{"id":883999,"date":"2015-10-07T12:05:35","date_gmt":"2015-10-07T18:05:35","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=883999"},"modified":"2015-10-07T12:05:35","modified_gmt":"2015-10-07T18:05:35","slug":"defective-construction-can-be-a-covered-occurrence-in-new-jersey-the-end-of-weedo","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/defective-construction-can-be-a-covered-occurrence-in-new-jersey-the-end-of-weedo\/","title":{"rendered":"Defective Construction Can Be a Covered Occurrence in New Jersey \u2013 the End of Weedo?"},"content":{"rendered":"<p>Caroline W. Spangenberg and Edmund M. Kneisel | Kilpatrick Townsend | July 23, 2015<\/p>\n<p>Perhaps no case has generated as many citations and commentary (more than 1,880 citations, including 440 cases) on the subject of liability coverage for \u201cconstruction defects\u201d as <em>Weedo v. Stone-E-Brick, Inc.<\/em>, 81 N.J. 233, 405 A.2d 788 (1979). For more than 35 years, courts in many jurisdictions have relied on <em>Weedo<\/em> in ruling that improper, non-conforming, defective construction (faulty workmanship by contractors) is a normal, construction-related \u201cbusiness risk\u201d that is not covered by a contractor\u2019s general liability policy. However, courts slowly began to recognize that <em>Weedo<\/em> and its progeny construed policy language that was replaced in 1986 by a new policy form providing products completed operations hazard (\u201cPCOH\u201d) coverage for damage caused by a negligent subcontractor. Now, two new decisions in New Jersey have limited <em>Weedo<\/em> to its facts (and the form of policy at issue then) by recognizing that defective construction is an insured \u201coccurrence\u201d that can be covered by a general liability policy. These cases signal the \u201cdeath knell\u201d for <em>Weedo<\/em>.<\/p>\n<p>In two, straight-forward, clear decisions, the Appellate Division of the Superior Court of New Jersey issued rulings that appropriately limited the outcome in <em>Weedo<\/em>. The New Jersey cases are <em>Cypress Point Condo. Ass\u2019n, Inc. v. Adira Towers, L.L.C.<\/em>, Docket No. A-2767-13T1, 2015 WL 4111890, (N.J. App. Div. July 9, 2015) and <em>Belmont Condo. Ass\u2019n, Inc. v. Arrowpoint Capital Corp.<\/em>, Docket No. A-4187-12T4, 2015 WL 4416582 (N.J. App. Div. July 21, 2015). Both appellate courts recognized that the standard form of CGL policy in effect when <em>Weedo<\/em> was decided (ISO\u2019s 1973 policy form) contains a broad exclusion for the defective construction \u201cwork\u201d of both general contractors and subcontractors, which the New Jersey Supreme Court characterized as an uninsured \u201cbusiness risk.\u201d Unlike the 1973 ISO form, the 1986 policy form contains a \u201csubcontractor\u201d exception to the \u201cyour work\u201d exclusion that extends coverage when the insured is sued for property damage caused by a negligent subcontractor.<\/p>\n<p>While these are the first two New Jersey appellate decisions holding that defective construction can be a covered \u201coccurrence,\u201d these certainly are not the first cases to recognize that <em>Weedo<\/em>, when properly considered in light of the 1973 policy form at issue in that case, does not stand for the proposition that faulty workmanship, a\/k\/a \u201cdefective work,\u201d can never be a covered \u201coccurrence.\u201d Nevertheless, as noted by a Texas court in construing the PCOH coverage of the 1986 policy form, many courts have \u201ccontinually misapplied <em>Weedo<\/em> to hold that defective construction cannot constitute an occurrence resulting in some \u2018regrettably overbroad\u2019 generalizations about CGL policies.\u201d <em>Lennar Corp. v. Great Am. Ins. Co.<\/em>, 200 S.W. 3d 651, 671 (Tex. App. 2006) (citing and quoting in part <em>Am. Family Mut. Ins. Co. v. Am. Girl, Inc.<\/em>, 268 Wis.2d 16, 673 N.W.2d 65, 74 (2004)). For instance, in a leading PCOH decision, the Florida Supreme Court concluded that the outcome in <em>Weedo<\/em> was \u201cnot due to the insuring provisions [of the policy], but because faulty workmanship by a contractor was specifically excluded based on the clear and unambiguous \u2018business risk\u2019 exclusionary clauses\u201d contained in the 1973 policy form.