A Sunset Clause is an endorsement that some insurance carriers use to limit coverage on a General Liability insurance policy, typically set to a predetermined amount of time, usually 3-5 years. 

For example, a General Liability policy runs from 6/20/2018-6/20/2019, and has a 3 year Sunset Clause.  The cause of any claims for this policy must (1) have occurred during the original policy period and (2) be filed before 06/20/2022. In the case of a contractor, the work must have been done during the policy period and the claim must be filed prior to 06/20/2022.

Sunset Clauses are dangerous to contractors because in the state of California construction defects must be warranted for 10 years. The statute of limitations in California is 10 years.  A 3 year sunset clause means the contractor is left holding the bag for the final 7 years before the state requirement is met. While you may save about 5-10% on the overall premium of your General Liability policy, the overall risk doesn’t outweigh the reward.

Always check your quotes and policies to be sure that a sunset clause does not find its way onto your policy. Should you have any questions regarding this endorsement, please do not hesitate to reach out to us, as we’re more than happy to look over your current quote or policy to ensure you’re covered for the full 10 year statute of limitations.