Posted In: Insurance Recovery, Insurance Recovery, Insurance Recovery, Real Estate & Construction, Real Estate & Construction & Real Estate & Construction
By Amanda M. Leffler on January 05, 2015
In a recent case, Cincinnati Ins. Cos. v. Motorists Mut. Ins. Co., Medina Cty. No. 13CA0016-M, 2014-Ohio-3864, paragraph 4 (9th Dist.), the court made this distinction clear. The insured, an electrician, allegedly installed faulty wiring, which caused a fire outside the policy period. The insurer argued that it was not required to defend the policyholder because there were no allegations of a covered “occurrence” within the policy period. The court acknowledged that the faulty workmanship itself could not constitute an occurrence. But, the Court held that the allegations were broad enough that they arguably or potentially alleged the existence of an occurrence within the policy period. In fact, there was testimony that the wiring for one light in the house caused damage to the wood around it—lowering its ignition temperature—every time it was switched on. This physical damage, which was the consequence of faulty workmanship, could constitute a covered “occurrence,” the court concluded. It was possible that this damage was of a continuous nature, ultimately causing the fire – meaning that the insurer owed a duty to defend the policyholder against the claims arising out of the fire, even though the fire occurred outside the policy period.
Damages arising from construction defects can be significant, and many contractors still expect them to be covered by CGL policies. Policyholders can protect themselves by doing the following:
- Owners or general contractors should consider requiring a performance bond from downstream contractors in an amount that will protect them if there is defective workmanship;
- In the event of a claim, the policyholder should recognize that not all defective construction claims are barred, and carefully analyze whether the defective workmanship caused damage to property other than the policyholder’s own work; and
- The policyholder should analyze the potential applicability of any policy exclusions.
As in any case involving complex coverage analysis, policyholders should consider retaining experienced coverage counsel to assist in the claim process so as to best position their claim for coverage.© Brouse McDowell, A Legal Professional Association. A Member of TAGLaw® a Worldwide Alliance of Independent Law Firms.
Brouse McDowell, A Legal Professional Association. A Member of TAGLaw® a Worldwide Alliance of Independent Law Firms.