{"id":897498,"date":"2020-05-20T10:14:53","date_gmt":"2020-05-20T16:14:53","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897498"},"modified":"2020-05-20T10:14:56","modified_gmt":"2020-05-20T16:14:56","slug":"cgl-policy-may-cover-more","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/cgl-policy-may-cover-more\/","title":{"rendered":"Your CGL Policy May Cover More Than You Think – Damages “because of’ Property Damage or Bodily Injury for Construction Projects"},"content":{"rendered":"\n

Stella Szantova Giordano | Saxe Doernberger & Vita<\/a><\/p>\n\n\n\n

Construction projects are susceptible to injuries and property damage – which is why the stakeholders involved rely heavily on commercial general liability (\u201cCGL\u201d) insurance policies when such losses occur. While many insureds are familiar with pursuing insurance coverage for bodily injury and property damage, a CGL policy can also cover certain consequential damages if they can be characterized as damages \u201cbecause of\u201d property damage or bodily injury.<\/p>\n\n\n\n

Imagine the following scenario: An employee falls from scaffolding at the project site. OSHA shuts down the site for investigation of safety issues, and no trades are allowed to return to work for a month. Because of this, the project schedule falls behind, and the owner and the GC suffer extensive delay damages. The question is: can these (and similar) consequential damages be covered as \u201cbecause of\u201d damages under a CGL policy.<\/p>\n\n\n\n

How does “because of” coverage work?<\/strong><\/p>\n\n\n\n

The key language to access the \u201cbecause of\u201d damages coverage is in the insuring agreement of every CGL policy written on the post-1973 ISO coverage form CG 00 01. Section I.A(1) reads:<\/p>\n\n\n\n

(a) We will pay those sums that the insured becomes legally obligated to pay as damages because of \u201cbodily injury\u201d<\/strong> or \u201cproperty damage\u201d<\/strong> to which this insurance applies.2<\/sup><\/p><\/blockquote>\n\n\n\n

Because the highlighted phrase can be interpreted very broadly, many courts have concluded that a CGL policy covers certain damages flowing from a bodily injury and property damage if the following is true: 1) there is a bodily injury or property damage for which the CGL policy provides coverage; 2) the sought damages were incurred \u201cbecause of\u201d such bodily injury or property damage; and 3) the connection between the bodily injury or property damage and the \u201cbecause of\u201d damages sought is not too attenuated.3<\/sup><\/p>\n\n\n\n

As for the third element, any degree of \u201cbut for\u201d causation can be construed to provide coverage, since \u201cbecause of\u201d damages can (and very often are) far broader than property damage or bodily injury itself. Exactly how closely related the losses for which coverage is sought must be related to the underlying bodily injury or property damage will vary from case to case, but a good rule of thumb is the closer related to the underlying bodily injury or property damage, the better.<\/p>\n\n\n\n

What types of damages can be covered?<\/strong><\/p>\n\n\n\n

Theoretically, any damages which can be described as damages \u201cbecause of\u201d bodily injury or property damage could be covered. However, case law on this type of coverage is limited so a creative argument, matching your particular circumstances, may be needed. Courts found \u201cbecause of\u201d coverage for these types of damages stemming from underlying property damage: 1) delay costs (California, Illinois, Michigan, Texas, Washington and Wisconsin); 2) liquidated damages (Texas and Pennsylvania); and 3) diminution of value (Missouri and Texas).<\/p>\n\n\n\n

Delay Costs. If construction is halted and delayed \u201cbecause of\u201d property damage, associated costs can be very expensive. Examples of covered losses include: a 131-day delay in completion of a California residential project because of water intrusion property damage4<\/sup>; and delay costs associated with re-engineering and rip-and-tear damages stemming from a subcontractor\u2019s failure to construct concrete piles to their required strength in Washington.5<\/sup><\/p>\n\n\n\n

Liquidated Damages. Because liquidated damages are considered to be contract-based, obtaining coverage for them under the \u201cbecause of\u201d theory can be more difficult. The key distinction is whether the damages are a result of the insured\u2019s negligence (in which case they are covered), or whether the damages arise from a contractual obligation (in which case they are not). A federal court applying Texas law allowed coverage for liquidated damages of $5,400 per day resulting from damage to an oil pipeline.6<\/sup> A court in Pennsylvania found that liquidated damages \u201cbecause of\u201d a subcontractor accidentally cutting structural parts of a bridge were covered.7<\/sup> Finally, a Tennessee court explained that if the insurers wanted to protect themselves from coverage for liquidated damages as \u201cbecause of\u201d damages, they could specifically endorse their policies to exclude liquidated damages.8<\/sup><\/p>\n\n\n\n

Diminution of Value. In and of itself, diminution in value is a purely economic loss not considered property damage. However, if it stems from underlying property damage, \u201cbecause of\u201d coverage is available. One court, applying Missouri law, allowed \u201cbecause of\u201d coverage to a supermarket for diminution in value to its building because of improperly installed and cracking terrazzo floor.9<\/sup> Another court in Texas allowed coverage for diminution in value caused by water leakage from developer-made lakes to individual homes.10<\/sup><\/p>\n\n\n\n

NOTE: Many states also allow coverage for ensuing damage arising out of defective construction. While some cases characterize this as \u201cbecause of\u201d coverage, seeking defective construction coverage usually involves a different analysis which is beyond the scope of this article.11<\/sup><\/p>\n\n\n\n

Damages “because of” bodily inury may be more limited<\/strong><\/p>\n\n\n\n

Very few cases address coverage for consequential damages \u201cbecause of\u201d bodily injury on a construction project, but the argument should be the same as with damages flowing from property damage. One notable New York case allowed \u201cbecause of\u201d damages coverage for a project owner whose employees slipped and fell on water which came from an improperly installed (and leaking) roof.12<\/sup> In addition, cases from non-construction settings can be used as guidance when seeking damages \u201cbecause of\u201d bodily injury. For example, a Maryland case allowed compensatory damages (including purchase of a cell phone head set) to individuals injured by cell phones emitting dangerous levels of radiation.13<\/sup> In any case, the argument that damages \u201cbecause of\u201d bodily injury (such as the delay costs in the hypothetical scenario mentioned earlier) should be covered by a CGL policy is often worth making.<\/p>\n\n\n\n

Conclusion<\/strong><\/p>\n\n\n\n

If you find yourself faced with consequential damages on a construction project caused by property damage or bodily injury, you should consider whether the \u201cbecause of\u201d argument could get you additional recovery under a CGL policy. Coverage counsel can help you evaluate whether damages such as delay in completion, repair costs, liquidated damages or diminution in value could be covered.<\/p>\n","protected":false},"excerpt":{"rendered":"

Stella Szantova Giordano | Saxe Doernberger & Vita Construction projects are susceptible to injuries and property damage – which is why the stakeholders involved rely heavily on commercial general liability (\u201cCGL\u201d) insurance policies when such losses occur. While many insureds are familiar with pursuing insurance coverage for bodily injury and property damage, a CGL policy… Continue reading Your CGL Policy May Cover More Than You Think – Damages “because of’ Property Damage or Bodily Injury for Construction Projects<\/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":[30,8782,9721],"tags":[9895,11169,4739,9792,56],"class_list":["post-897498","post","type-post","status-publish","format-standard","hentry","category-general-liability-policy","category-personal-injury","category-property-damage","tag-advise-consult","tag-bodily-injury","tag-commercial-general-liability-policy","tag-construction-projects","tag-property-damage","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nYour CGL Policy May Cover More Than You Think - 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