Author: Grit Insurance Group
You finished the job. Punch list closed, retention released, certificate of occupancy issued. The crew moved on to eleven other projects. You have not thought about that building in years.
Then a certified letter shows up.
It tells you there was a fire. It tells you the property insurance carrier paid its insured and is now investigating who is responsible. It tells you that you are invited to a joint examination of the fire scene, on a specific date, and that the examination will be destructive. It tells you to preserve every document and every text message related to the project. And it tells you, in plain language, to notify your own insurance company immediately.
Most contractors have never seen this letter and have no plan for it. The first two weeks after it arrives do more to determine the outcome than anything that happens in the following two years.
Here is how the process actually works, and what to do.
Most contractors encounter the word subrogation in a contract clause and never think about it again. It is simpler than it sounds.
When a property owner suffers a large loss, their own property carrier pays the claim. Having paid, that carrier steps into the owner's shoes and acquires the owner's right to recover from whoever caused the loss. That is subrogation. The carrier is not suing on its own behalf so much as standing where its insured stood.
Two consequences follow, and they matter:
This is also why a waiver of subrogation in a construction contract is worth real money. When the owner's property policy includes a waiver of subrogation in favor of the contractors, the carrier gives up the right to come after the parties named. Whether one exists, and who it covers, is one of the first things to find out. It is decided at contract signing, years before anyone needs it.
Here is the part that surprises people most.
When a fire loss is large and the cause is not yet established, the investigating carrier does not pick a defendant. It notices everyone with a plausible connection to the area of origin. In a multifamily building that can mean the developer, the general contractor, the architect, the structural and mechanical engineers, the inspection firm, and then the entire relevant trade stack: electrical, HVAC and mechanical, plumbing, framing, drywall, insulation, roofing, exterior finishes, fire sprinkler, elevator. It also commonly reaches the manufacturers of specific installed equipment, identified down to model and serial number.
Twenty or more parties on a single notice is normal. That has three practical implications:
The letter will invite you to a joint examination of the fire scene, typically conducted under NFPA 921, the standard guide for fire and explosion investigations. Two words in that invitation deserve your full attention: destructive and only.
A destructive examination means material is cut, removed, and disassembled to reach the area of origin. Evidence may be taken off site for laboratory analysis. Once the examination is finished, repairs begin and the scene ceases to exist.
If you do not attend, and do not send someone qualified to look on your behalf, you will never see the physical evidence in its original condition. You will be left arguing about someone else's photographs and someone else's conclusions, years later, with no independent record of your own.
Sending your own expert costs money. Not sending one can cost the case. This is a decision to make with your carrier and your attorney, quickly, because these letters typically carry a response deadline a couple of weeks ahead of the examination itself.
The letter will almost certainly include a preservation demand, often called a litigation hold. It states that litigation is reasonably anticipated and that you are obligated to preserve everything potentially relevant.
Contractors tend to read this as legal boilerplate. It is the opposite. Because the fire happened years after you finished, the ordinary operation of your own systems is actively destroying your defense right now.
Things that quietly delete evidence while you decide what to do:
Two points that catch people:
Former employees matter most. The superintendent who ran that job in 2022 probably left in 2023. His email, his phone, his notes, and his photos may be the most important evidence in the case, and standard offboarding is designed to delete exactly that.
Do not tidy up the files. Preservation demands typically extend to metadata, version history, and audit logs. Bulk copying, renaming, or re-saving project files can alter timestamps. Opening a folder to "get organized" before your attorney sets up preservation can create a real problem out of nothing. Freeze it, then get instructions.
The right sequence is short: suspend the deletion, do not touch the files, and confirm in writing that you have done so.
This is where a lot of contractors get an unpleasant surprise, and it is worth being precise about.
A standard commercial general liability policy responds based on when the damage occurs, not when the work was performed. The fire is the occurrence. So the policy that responds is generally the one in force on the date of the fire, and that only helps you if the products-completed operations coverage has been continuously in place across the whole span since you finished.
Where the gaps come from:
We have written about how that coverage works in detail in Your Wiring Job From Last Year Can Still Burn You, which is written for electrical contractors but applies to any trade whose work can fail years later.
One more item, specifically for general contractors: additional insured status from your subs usually does not survive completion. The common endorsement covering ongoing operations stops when the work is done. Protection for the completed operations tail generally requires a separate endorsement, commonly CG 20 37. A GC holding a four-year-old certificate that says "additional insured" may have nothing at all from that sub on a completed operations claim. Check the endorsement, not the certificate summary.
Longer than most contractors assume, and it varies by state.
Utah is a useful example because the statute is clear. Under Utah Code § 78B-2-225, actions related to improvements to real property break down like this:
"Completion" is defined as the earliest of a certificate of substantial completion, a certificate of occupancy, or the date of first use or possession. And the repose protection does not apply where there was fraudulent concealment or a willful or intentional act.
So a fire four years after substantial completion sits comfortably inside the window, with years to spare. Across the country the range generally runs from roughly 6 to 10 years, with some states longer. Your retention policy should be built around your state's actual number, not around a three-year habit.
If you carry a surety program, a large open claim is not only an insurance matter. It is a credit matter.
Sureties underwrite your balance sheet, your work in progress, and your character. A significant open claim against your company shows up in the financial statements and in the conversation with the underwriter. Depending on size and how it is handled, it can affect your single job limit, your aggregate capacity, and your rate. The contractors who navigate this well are the ones whose broker gets in front of the surety early with a clear explanation, rather than letting the underwriter discover it during a renewal.
That coordination between the casualty side and the surety side is the whole argument for having both in one place. If you want the background on how a program is built, start with bonding program vs one-off bonds.
The property owner's insurer paid its insured for the loss and has taken over the owner's right to recover from whoever was responsible. It is pursuing you for what it paid out. The amount claimed is tied to the size of the loss, not the size of your original contract.
Not necessarily. These letters commonly go to every party connected to the area of origin, and they typically state that the investigation is ongoing and no determination of liability has been made. It is notice of potential exposure. It still requires an immediate response.
You are not compelled to, but the examination is usually destructive and is typically the only opportunity to inspect the evidence before repairs begin. If you skip it, you generally give up any independent look at the physical evidence permanently. Make that decision with your carrier and counsel.
Generally the policy in force when the damage occurs, with the products-completed operations coverage doing the work. That means continuity across the years since completion matters, and gaps from lapses or carrier changes can leave you exposed. Have your broker confirm which policy year answers.
It depends on the state. In Utah, contract and warranty actions run 6 years from completion and there is a 9-year absolute repose, extended by 2 years if the claim is discovered in the eighth or ninth year. Nationally the range generally runs about 6 to 10 years, with some states longer. Build your record retention around your state's actual period.
It can. Sureties look at open claims as part of underwriting your financial strength. A large open claim can affect your single and aggregate limits and your rate. Getting ahead of it with your surety, rather than having it discovered at renewal, generally produces a better outcome.
If a preservation letter or a claim notice is sitting on your desk right now, call us today. Not next week. We will help you tender it correctly, identify the policy year that responds, and coordinate the casualty and surety sides so nothing gets discovered at renewal.
If nothing has happened yet, that is the better call to make. We will review your completed operations coverage, your subcontractor endorsement requirements, and your retention practices while there is still time for it to matter.
Call us directly: (801) 505-5500
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We came from the trades we insure. No corporate speak. Straight answers from people who know the business.
This article is general education, not legal advice or a coverage opinion. Statutes of limitation and repose vary by state and change over time. Coverage depends on the specific terms, limits, and exclusions of your policy. If you have received a claim notice or preservation demand, consult your attorney and your broker.