Understanding Coverage for Rip and Tear Costs in Commercial General Liability Policies 

• By: Nancy Germond
• January 16, 2026

When a construction project stalls due to defective work, the direct repair costs may be the tip of the iceberg. Contractors must consider the expenses needed to access the faulty part. Known as “rip and tear” costs, these costs can be a significant financial burden. Understanding whether the Commercial General Liability (CGL) policy covers these expenses is critical for any business in the construction and manufacturing sectors. It’s also critical that agents offer coverage for these types of costs when available. Failure to do so can lead to an errors & omissions claim.  

A CGL policy’s insuring agreement typically states the carrier will “pay those sums that the insured becomes legally obligated to pay as damages because of… ‘property damage’ to which this insurance applies.” An important question is whether the cost to demolish or remove perfectly good property to get access to defective work qualifies as covered “property damage.” Several key court cases have shaped the answer, providing important legal precedents. 

This article will break down the concept of rip and tear costs, explore earlier court interpretations of coverage under CGL policies and discuss future issues that could affect this important coverage. 

What Are Rip and Tear Costs? 

Experts call expenses incurred to access and replace defective work or to investigate the extent of resulting property damages “rip and tear costs.” Let’s look at a plumbing contractor who installs a faulty pipe inside a finished wall. To fix the leak, the plumber must do the following.  

1. Cut open the drywall (the “rip”). 

2. Remove insulation (the “tear”). 

3. Repair or replace the pipe. 

4. Install new insulation and drywall. 

5. Repaint the wall to match. 

The costs associated with cutting open the wall, removing materials and then restoring the non-defective parts of the structure are all part of rip and tear costs. The contractor incurs these expenses due to the property damage caused by the faulty pipe. 

Agents and adjusters see frequent claims arising from the installation of exterior insulation and finish systems (EFIS). These claims arise when moisture penetrates joints or cracks and can cause mold and other moisture issues.  

Courts in most jurisdictions have ruled defective workmanship alone does not qualify as “property damage” resulting from an “occurrence.” Consequently, the CGL policy typically excludes coverage for the costs associated with repairing or replacing the defective work. 

This is where rip and tear coverage can become essential.  

Key Legal Precedents on Rip and Tear Coverage 

Court rulings have defined how CGL policies respond to rip and tear claims. Two landmark cases in Texas, Lennar Corp. v. Markel American and U.S. Metals, Inc. v. Liberty Mutual Group, Inc., offer valuable insights.  

Homebuilder Lennar Corp. found defective EIFS siding on its homes was causing wood rot. Lennar sought coverage for the cost of removing the EIFS to inspect and repair the underlying water damage. This claim arose pursuing the costs to investigate which homes had sustained actual wood rot, even if it meant removing siding from homes inspected and found undamaged. The Texas Supreme Court in 2013 awarded Lennar their incurred costs to determine which homes had damage. This case, then, confirmed coverage for costs to access to evaluate property damage. 

U.S. Metals, Inc. v. Liberty Mutual Group, Inc. (2016) offered solid insight into what constitutes “property damage” in a rip and tear claim. U.S. Metals sold defective flanges to ExxonMobil for use in diesel processing units. When the flanges leaked during testing, they required replacements. The replacement process was both extensive and costly. There were six steps in the process to determine and repair the defective products.  

ExxonMobil sued U.S. Metals for over $6.3 million to cover the replacement and $16.6 million for lost use of the units. U.S. Metals settled for $2.2 million and sought indemnification from its CGL carrier, Liberty Mutual. The court determined that while the flanges themselves were not covered (Exclusion K), the policy covered the loss of use of the diesel units. Additionally, the policy covered the cost of replacing those units that destroyed the insulation and the gaskets, and the cost to replace those units. 

This case established a critical principle: the destruction of otherwise non-defective property (the insulation and gaskets) to access and repair a defective component (the flanges) constitutes new property damage that triggers coverage under a CGL policy. 

