Construction Defects and Limitations on CGL Coverage

Understanding and Mitigating Risk for Construction Defects

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Wednesday, August 24, 2022

Recorded event now available

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Course Materials

This CLE course will advise construction attorneys on remedies available for construction defect claims, including in states that treat a construction defect as the builder's business risk. The panel will discuss how to pursue claims and how court imposed limitations on CGL coverage for defect claims in certain states present unique challenges.

Description

General contractors frequently buy CGL insurance on the assumption that it will cover third-party claims in connection with defective construction. But whether defective construction work constitutes an accidental "occurrence" under the standard form CGL insurance policy--with or without resulting property damage--is dependent on which state's law applies. Determining which state's law applies to a construction defect claim is critical and may be outcome determinative.

Certain jurisdictions hold that construction defect claims do not give rise to an accidental "occurrence" within the CGL insurance policy and may refuse to provide coverage. However, the analysis often depends on the named insured’s scope of work and whether the complaint identifies claims for purely defective work or includes allegations of resulting damage.

Typically, favorable indemnity agreements with subcontractors can protect against relying on insurance coverage, but that requires a solvent and responsible subcontractor. Builders should, when possible, negotiate during the policy procurement process for amended language that broadens coverage or for favorable choice of law provisions. Alternatively, builders may look to other insurance options, including manuscripted Controlled Insurance Programs (CIPs) specifically designed to provide coverage for construction defect claims.

Listen as our authoritative panel discusses proceeding with construction defect claims in jurisdictions across the country. The panel will address best practices to mitigate liability and pursue claims when coverage may not be available.

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Outline

  1. Analysis of how jurisdictions across the country address coverage for construction defects
  2. Recent cases addressing CGL coverage for construction defects
    1. Virginia
    2. Illinois
    3. South Carolina
    4. Pennsylvania
  3. Best practices for obtaining coverage
  4. Alternative contracting and insurance options

Benefits

The panel will discuss these and other key issues:

  • What states limit coverage for construction defect claims under a CGL policy?
  • How can an owner or general contractor frame a construction defect claim to obtain CGL coverage?
  • What types of additional insurance can provide protection?

Faculty

Asay, Stephen
Stephen S. Asay

Counsel
Pillsbury Winthrop Shaw Pittman

Mr. Asay’s practice includes advising clients on risk management issues and the resolution of complex commercial...  |  Read More

Gold, Eric
Eric M. Gold

Partner
Pillsbury Winthrop Shaw Pittman

Mr. Gold has in-depth experience analyzing and resolving insurance coverage and commercial construction disputes on...  |  Read More

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