t. This was seen a few years ago (2020) with the Atlas Chalet roof shingles that were found to be defective and fail prematurely. Many homeowners had to join the class action lawsuit and pay out of pocket to get a new roof.

• “Vicarious Liability” Risks – If your contractor is uninsured and a third party (like a neighbor) is injured, in some circumstances, you could be held liable under Georgia law if the contractor is considered your agent.

Pro Tip: Ask your insurance agent specifically about “coverage for damages caused by contractors” before starting any project. Many policies offer endorsements or additional coverage for construction-related risks.

Georgia-Specific Legal Considerations

Georgia law places some responsibility on homeowners but also protects them in certain ways:

1. Licensing Requirements – Contractors in Georgia must have a state license for projects exceeding $2,500. Certain trades (electrical, plumbing, HVAC) also require specific licensing. Hiring an unlicensed contractor can void your ability to make claims on your insurance if damage occurs. (Georgia State Licensing Board)

2. Subcontractor Liability – If your contractor hires uninsured subcontractors, you could technically be liable for injuries or damage, especially if you were involved in directing the work.

3. Owner-Controlled Insurance Programs (OCIP) – For large projects, some homeowners purchase an OCIP, which covers liability and property damage during construction. Most homeowners aren’t aware of this option, but it can eliminate disputes if contractors are uninsured.

4. Indemnity Clauses – Your contract should include clear language holding the contractor responsible for their own mistakes. Georgia courts generally enforce these clauses, but they’re only effective if written properly.

Steps to Take if Damage Occurs

Even with careful planning, accidents happen. If a contractor damages your property:

1. Document Everything – Take photos, videos, and notes immediately. Include the date, time, and any witnesses.

2. Notify the Contractor – Give the contractor a chance to take responsibility. Often, legitimate contractors will work with their insurance company to cover damages.

3. Contact Your Homeowners Insurance – Report the incident. Be clear about what happened, including whether the contractor was insured.

4. Consult a Lawyer if Necessary – Especially if the contractor refuses to take responsibility or the damage is significant. Georgia law allows for legal action against uninsured contractors.

Insider Tip: Some homeowners don’t realize that if a contractor disappears or is uninsured, your insurance may still pay for the damage — but only if you purchased certain optional endorsements, like “construction defect coverage” or “extended property protection.” Check with your agent before work begins.

Certain work must be permitted and inspected. Always do your due diligence to protect yourself.

How to Protect Yourself Before Hiring a Contractor

Prevention is always better than damage control. Here are the steps savvy Georgia homeowners should take:

1. Verify Insurance and Licensing – Ask for proof of current general liability and workers’ compensation insurance. Confirm the license number with the Georgia State Licensing Board.

2. Check References – Speak to past clients and ask specifically about insurance claims or accidents.

3. Get a Written Contract – Include detailed scope, timeline, materials, payment schedule, and liability clauses.

4. Consider Builder’s Risk Insurance – For larger projects, this coverage protects your property from damage during construction.

5. Ask About Additional Endorsements – Optional coverage for contractor damages or subcontractor negligence can save you thousands.

6. Stay Involved – Regularly inspect the work. Being hands-on can prevent small mistakes from turning into major damage.

Pro Tip: Always include a clause requiring the contractor to maintain insurance throughout the project — not just at the start. It’s easy for policies to lapse mid-project.

Conclusion

Hiring an uninsured contractor in Georgia is a risk many homeowners don’t realize until it’s too late. By understanding the limits of your homeowners insurance, verifying contractor licenses and insurance, and taking proactive steps, you can protect yourself from financial loss and legal headaches.

📞 Protect Your Home Before Your Next Project

Before your next home project, let’s make sure your coverage protects you from the unexpected. Call or text me at 678-809-0094 or visit www.cibinsure.com for a quick coverage check.