A Homeowner's Insurer Sent Me a Bill for Damage. Now What?

What is this letter, and why is an insurance company billing me?

It is a subrogation demand. The homeowner filed a claim, their carrier paid to dry out and repair the house, and the carrier now steps into the homeowner's place to recover what it spent from whoever it believes caused the loss. If your crew touched the supply line, the water heater, the roof, the panel, or the shower pan, your business name ends up on that file. Nothing about the letter means a court has decided anything. It is a civil money claim at the opening stage.

Two things surprise owners. The first is the timing. A carrier pays its customer quickly, then the recovery unit reviews the cause of loss, orders an engineer report, and writes to the responsible party later, so a demand about a job you finished last spring can land this fall. The second is that the homeowner often did not ask for any of this. Recovery is something the carrier does on its own, which is why a client who still likes you can be genuinely confused when you call.

So do not call the homeowner to work it out privately, and do not treat the letter as an insult you can answer yourself. Both instincts feel natural and both make the file harder to defend later. Treat it the way you would treat a subpoena or a CSLB letter: read it, date stamp it, and hand it to the person whose job it is to answer it.

Do I have to pay this out of my own pocket?

Usually not, and paying it yourself is often the most expensive way to handle it. A standard general liability policy contains a voluntary payments condition: if you pay, promise to pay, or accept responsibility without the carrier's consent, you can give up the coverage that would otherwise have paid the bill and hired the lawyer. Writing a check to be polite is the one move that can turn a covered claim into your own debt.

The number is also an opening figure, not a verdict. Recovery files get negotiated, and a fair share of them close for less than the demand or for nothing at all, because the real cause turns out to be age, a manufacturing defect in a part, a previous contractor's work, or a maintenance issue the homeowner had been putting off. Your side of that argument only gets made if a carrier or attorney is making it.

Here is the first week. Do not sign anything, do not pay, and do not send a written explanation of what you think happened. Forward the letter and every page of the enclosure to your broker or carrier the day it arrives, because most policies ask for prompt notice. Then pull the job file: the signed contract and change orders, before and after photos, the permit and any inspection sign off, your invoices, the schedule showing who was on site, and the supplier receipts for the parts you installed. A failed manufactured fitting with a lot number on it moves the conversation toward the maker instead of you.

Does my general liability policy cover a subrogation claim?

Generally yes, when the claim is for property damage to something other than your own work, caused by an accident during a period your policy was in force. In a standard form the carrier also pays defense costs in addition to your limit, which matters here because the lawyer and the engineer often cost more than the disputed repair.

The split that catches contractors is between your work and the damage around it. Liability coverage is built to pay for the harm your work caused to other property, meaning the drywall, flooring, cabinets, and belongings the water ruined. It is not built to pay for redoing the part you installed wrong, because that is a business risk the policy calls out in the your work exclusions. If a fitting failed and flooded two rooms, the two rooms are the insurance claim and the fitting is your cost.

One more line is worth checking before you need it. When the damage shows up after you have finished and left the site, which is nearly always true of a subrogation letter, the claim falls under products and completed operations. Some low cost artisan policies restrict or exclude that part, and some owners drop it at renewal without realizing what it was. Pull your declarations page and confirm there is a products and completed operations aggregate listed, and that the classification on the policy matches the work you actually performed.

How far back can they reach, and which policy year answers?

California gives three years to bring an action for injury to real property under Code of Civil Procedure section 338, measured from the damage rather than from the day you finished. Construction deficiency claims also sit under outside limits: four years from substantial completion for a deficiency that a reasonable inspection would have revealed, and ten years for one that would not, under sections 337.1 and 337.15. A subrogating carrier inherits the homeowner's rights, so it gets no more time than the homeowner had, and no less.

The policy that responds is the one that was in force when the damage happened, not the one you are paying for today. Standard liability coverage is written on an occurrence basis, so a pipe that let go in 2024 goes to your 2024 carrier even if you have changed companies twice since. That is why a demand for an old job is not something you can answer with your current certificate. Keep every expired declarations page and policy number, one folder per year, digital is fine. If you cannot find an old one, your broker can usually trace the carrier and the policy number for you, which is one practical reason to keep a broker rather than rebuying online each year.

Contract language decides some of these before they start. A waiver of subrogation in your agreement can bar the recovery claim outright, and on the other side, your own subcontract should require every sub to carry general liability, name you as additional insured, and hand you a certificate before they start. When a demand arrives for work a sub performed, that paperwork is what moves the file off your desk.

Get a free contractor policy review, in English or Vietnamese

Before the rain starts, four lines on your declarations page are worth confirming. Is products and completed operations included and at what aggregate, does the classification match the work your crews actually do, is your per occurrence limit still realistic for the homes you work in, and do you have a saved copy of each prior year's policy?

As an independent brokerage in Fountain Valley, we work with many carriers, so we can compare how different companies handle completed operations claims for a plumbing, roofing, HVAC, electrical, or remodeling business like yours, check whether your subcontractor requirements match what your carrier expects at audit, and read any exclusion back to you in plain language before you sign.

We help contractors across Westminster, Garden Grove, Fountain Valley, Santa Ana, Huntington Beach, Anaheim, and all of Orange County. Send us your current declarations page and a short description of the work your crews do, and ask for a free quote, in English or Vietnamese.

Frequently asked questions

What is a subrogation demand letter?

It is a letter from an insurance company that already paid its own customer for damage, asking you to reimburse what it paid because it believes your work caused the loss. It is a civil money claim at the opening stage, not a finding of fault and not a license complaint.

Should I just pay a small demand to make it go away?

That is usually the costliest option. A standard liability policy has a voluntary payments condition, so paying or accepting responsibility without your carrier's consent can give up the coverage that would have paid the bill and provided a defense. Report it first and let the carrier evaluate the cause.

Does general liability pay to redo the work I installed wrong?

Generally no. The policy is built to pay for damage your work caused to other property, such as the flooring, drywall, and belongings that got wet. The cost of tearing out and replacing your own defective work usually falls under the your work exclusions and stays your expense.

How long after a job can a homeowner's insurer come after me in California?

Injury to real property generally carries a three year limit under Code of Civil Procedure section 338, measured from the damage. Construction deficiency claims also face outside limits of four years from substantial completion for an apparent deficiency and ten years for a hidden one.

Which policy responds if I switched carriers since that job?

Standard liability coverage is written on an occurrence basis, so the policy in force when the damage happened is the one that answers, not your current policy. Keep each expired declarations page and policy number by year, and ask your broker to trace any you cannot find.

Can you review my contractor policy in Vietnamese?

Yes. We are a bilingual brokerage in Fountain Valley. Send your declarations page and tell us what your crews install and repair, and we will show you the completed operations aggregate, the classification on the policy, and what a better fit would cost, in English or Vietnamese.