{"id":899710,"date":"2022-03-14T15:00:32","date_gmt":"2022-03-14T21:00:32","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=899710"},"modified":"2022-03-14T15:01:05","modified_gmt":"2022-03-14T21:01:05","slug":"construction-defect-claims-cgl-policies-2","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-defect-claims-cgl-policies-2\/","title":{"rendered":"Pennsylvania Federal Court Confirms: Construction Defect Claims Not Covered By CGL Policies"},"content":{"rendered":"\n<p>Nathan A. Cazier and Scott S. Thomas | <a href=\"https:\/\/www.paynefears.com\/insights\/pennsylvania-federal-court-confirms-construction-defect-claims-not-covered-cgl-policies\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">Payne &amp; Fears<\/a><\/p>\n\n\n\n<p>The construction industry operates under the constant spectre of <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-defect-claim-inquiry-notice\/\" target=\"_blank\" rel=\"noreferrer noopener\">claims seeking damages for defective or faulty workmanship<\/a>. Fortunately, the law in most states treats these claims as covered under commercial general liability (\u201cCGL\u201d) policies. A small minority of states take a much stingier view. In a newly decided case, a Pennsylvania federal court confirmed that Pennsylvania belongs to this small group of states that regard construction claims as not worthy of liability insurance coverage.\u00a0<em>Main St. Am. Assurance Co. v. Howard Lynch Plastering, Inc.<\/em>, No. CV 21-3977, 2022 WL 445768, (E.D. Pa. Feb. 14, 2022).<\/p>\n\n\n\n<p><em>Main St<\/em>. involves a typical construction defect case: W.B. Homes (\u201cW.B.\u201d) developed a residential community, contracting with various trades to build the homes. W.B. required these subcontractors to obtain liability insurance covering their work and, when homeowners sued W.B. for damages due to allegedly faulty work, W.B. tendered the claim to these insurers. One of them, Main Street Assurance Co. (\u201cMain Street\u201d) then sued W.B. for declaratory relief, arguing that under Pennsylvania law, it had no duty to defend W.B.<\/p>\n\n\n\n<p>Following Pennsylvania precedent,&nbsp;<em>Main St<\/em>. held that faulty workmanship is not an \u201coccurrence\u201d and, thus, claims grounded in faulty workmanship are not covered under CGL policies. See&nbsp;<em>Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Com. Union Ins. Co.<\/em>, 908 A.2d 888 (Pa. 2006). Kvaerner \u2013 and now Main St. \u2013 reason that CGL policies, which cover only liability caused by an \u201coccurrence,\u201d define \u201coccurrence\u201d as an \u201caccident,\u201d and \u201cfaulty workmanship does not constitute an \u2018accident.\u2019\u201d&nbsp;<em>Id.<\/em>&nbsp;at 899\u2013900.<\/p>\n\n\n\n<p>W.B. anticipated this reasoning, and tried to get around it in two ways: First W.B. argued that the construction defect claim was grounded in product liability (which&nbsp;<em>might<\/em>&nbsp;be covered by CGL policies in Pennsylvania). The court rejected this argument, since the homeowners never actually alleged that any product caused damage. Next, W.B. argued that the policy\u2019s \u201cProducts Completed Operations Hazard\u201d exclusion, (eliminating coverage for certain damages caused by faulty workmanship) implies that the policy was intended to treat faulty workmanship as an \u201coccurrence\u201d \u2013 otherwise the exclusion would be unnecessary.&nbsp;<em>Main St<\/em>. rejected this argument because, in the court\u2019s view, it doesn\u2019t overcome W.B.\u2019s threshold problem: faulty workmanship is not an \u201coccurrence\u201d in Pennsylvania. Thus, the court reasoned, because the \u201coccurrence\u201d requirement in the insuring agreement was never satisfied, the court need not consider whether exclusions and their exceptions apply.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Takeaways<\/strong><\/h4>\n\n\n\n<p><em>Main St<\/em>. makes it clear that risk transfer strategies for Pennsylvania projects based on traditional general liability insurance coverage will continue to be problematic. Negotiating during the procurement process (when possible) for amended language that broadens coverage, or for favorable choice-of-law provisions, may help. Manuscripted OCIP\u2019s specifically designed to provide coverage for construction defect claims may also be an alternative.Finally, negotiating favorable indemnity agreements with trades and suppliers \u2013 which has its own set of challenges and limitations \u2013 becomes even more important. But there are no convenient solutions to Pennsylvania\u2019s outlier perspective on insurance coverage for construction defect claims.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\" target=\"_blank\" rel=\"noreferrer noopener\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nathan A. Cazier and Scott S. Thomas | Payne &amp; Fears The construction industry operates under the constant spectre of claims seeking damages for defective or faulty workmanship. Fortunately, the law in most states treats these claims as covered under commercial general liability (\u201cCGL\u201d) policies. A small minority of states take a much stingier view.&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-defect-claims-cgl-policies-2\/\">Continue reading <span class=\"screen-reader-text\">Pennsylvania Federal Court Confirms: Construction Defect Claims Not Covered By CGL Policies<\/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":[11015,4],"tags":[9895,392,4739,11631,7754],"class_list":["post-899710","post","type-post","status-publish","format-standard","hentry","category-construction-claims","category-construction-defects","tag-advise-consult","tag-cgl-policy","tag-commercial-general-liability-policy","tag-construction-defect-clai","tag-pennsylvania","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>Pennsylvania Federal Court Confirms: Construction Defect Claims Not Covered By CGL Policies - Advise &amp; 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