A homeowner discovers water damage from faulty plumbing work 18 months after completion. The contractor's insurance policy expired 6 months ago. What is the contractor's liability?
Correct Answer
D) Full liability regardless of insurance status
Contractors remain fully liable for defective work regardless of insurance status. Insurance expiration doesn't eliminate legal responsibility for faulty workmanship.
Why This Is the Correct Answer
A contractor's legal liability for defective workmanship is independent of their insurance coverage status. Insurance is a financial mechanism for satisfying liability, not a shield from it. The contractor remains fully liable for faulty work within the applicable statute of repose, regardless of whether their policy is active.
Why the Other Options Are Wrong
Option A: Limited liability for materials only
Limiting liability to materials only is not a legal principle under South Carolina law. Contractor liability encompasses both labor and materials for defective workmanship claims.
Option B: Liability shared with insurance company
Liability is not shared with the insurance company once the policy expires. The insurance company has no obligation to cover claims under a lapsed policy. The contractor bears the liability personally.
Option C: No liability due to expired insurance
Expired insurance does not eliminate legal liability. This is the most dangerous misconception — contractors cannot use insurance lapses as a defense against workmanship claims. Liability persists through the statute of repose period.
Memory Technique
Insurance covers liability — it does not create or eliminate it. A contractor without insurance is like a driver without car insurance: still legally responsible for accidents, just personally on the hook.
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