Construction Defect Claims: Navigating the CGL Contractual Exclusion Amid Varying Court Interpretations

Description

Whether the contractual liability exclusion includes breach of contract claims for defective workmanship has been addressed by many courts. Most courts hold that breach of contract claims based on the insured’s negligence are not “assumed” liabilities and do not fall within the contractual liability exclusion.

Prior to the recent ruling by the Texas Supreme Court in Ewing Construction, the Fifth Circuit’s ruling precluding coverage for a contractor’s construction defect shocked many policyholders in the construction industry. The history of this case illustrates the deep confusion over the scope of the exclusion.

The “insured contract” exception restores coverage where the insured contractually assumes the tort liability of another to pay for third party bodily injury or property damage.  Therefore, the scope of hold harmless and indemnification provisions in construction contracts must be carefully structured and negotiated. 

Listen as our authoritative panel of attorneys discusses the evolving interpretations of the CGL contractual liability exclusion and its exceptions in construction defect claims, the historical analysis of the exclusion, and the impact of the exclusion for construction contracts and indemnity agreements.