Product Update

Limitations on State Guaranty Fund Claims Discussed in Construction Risk Management


When an insurance company becomes insolvent, contractors can look to the state guaranty fund as a source of recovery for unpaid claims. In some states, recovery is subject to a nominal deductible, such as $100 to $250 per claim. However, guaranty funds are not a reliable method of avoiding coverage gaps because they contain statutory maximums and other provisions that limit an insured's potential recovery. For example, in some states, insureds whose net worth exceeds a specified level are not entitled to recovery from the funds at all. Notably for contractors, claims against a surety are not covered by some states' guaranty funds. Also, in states where the guaranty fund covers only admitted insurers, claims against excess and surplus lines insurers are ineligible. (In most states, limitations on guaranty fund recoveries do not apply to workers compensation claims.)

This release of Construction Risk Management updates the "Statutory Limitations on Covered Claims under State Guaranty Fund" chart, which provides a summary of statutory limits on guaranty funds in each state.

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