<em>United States Fire Ins. Co., v. J.S.U.B., Inc.<\/em>, 979 So.2d 871, 881-82 (2007). Indeed, the <em>Weedo<\/em>court itself specifically noted that the coverage limitations it applied \u201care set forth in the exclusion clauses of the policy, <em>whose function it is to restrict and shape the coverage otherwise afforded<\/em>.\u201d 405 A.2d at 790 (emphasis added). As recognized in <em>J.S.U.B.<\/em> and by <em>Cypress Point<\/em>and <em>Belmont<\/em>, if those coverage exclusions do not apply, <em>Weedo<\/em> does not answer the question of whether or not defective construction, <em>i.e.<\/em>, faulty, negligent workmanship, can be a covered \u201coccurrence.\u201d<\/p>\n<p>As noted simply in <em>Cypress Point<\/em>, \u201c[i]n <em>Weedo<\/em>, the Court did not resolve whether consequential damages resulting from subcontractors\u2019 faulty workmanship constituted \u2018property damage\u2019 or an \u2018occurrence.\u2019\u201d 2015 WL 4111890, at *4. Most importantly, unlike the 1973 policy form construed in <em>Weedo,<\/em> the \u201cplain language\u201d of the 1986 policy form at issue in <em>Cypress Point <\/em>contained a critical difference in the exclusionary language for damage to \u201cyour work.\u201d Unlike the policy form at issue in <em>Weedo<\/em>, the policy construed in <em>Cypress Point <\/em>contains an \u201cexception\u201d that eliminates the \u201cyour work\u201d exclusion \u201c\u2018<em>if the damaged work or the work out of which the damage arises was performed on your [the insured\u2019s] behalf by a subcontractor<\/em>.\u2019\u201d <em>Id.<\/em> at 6 (quoting policy form) (emphasis in original). The court ruled that the \u201caddition of the subcontractor\u2019s exception is of critical importance when determining whether the subcontractors\u2019 faulty workmanship causing consequential damages amounts to \u2018property damage\u2019 and an \u2018occurrence\u2019 under the policy.\u201d<em>Id.<\/em> at 6. Citing <em>J.S.U.B.<\/em>, among other authorities, the <em>Cypress Point <\/em>court noted that the proposition that \u201cconstruction defects\u201d can be insured \u201coccurrences\u201d was now the \u201cmajority rule\u201d in cases construing the 1986 policy form when post-completion property damage is caused by a negligent subcontractor. <em>Id.<\/em> at 7. Citing the commonly-used definition of an \u201caccidental occurrence\u201d as an event neither expected nor intended by the wrongdoer, the court noted that the \u201cinsurers do not contend, and we cannot reasonably believe, that the subcontractors either expected or intended for their faulty workmanship to cause \u2018physical injury to tangible property.\u2019\u201d <em>Id.<\/em> at 4.<\/p>\n<p><a href=\"http:\/\/www.kilpatricktownsend.com\/en\/Knowledge_Center\/Alerts_and_Podcasts\/Legal_Alerts\/2015\/07\/Defective_Construction_Can_Be_a_Covered_Occurrence_in_New_Jersey_the_End_of_Weedo.aspx?utm_source=Mondaq&amp;utm_medium=syndication&amp;utm_campaign=LinkedIn-integration\">To read the rest of this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Caroline W. Spangenberg and Edmund M. Kneisel | Kilpatrick Townsend | July 23, 2015 Perhaps no case has generated as many citations and commentary (more than 1,880 citations, including 440 cases) on the subject of liability coverage for \u201cconstruction defects\u201d as Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 405 A.2d 788 (1979). For more than&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/defective-construction-can-be-a-covered-occurrence-in-new-jersey-the-end-of-weedo\/\">Continue reading <span class=\"screen-reader-text\">Defective Construction Can Be a Covered Occurrence in New Jersey \u2013 the End of Weedo?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4,3],"tags":[309,19,3,139,8856],"class_list":["post-883999","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-insurance-claims","tag-occurrence","tag-construction-defects-2","tag-insurance-claims","tag-new-jersey","tag-weedo","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Defective Construction Can Be a Covered Occurrence in New Jersey \u2013 the End of Weedo? 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