While several delightfully nerdy insurance coverage issues are percolating through the courts, the most notable insurance law decision of 2014 is the Texas Supreme Court’s unanimous opinion in Ewing Construction Co. v. Amerisure Ins. Co. In Ewing, the Texas high court ruled that construction defect lawsuits alleging faulty workmanship are generally covered under a commercial general liability, concluding that the contractual liability exclusion does not preclude coverage for defective work claims, except in situations where the insured contractually assumed liability above and beyond its common law obligations. The decision followed the trend in the majority of jurisdictions, declining to apply the contractual liability exclusion to defective construction lawsuits against builders and other contractors who agreed to perform work in a good and workmanlike matter in the absence of specific provisions enlarging the standard under which the construction work would be performed. Not surprisingly, property owners and contractors alike breathed a collective sigh of relief knowing that liability insurance purchased to cover such claims will provide the expected protection.
Ewing arose from the allegedly faulty construction by Ewing of school district tennis courts. Shortly after construction was completed, the school district complained that the courts were flaking, crumbling, and cracking, making them unusable for competitive tennis events. The district sued Ewing for faulty construction, asserting causes of action for breach of contract and negligence. Ewing tendered the lawsuit to its commercial general liability insurer, who denied coverage based on the contractual liability exclusion. This prompted Ewing to initiate coverage litigation in federal court in Texas.
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