Battles have historically raged across the country as to whether faulty workmanship claims constitute a coverage-triggering “occurrence” under a standard form comprehensive general liability (CGL) insurance policy. Various state legislatures, including those in Arkansas, Colorado, Hawaii and South Carolina, have responded by enacting statutes intended to provide CGL coverage for faulty workmanship—regardless of whether the claim arises from the work of the policyholder or its subcontractor. New Jersey most recently took similar action on behalf of its state’s policyholders. On Nov. 13, 2013, legislation was introduced that, if enacted, will require CGL insurers to redefine “occurrence” so as to include claims of property damage or bodily injury resulting from faulty workmanship.
Overview of CGL Coverage for Construction Defects
CGL insurance is generally written on a standard form policy and provides coverage to businesses for liability claims. The typical CGL policy provides a broad grant of coverage promising to “pay those sums that the insured becomes legally obligated to pay as damages because of, ‘bodily injury’ or ‘property damage.’” That “bodily injury or property damage,” however, must be caused by an “occurrence.” Thus, a contractor or developer with a claim under its CGL policy needs to demonstrate that faulty workmanship or a construction defect resulted in damage caused by an “occurrence.”
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