This ruling was further supported in Travelers Lloyds Ins. Co. v. Cruz Contracting of Texas, LLC (2017), where a court found coverage for the cost of removing a newly built roadway to access and repair a subcontractor’s defective utility work underneath. 

Additionally, in Desert Mountain Prop. Ltd. V. Liberty Mutual, a 2010 Arizona appellate decision found that the CGL does not offer coverage for damage caused to nondefective items and the replacement of defective work. This claim arose from poorly compacted soil because that issue alone did not rise to an “occurrence.” 

Future Issues and Considerations for Policyholders 

The always-evolving legal landscape presents several ongoing questions that policyholders, agents and insurers should consider.  

Can Rip and Tear Be an “Occurrence”? 

A CGL policy requires property damage to be caused by an “occurrence.” Once the policy defines a word, we look to the policy definitions to see how the policy defines that word. Many CGL policies define an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  

Courts have generally found this: the initial defective work is the occurrence. The subsequent rip and tear damage flows from that event. However, this point remains a potential area for dispute. As with most insurance claims, “It depends.”  

Which Policy Is Triggered and When? 

Normally, when the property is actually damaged triggers a CGL occurrence policy, not when the claimant or insured discovers the damage. For rip and tear costs, does the damage “occur” when the contractor installs the defective product, or when the contractor must demolish the non-defective property to access it? This timing can determine which policy period applies, a critical issue if an insured has a claims-made liability policy or has switched carriers. 

Note to Agents to Avoid an E&O Claim 

This type of claim highlights the need for contractors who retire or sell their business to buy discontinued operations coverage. It is vitally important that contractors continue some level of coverage to avoid out-of-pocket costs of claims arising from past work. So few business owners consider this as the exception rather than the rule is that smaller contractors sell or retire and do not have this important protection. Be sure when you offer this coverage, you obtain your insured’s signed declination of coverage or send an email or letter that not only briefly explains the coverage, verifies your offer and states that they declined. If you do not briefly explain the coverage, you run the risk of the insured later testifying, “You never explained the coverage.”  

Big “I” members can access a variety of declination forms, including the discontinued operations form, at this link.  

Carriers May Use the “Expected or Intended” Exclusion to Deny Coverage 

Exclusion A in a standard CGL policy eliminates coverage for property damage “expected or intended from the standpoint of the insured.” The adjuster may argue that since a contractor intentionally demolishes property to access a defect, the resulting damage is “expected or intended” and therefore excluded. The insured’s best argument is that while they intended to destroy the property, the resulting damage to otherwise good property is an unintended consequence of fixing the original problem. 

Rip and Tear Endorsements 

In response to court rulings favorable to policyholders, some insurers introduced specific “rip and tear” endorsements. These endorsements can either explicitly grant or, more commonly, limit or exclude coverage for these costs. It is essential for agents to review the renewal of CGLs and newly written liability policies to ensure there is coverage for this important need. Here are some tips.  

• Review the policy carefully: Do not assume the carrier provides rip and tear coverage. Look for specific endorsements that address this exposure. 

• Review any vaguely worded endorsements. Sometime the devil is in the details, and the title of the endorsement may not exactly match the insured’s intent in writing the endorsement.  

• Consult with your underwriter or claims manager: Discuss the insured’s specific operations and risks to ensure the policy provides the necessary protection. 

• Negotiate coverage: If the policy contains a restrictive endorsement, work with your underwriter to see if the carrier will remove or amend the endorsement.  

Currently, ISO does not offer a CGL endorsement for rip & tear coverage, although at least one carrier does offer an endorsement extension for such coverage.  

Watch out for these endorsements: CG 22 94 10 01 and CG 22 95 01. These endorsements can impair coverage for completed operations property damage coverage. According to one expert, insurers have been adding these endorsements to help guard against rising costs.  

Understanding the CGL policy’s position on rip and tear costs is not just an academic exercise; it is a crucial part of helping your client manage their business’s financial risk. Pointing out the need for various coverages can only enhance your reputation as a trusted adviser.  

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