{"id":897815,"date":"2020-08-11T16:43:04","date_gmt":"2020-08-11T22:43:04","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=897815"},"modified":"2020-08-11T16:43:09","modified_gmt":"2020-08-11T22:43:09","slug":"coverage-for-defective-work","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/coverage-for-defective-work\/","title":{"rendered":"Coverage for Defective Work? Michigan Joins Majority"},"content":{"rendered":"\n

Alexander G. Thrasher and Heather Howell Wright | Buildsmart<\/a><\/p>\n\n\n\n

Michigan has joined the majority of jurisdictions in holding that a general liability policy<\/a> may provide coverage for claims for property damage<\/a> allegedly caused by the defective work of a subcontractor<\/a>. In a unanimous decision reversing the Michigan Court of Appeals, the Michigan Supreme Court held that a subcontractor\u2019s unintentional defective work was an \u201caccident\u201d and, thus, an \u201coccurrence\u201d covered under the subcontractor\u2019s commercial general liability (CGL) policy.<\/p>\n\n\n\n

In Skanska USA Building Inc. v. MAP Mechanical Contractors, Inc.<\/em>, Skanska USA Building Inc. served as the construction manager on a medical center renovation project. Skanska hired defendant MAP Mechanical Contractors, Inc. (MAP) to perform heating and cooling work that included the installation of expansion joints on part of a steam boiler and piping system.  Several years after the installation, extensive damage to concrete, steel, and the heating system occurred, and Skanska determined that the cause was MAP\u2019s incorrect installation of some of the expansion joints. Skanska repaired and replaced the damaged property at a cost of about $1.4 million and submitted a claim to MAP\u2019s insurer, co-defendant Amerisure Insurance Company. Amerisure denied coverage for the claim, and Skanska filed suit.<\/p>\n\n\n\n

The trial court denied competing summary judgment motions, and Skanska and Amerisure both filed applications for leave to appeal to the Court of Appeals. The applications were granted, and the appeals were consolidated.<\/p>\n\n\n\n

The policy provided coverage for \u201cproperty damage\u201d caused by an \u201coccurrence.\u201d The term \u201coccurrence\u201d was defined as \u201can accident, including continuous or repeated exposure to substantially the same general harmful conditions.\u201d Interpreting this language, the Michigan Court of Appeals held that summary judgment should be granted to Amerisure as \u201cthere was no \u2018occurrence\u2019 under the CGL policy because the only damage was to the insured\u2019s own work product.\u201d The term \u201caccident\u201d is not defined in the policy and the Court of Appeals, applying a definition of \u201caccident\u201d from Michigan appellate court precedent, reasoned that there was no \u201caccident\u201d and thus no \u201coccurrence\u201d to trigger coverage under the policy.<\/p>\n\n\n\n

Skanska appealed to the Michigan Supreme Court. The Skanska <\/em>Court began its review by focusing on the policy\u2019s definition of \u201coccurrence\u201d as an \u201caccident.\u201d In doing so, the court relied on a definition of \u201caccident\u201d as \u201can undefined contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated and not naturally to be expected.\u201d Amerisure contended that an \u201caccident\u201d must involve \u201cfortuity,\u201d or \u201csomething over which the insured has no control,\u201d but the court disagreed. Instead, the court concluded that the term \u201caccident\u201d is both plain and broad in its meaning and a subcontractor\u2019s faulty work may fall within the court\u2019s definition of an \u201caccident.\u201d Although \u201cfortuity\u201d is one way to show an accident occurred, the court was steadfast that it is not the only way to do so.<\/p>\n\n\n\n

The court also rejected the Court of Appeals\u2019 conclusion that \u201caccident\u201d cannot include damage limited to the insured\u2019s own work product because the policy at issue did not limit the definition of \u201coccurrence\u201d with any reference to the owner of the damaged property.<\/p>\n\n\n\n

Finally, the court rejected Amerisure\u2019s argument that providing coverage for the faulty subcontractor\u2019s work would convert the insurance policy into a performance bond. The court observed: The fact that \u201ccoverage may overlap with a performance bond is not a reason to deviate from the most reasonable reading of the policy language.\u201d<\/p>\n\n\n\n

Whether faulty or defective workmanship constitutes an \u201coccurrence\u201d under the CGL is a state-specific question, and courts across the country are divided on this issue. While some states have held that faulty workmanship or improper construction is not an \u201coccurrence\u201d because it can never be an \u201caccident,\u201d others have held that faulty workmanship can be an \u201caccident\u201d if the resulting damage occurs without the insured\u2019s expectation or foresight. The recent trend has been for courts to find that a construction defect or faulty workmanship satisfies the \u201coccurrence\u201d and \u201cproperty damage\u201d requirements under a general liability policy and losses sustained as a result of such defects may be covered. The Michigan Supreme Court\u2019s decision is yet another example that the tide continues to change in favor of insureds as to whether property damage caused by defective work may be covered under a general liability policy.Print:<\/a>Email<\/a>Tweet<\/a>Like<\/a>LinkedIn<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Alexander G. Thrasher and Heather Howell Wright | Buildsmart Michigan has joined the majority of jurisdictions in holding that a general liability policy may provide coverage for claims for property damage allegedly caused by the defective work of a subcontractor. In a unanimous decision reversing the Michigan Court of Appeals, the Michigan Supreme Court held… Continue reading Coverage for Defective Work? Michigan Joins Majority<\/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":[4,30,9914,9721],"tags":[9895,4739,918,10904,8675,56,157],"class_list":["post-897815","post","type-post","status-publish","format-standard","hentry","category-construction-defects","category-general-liability-policy","category-insurance-coverage","category-property-damage","tag-advise-consult","tag-commercial-general-liability-policy","tag-defective-work","tag-insurance-coverage-claims","tag-michigan","tag-property-damage","tag-subcontractor","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nCoverage for Defective Work? 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