{"id":889349,"date":"2016-06-14T16:21:10","date_gmt":"2016-06-14T22:21:10","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=889349"},"modified":"2016-06-14T16:21:10","modified_gmt":"2016-06-14T22:21:10","slug":"what-did-you-expect-how-contractors-can-help-ensure-insurance-coverage-under-a-cgl-policy","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/what-did-you-expect-how-contractors-can-help-ensure-insurance-coverage-under-a-cgl-policy\/","title":{"rendered":"What Did You Expect? How Contractors Can Help Ensure Insurance Coverage Under a CGL Policy"},"content":{"rendered":"

Matthew F. Putorti | Pillsbury Winthrop Shaw Pittman LLP<\/a> | June 6, 2016<\/p>\n

Insurance covers the unexpected. Courts sometimes struggle to assess what an insured did expect, didn\u2019t expect, or sometimes, should have expected. Contractors, construction firms and others should bear this in mind in their daily operations and when seeking a defense from their insurance companies.<\/p>\n

In Auto-Owners Insurance Co. v. Ryan Stevens Construction, Inc.<\/em> the U.S. District Court for the District of Utah recently held that a contractor\u2019s commercial general liability insurance<\/a> carrier had no\u00a0duty to defend<\/a> a contractor who should <\/em>have expected property damage resulting from its use of certain equipment on a construction project. The decision cautions contractors around the country to consider the expected consequences of their on-site actions to avoid arguments from insurers that any resulting damages are not accidental.<\/p>\n

The facts are all too common. Robert Strieper engaged Ryan Stevens and his company, Ryan Stevens Construction, to build a home on property that Mr. Strieper owned. The property had existing structures, including a garage, workshop and attached storage building. The building contained a water tank and well pump that was serviced by electrical lines and water pipes. Mr. Strieper alleged that he told Mr. Stevens that if any existing structures had to be removed, Mr. Stevens would need to first disconnect the water tank, electrical wires, and water lines from the pump to protect the water supply during construction. Mr. Strieper alleged that despite his warning, Mr. Stevens failed to disconnect the water supply and used a track hoe that ripped out and damaged the wires, water line, and tank \u201ccausing significant damage to the system.\u201d Mr. Strieper sued Mr. Stevens and sought damages for loss of the existing structures, destruction of the water tank, and damage to the water pump and system. Mr. Stevens turned to Auto-Owners Insurance Company, his CGL carrier, for coverage in defending against and indemnifying Mr. Strieper. Auto-Owners in turn sought a declaration from the court that it had no duty to defend or indemnify.<\/p>\n

The District of Utah\u2014comparing the language of the insurance policy with the allegations in Mr. Strieper\u2019s complaint\u2014determined that Auto-Owners owed no duty to defend Mr. Stevens. Like most CGL policies, Mr. Steven\u2019s insurance policy insured against bodily injury or property damage \u201ccaused by an occurrence\u201d where an \u201coccurrence<\/a>\u201d is \u201can accident.\u201d The Utah Supreme Court had previously considered situations where damage to property would be non-accidental (and thus not an occurrence under Utah law); one such situation is where the damage is the natural and probable consequence of the policyholder\u2019s act or should have been expected.<\/p>\n

Applying these standards, the District Court concluded that the property damage that Mr. Strieper alleged was the natural and probable consequence of Mr. Stevens\u2019 act: \u201cThe property damage was allegedly caused by [Mr. Stevens] using a track hoe to rip out the electrical wires, water line, and water tank that were still connected.\u201d Significantly, the Court added: \u201cEven if [Mr. Stevens] did not intend to remove these items, [he] should have expected<\/em> that using a track hoe to remove them would result in the property damage alleged by the Striepers.\u201d Accordingly, the Court held there was no accident and therefore no occurrence and no coverage.<\/p>\n

There has been a range of judicial opinions around the country as to whether coverage can be barred based on whether an insured actually <\/em>expected a loss, or merely should <\/em>have. Most courts require the policyholder to have subjective expectation of damage before determining that a contractor\u2019s actions constitute a non-accidental occurrence ineligible for coverage under a CGL policy<\/a>. As a federal court interpretation of Utah law, Ryan Stevens Construction <\/em>is just one voice in the crowd, and not binding even on a Utah state court. Nevertheless, construction firms and contractors are advised to take this recent decision into account and consider, before performing any on-site actions, what might be the reasonably expected consequences of those actions. For example, will using a certain piece of equipment cause any ancillary damage? If that fails and it appears the insurer may make this argument, policyholders should also consider state law on this issue as part of their claim strategy.<\/p>\n

If contractors know what to expect and prevent the expected, then insurers are more likely to provide coverage when unexpected damage does occur.<\/p>\n","protected":false},"excerpt":{"rendered":"

Matthew F. Putorti | Pillsbury Winthrop Shaw Pittman LLP | June 6, 2016 Insurance covers the unexpected. Courts sometimes struggle to assess what an insured did expect, didn\u2019t expect, or sometimes, should have expected. Contractors, construction firms and others should bear this in mind in their daily operations and when seeking a defense from their… Continue reading What Did You Expect? How Contractors Can Help Ensure Insurance Coverage Under a CGL Policy<\/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":[4,30,3],"tags":[4739,23,106],"class_list":["post-889349","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-general-liability-policy","category-insurance-claims","tag-commercial-general-liability-policy","tag-insurance-coverage","tag-utah","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWhat Did You Expect? 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