Central Insurance Blog

With over 80% of U.S. homes now more than 20 years old and commercial renovation spending projected to rise by 67% by 2030, the demand for improvements is skyrocketing. These numbers indicate a thriving renovation market, as residential owners and commercial developers invest heavily in updating and repurposing properties. And it’s no surprise—renovations breathe new life into aging buildings, often at a lower cost than new construction.

However, unexpected setbacks can accompany renovation projects, particularly when accidental property damage occurs. Whether it’s a broken fixture, burst pipe, or collapsed wall, these costly issues raise an important question: who pays for the damage?

In this article, John Hughes, construction underwriter at Central Insurance, shares expert insights on this complex question—one that depends on several key factors, including the type of project, the terms of the contract, and the insurance coverage held by each party involved. Read on to learn more.

Renovations Come with Risk of Accidental Property Damage

Accidental property damage can strike when you least expect it. The risk is always present, from simple renovations to complex overhauls, and it can grow with project complexity and building age.

“Accidents can happen on any project, regardless of size,” Hughes says. “But the more complex the project, the more likely it is that accidental damage could occur.”

Older buildings or structures in poor condition carry even greater risk. “You don’t always know what’s behind a wall or in a ceiling,” he explains. “And if you’re making big changes—like converting a basic building into a more elaborate space—the risk increases.”

Contractors can inadvertently hit electrical or plumbing lines, damage structural elements, or cause harm with large equipment. Even small oversights, like failing to secure materials, can have major consequences. In multi-trade environments, one subcontractor’s mistakes can easily trigger a chain reaction that impacts the entire jobsite.

Who’s Responsible for Accidental Property Damage Costs?

Hughes emphasizes that in most cases, the contractor who caused the accidental property damage is financially responsible. However, when subcontractors are involved, things get more complicated. 

That’s why general contractors need to have written agreements with subcontractors and ensure they carry their own insurance coverage.

“Even when subcontractors carry their own insurance, primary contractors should verify that the coverage is active and appropriate for the scope of work,” Hughes explains. “Getting a certificate of insurance isn’t enough—you need to make sure the policy includes relevant protections and hasn’t lapsed.” 

He also recommends including contract language that requires notice of cancellation. If a subcontractor’s policy is terminated before or during the project, the primary contractor won’t be caught off guard. These proactive measures can help avoid costly disputes and ensure coverage is in place when accidental property damage occurs.

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The Role of Insurance When Accidental Property Damage Occurs

To protect against financial fallout from accidental property damage, contractors should have comprehensive general liability insurance. 

“You want to make sure there are no exclusions for work done by subcontractors and that it includes coverage for ongoing and completed operations,” Hughes advises.

It’s also important to review subcontractor agreements carefully. Contractors should require subcontractors to list them as an Additional Insured on the subcontractor’s policy, and ensure that coverage is written on a Primary and Non-Contributory basis.

These two provisions are critical for a sound contract, as they prevent coverage disputes and protect project owners and general contractors from unexpected financial exposure. While there are other valuable risk transfer clauses to consider, these are two of the most fundamental.

Additional policies like Contractor’s Errors & Omissions (E&O) can further safeguard businesses from liability related to professional mistakes or oversight, as they can protect against errors or faulty workmanship claims.

Project owners should ensure they’re adequately protected by having the right insurance throughout the renovation process. 

“A Builder’s Risk policy is critical for renovation projects,” Hughes explains. “It provides first-party property damage coverage, which can respond quickly in the event of a covered accident or loss.” While standard property insurance may exclude or limit coverage during construction, Builder’s Risk can fill the gap, offering broader protection for covered accidental property damage that occurs before the project is complete.

Before work begins, contracts should clearly define who is responsible for what. There should also be a detailed scope of work and insurance requirements for the contractor or subcontractor. 

Hughes recommends ensuring that insurance documentation is project-specific and includes notification clauses. “You want proof of insurance tied to that specific job, and ideally, you should be notified if coverage is canceled or lapses during the project.” 

This proactive approach helps confirm that the contractor has appropriate coverage to respond to any accidental property damage, reducing the risk of costly coverage gaps.

Learn more: The Biggest Risks Facing Large Construction Companies in 2025

Accidental Property Damage Happened—Now What?

As soon as you discover the accidental property damage, notify your insurance agent and the contractor. 

Documentation is also key. Both contractors and project owners should take before-and-after photos and maintain detailed project records to help establish timelines and responsibilities if a claim is filed.

“Photos, estimates, contracts—anything that shows the extent of damage or outlines the agreement is extremely helpful during the claims process,” he notes.

Work with an Insurance Partner Who Understands Your Business

At Central Insurance, construction coverage is more than just a policy—it’s a partnership backed by expertise. 

“We’ve built our specialized construction program around the unique needs of contractors and construction projects,” Hughes states. “Our underwriting team understands the complexity of construction, and we offer tailored coverage options to protect against the unexpected.”

What’s more, Central takes a proactive approach to protecting contractors, working closely with agents and clients to identify potential coverage gaps before they become costly issues. 

“If a claim does happen, our claims team is experienced, responsive, and ready to step in,” Hughes says. “We know how important it is to keep construction projects moving forward, and we’re going to do everything we can to ensure your work stays on track.”

Central offers a full suite of insurance solutions tailored to contractors’ needs. With deep expertise in construction underwriting, loss control, and claims handling, we deliver the policies and support that help contractors manage risk, protect their reputations, and build long-term success. Contact your local independent Central agent today for more guidance on accidental property damage and project-specific coverage.