{"id":890667,"date":"2016-08-15T14:35:07","date_gmt":"2016-08-15T20:35:07","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=890667"},"modified":"2016-08-15T14:35:07","modified_gmt":"2016-08-15T20:35:07","slug":"dispelling-myths-about-insurance-coverage-of-defective-construction","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/dispelling-myths-about-insurance-coverage-of-defective-construction\/","title":{"rendered":"Dispelling Myths about Insurance Coverage of Defective Construction"},"content":{"rendered":"<p>Stan Martin | <a href=\"http:\/\/www.lexology.com\/library\/detail.aspx?g=0cd117d5-c7c1-471c-ab46-6c08e4c1afb3\" target=\"_blank\">Commonsense Construction Law LLC<\/a> | August 11, 2016<\/p>\n<p>Lawsuits over defective construction often result in one or more parties attempting to invoke insurance coverage, at least to cover defense costs if not to cover the underlying claims. Some fifty years after courts began parsing the extent of <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/sustainable-construction-too-good-to-be-true\/\" target=\"_blank\">insurance coverage for construction defects<\/a>, some standards have become commonplace, if not uniform, among the states. Two state supreme court decisions in the past week have confirmed these standards. In short, there is almost never (see below on the \u201calmost never\u201d point) insurance coverage for repair or replacement of defective work. On the other hand, damage to certain building elements or systems, caused by defective work to <strong><em>other<\/em><\/strong> elements or systems, is normally covered by general liability insurance.<\/p>\n<p>The Nebraska Supreme Court held that remedial work to address defective rebar in pile caps was not \u201cproperty damage.\u201d Problems with the rebar did not require remedial work to be done to any other aspect of the project, as the deficiency was addressed by making existing pile caps wider, with more rebar. In the case of <em>Drake-Williams Steel, Inc. v. Continental Casualty Co.<\/em>, (Aug. 5, 2016), the Nebraska high court reaffirmed the common standard: the cost to repair or replace defective work is a business risk that is not ordinarily covered by insurance.<\/p>\n<p>In New Jersey, that state\u2019s supreme court held that water damage to other building components, arising from a <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/can-faulty-workmanship-give-rise-to-a-covered-insurance-claim-illinois-court-says-yes\/\" target=\"_blank\">sub\u2019s faulty workmanship<\/a>, was \u201cproperty damage\u201d and the water flowing to the interior portions of the building was an \u201coccurrence\u201d covered by the developer\u2019s\/contractor\u2019s general liability coverage. That case is<\/p>\n<p>With all due respect to the legions of ink used to report on these decisions \u2013 particularly the New Jersey case \u2013 neither case is a ground-breaking decision. Both decisions confirm what has become the general rule throughout the U.S. on cases discussing <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/new-jersey-high-court-follows-nationwide-majority-on-cgl-coverage-for-general-contractor\/\" target=\"_blank\">insurance coverage of construction defects<\/a>.<\/p>\n<p>When faced with the cost of addressing improper work, most parties invariably seek to find pockets of money (meaning someone else\u2019s pockets!) to help address the situation. But the prevailing court decisions remain as before: insurance companies do not insure the business risk of fixing the insured\u2019s improper work. And in another respect the prevailing court decisions remain as before: consequential damage to another building component, arising from improper work, is normally covered by insurance. The \u201cmyth\u201d here is that either case was breaking news.<\/p>\n<p>A few words on the \u201calmost never\u201d comment above. There are anomalies, and there are certain coverages obtained at times, which would provide insurance coverage contrary to the \u201cstandard.\u201d Whether a unique rider that specifically covers defective construction (it does exist for certain specialty subs, albeit at a high premium), or a more narrow definition of \u201cnamed insured\u201d that exists in certain completed operations riders (potentially affording coverage to a prime contractor who must remedy a sub\u2019s improper work), there are unique circumstances that may in uncommon situations bring about a different result.<\/p>\n<p>But construction industry participants should come to expect the outcomes stated in the New Jersey and Nebraska decisions, when seeking coverage from an insurance carrier for <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/court-reaffirms-damages-analysis-in-construction-defect-cases\/\" target=\"_blank\">faulty construction<\/a> and its aftermath.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stan Martin | Commonsense Construction Law LLC | August 11, 2016 Lawsuits over defective construction often result in one or more parties attempting to invoke insurance coverage, at least to cover defense costs if not to cover the underlying claims. Some fifty years after courts began parsing the extent of insurance coverage for construction defects,&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/dispelling-myths-about-insurance-coverage-of-defective-construction\/\">Continue reading <span class=\"screen-reader-text\">Dispelling Myths about Insurance Coverage of Defective Construction<\/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":[19,68,23],"class_list":["post-890667","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-insurance-claims","tag-construction-defects-2","tag-faulty-workmanship","tag-insurance-coverage","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>Dispelling Myths about Insurance Coverage of Defective Construction - Advise &amp; 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