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Seeking Coverage Certainty in an Evolving Legal Landscape
Jeffrey J. VitaPartner
Saxe Doernberger & Vita, P.C.
Jim HensleyRegional Technical Director
Construction ClaimsWillis North America
Take Away Tips
Choice of Law
• Lex Loci Contractusvs.
• Restatement 2nd
CD As An Occurrence
CD As An Occurrence
“insurance applies to ‘bodily injury’ or ‘property damage’…caused by an ‘occurrence’”
“occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
CD As An Occurrence
Consult with your broker regarding potential changes to policy language
Endorsements:1. “A negligent act or omission in the performance of a ‘construction
contract,’ but only with respect to ‘property damage.’”
2. “Damages because of ‘property damage’ include damages... because of ‘property damage’ to ‘your work’ and shall be…an ‘occurrence,’ but only if the ‘property damage’ is unexpected or unintended from the standpoint of the insured.”
3. “Notwithstanding any applicable case law holding that a construction defect is not an ‘occurrence,’ any ‘property damage’ to ‘your work’ shall be deemed to be caused by an ‘occurrence’ as long as neither you nor the subcontractor who may have performed the work expected or intended the defect or damage.”
CD As An Occurrence
Seek legislative solutionsColorado
Hawaii
Arkansas
South Carolina
Additional Insured Claims
2001 20041985 1993
CG 20 10 11 85 “Arising out of”
CG 20 10 10 93 Limits coverage
to “ongoing operations”
CG 20 10 10 01 Excludes coverage
for completed operations
CG 20 10 07 04 Replaces
“arising out of” with “caused in
whole or in part.” Excludes
completed operations
CG 20 37 10 01 Reinstates completed operations coverage
Additional Insured Claims
Section II – Who Is an Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury”, “property damage”… caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf;
In the performance of your ongoing operations for the additional insured(s) at the location(s) at
CG 20 10 07 04
Additional Insured Claims
Always give notice and think of AI coverage following loss/claim
Check what AI endorsement or obligations are required of you
Obtain a copy of AI endorsements and review carefully to ensure compliance with contract
Don’t be afraid to ask for the endorsement you need
Contractual Liability Exclusion
Excludes coverage for:
“bodily injury or property damage for which the insured is obligation to pay damages by reason or assumption of liability in a contract or agreement”
Contractual Liability Exclusion
“This exclusion does not apply to liability for damages:
(1) That the insured would have in the absence of the contract or agreement, or
(2) Assumed in…an ‘insured contract.’”
Contractual Liability Exclusion
Go in with your eyes wide open
Known Injury and Damage
Montrose and first manifestation endorsements
If insured knew “bodily injury” or “property damage” occurred in whole or in part before policy period, any change, continuation or resumption of such “bodily injury” and “property damage” will be deemed to have been known prior to the policy period
j5 and j6
j(5) excludes PD to:
“…[t]hat particular part…on which you…are performing operations…”
j(6) excludes PD to:
“…[t]hat particular part of any property that must be restored, repaired, or replaced because ‘your work’ was incorrectly performed on it.”
j5 and j6
j5 and j6
Interpretation Favorable to Policyholder Alaska Missouri California Florida Texas Michigan (but only in federal court) Kentucky
No Case Law Exists (affirmatively confirmed)Connecticut Washington
Interpretation Favorable to Carrier New York Tennessee New Jersey Ohio Massachusetts
Conflicted JurisdictionsIllinois Louisiana Georgia Oregon
j5 and j6
© Saxe Doernberger & Vita, P.C.
Clarification of Coverage:
Identify “that particular part”Identify whose work caused the damage
Builders Risk
Coverage for Increased Costs
Builders Risk
Coverage for Increased Costs
Example: Property Damage impacts ability to timely complete project
Insuring Agreement: Policy covers “all risk of direct physical loss or damage”
Keating vs. Oceanside
This policy shall not pay for “costs necessary to replace, repair, and/or rectify any fault or defect in workmanship or materials, (but ensuing loss or damage is covered)”
Faulty Workmanship Exclusion
Builders Risk
Typically not defined Can be considered “Faulty Product” or
“Faulty Process” or both
Faulty Workmanship Exclusion
Some courts consider “Faulty Workmanship” ambiguous and construe the exclusion in favor of the insured, limiting the term to product or process, whichever is advantageous to the policyholder
Some Courts alternatively find “Faulty Workmanship” to be unambiguous, finding that it precludes losses associated with faulty product or process
Review language of exclusion to see if other words infer a product or a process
Builders Risk
Choice of Law
Most Favorable Venue
Endorsement
Questions
Thank You!
Jeffrey J. VitaSaxe Doernberger & Vita, P.C.
Jim HensleyWillis North America
