Construction Today - Volume 16, Issue 2 - 136

Residential

By Jeremy P. Brummond

Insuring Against

Construction
Defects
M

ost contractors have in place
commercial general liability
(CGL) insurance policies to
protect themselves against
liability arising out of their work on a construction project. These policies clearly cover
certain damage claims - for example, assume
a contractor is working on a remodel project
for office space. While moving materials,
someone loses control of a cart and the cart
runs into a woman who was walking in the
hallway. The contractor's CGL policy would
generally cover a damage claim such as a
claim by the woman to recoup her medical
expenses. Similarly, if the cart ran into existing office equipment (not being provided by
the contractor), the CGL policy would also
cover that property damage.
But what if the project was completed,
and later it is discovered that the contractor or one of its subcontractors improperly

136

CONSTRUCTION-TODAY.COM VOLUME 16, ISSUE 2

installed windows on the project or installed defective windows,
leading to water intrusion? Does a contractor or subcontractor's CGL
policy cover the cost to replace or repair the defective windows to stop
the water intrusion? Does the CGL policy cover wood rot caused by
the water intrusion? The short answer: it depends on the language of
the CGL policy and how applicable state courts have interpreted the
policy language. Under the same or similar circumstances, the answer
could differ depending on the state in which the work was performed.
State and federal courts vary widely on their interpretations of standard CGL policy, making it difficult to declare, in generalities, whether
the cost to replace defective work or resulting property damage is
covered under a CGL policy.

What's Covered?
Generally, CGL policies only insure for damages a contractor is obligated to pay because of "bodily injury" or "property damage" to others
that results from an occurrence or "accident." Some courts, when
interpreting standard CGL policy language, have held that defective
work by a contractor or subcontractor is not "accidental," so losses
resulting from defective work can never be covered by the CGL policy
because these policies only cover losses caused by "accidents." Those


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Table of Contents for the Digital Edition of Construction Today - Volume 16, Issue 2

Contents
Construction Today - Volume 16, Issue 2 - Cover1
Construction Today - Volume 16, Issue 2 - Cover2
Construction Today - Volume 16, Issue 2 - 1
Construction Today - Volume 16, Issue 2 - Contents
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