X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
When cold and snowy winter weather finally blows itself out, and warm weather brings the beginning of more construction projects, claims against contractors for construction defects are bound to arise. Defective construction claims are normal for an insured contractor and are usually addressed under the contractor’s commercial general liability (CGL) coverage form. Insurers will cover the claims or deny coverage based on the language of the policy and the facts of the incident.

Most of the general liability policies have the “business risks” exclusions that are familiar to those in the insurance industry. The “damage to property” exclusions and the “damage to your work” exclusion are often used by insurers to deny claims of property damage alleged against contractors. Insurers also raise the issue of whether the required “occurrence” happened in order to deny coverage for a claim. However, another course of action is sometimes taken to dispute coverage. Insurance industry personnel may be unfamiliar with this position—that the claim made against the insured is one for breach of contract and therefore, a claim not covered by the general liability policy that applies to tort claims.

There is no question that the standard CGL form is meant to apply to tort claims against the insured and is not intended to apply to only breach-of-contract claims. The policy does offer coverage for contractual assumptions of liability under certain circumstances, but that coverage does not readily extend to breach-of-contract claims; the general liability policy is not meant to be turned into a performance bond. Courts are on record as upholding this distinction in a variety of contexts; for example, Musgrove v. Southland Corporation, 898 F.2d 1041 (5th Cir. 1990) and James v. Burlington Northern Santa Fe Railway Company, 2007 WL 2461685 (D.Ariz.).

Want to continue reading?
Become a Free
PropertyCasualty360 Digital Reader.

INCLUDED IN A DIGITAL MEMBERSHIP:

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.

Already have an account?

 

PropertyCasualty360

Join PropertyCasualty360

Don’t miss crucial news and insights you need to make informed decisions for your P&C insurance business. Join PropertyCasualty360.com now!

  • Unlimited access to PropertyCasualty360.com - your roadmap to thriving in a disrupted environment
  • Access to other award-winning ALM websites including BenefitsPRO.com, ThinkAdvisor.com and Law.com
  • Exclusive discounts on PropertyCasualty360, National Underwriter, Claims and ALM events

Already have an account? Sign In Now
Join PropertyCasualty360

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.