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Showing posts with label construction defect. Show all posts
Showing posts with label construction defect. Show all posts
Monday, December 21, 2015
US District Court holds that failure of temporary patches does not prove faulty workmanship
I have been writing about General Casualty Co. of Wisconsin v. Five Star Building Corp., 2013 WL 5297095 (D. Mass.), in which rainwater penetrated temporary roof patches placed there by Five Star during HVAC work it was doing for UMass.
Five Star's insurer argued that coverage was excluded by an exclusion for property damage "to that particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." The insurer argued that the fact that the temporary patches failed to keep out rainwater shows that Five Star's work was incorrectly performed. The court rejected that argument because it assumes either a strict liability or breach of contract theory of faulty workmanship.
Saturday, December 19, 2015
US District Court construes construction exclusion narrowly
In my last post I wrote about General Casualty Co. of Wisconsin v. Five Star Building Corp., 2013 WL 5297095 (D. Mass.), in which rain infiltrated a building when temporary patches put up by Five Star during HVAC work for UMass failed.
Five Star's insurer argued that coverage was excluded by an exclusion for property damage "to that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the 'property damage' arises out of those operations."
The insurer argued that the entire roof was the "particular part" on which Five Star was working and that therefore all damage to the roof was excluded.
The court held that the exclusion does not extend beyond "the essence" of the insured's work. It held that Five Star's work extended only to the replacement of the ventilation system, not to repair or replacement of the roof. Although as part of its work Five Star was required to punch holes in the roof, that roof work was merely incidental to the replacement of the HVAC system. Therefore the exclusion does not apply.
Tuesday, October 20, 2015
Coverage for construction defects
When a construction contractor brings a claim under its general liability policy for coverage of construction defects -- construction that was faulty and needs to be redone, but did not cause injuries to people or damage to other property -- Massachusetts courts generally analyze (and deny) the claim under up to six exclusions, often referred to as the "your work" or, more accurately, "builder's risk," exclusions. In many policies the exclusions have some holes in them, however, depending on when and where the damage occurred and whether the work was done by the insured contractor or by a subcontractor. When I work on such a case I often make a chart which I stare at until I am bleary-eyed.
This article in Insurance Journal notes a wide variation from state to state in how construction defects are analyzed:
On whether faulty workmanship is itself an occurrence, some states say yes, some states say no, some states are undecided, and some states say faulty workmanship is not an occurrence but the resulting damage is. “You also see differences in states in other issues as well."
It should be noted that there are Builder's Risk policies available that will cover contractors for construction defects. I have yet to come across a contractor that actually has such a policy, but that may be because those claims get resolved without the help of counsel.
Tuesday, September 15, 2015
A Texas view of occurrences
In an earlier post I noted that the Massachusetts Appeals Court has stated in unpublished opinions that a construction defect is not an occurrence vis a vis the contractor responsible for the defect. Mike Tracy at Rudolph Friedmann has brought to my attention a recent decision from the Supreme Court of Texas, which assumed that a construction defect is an occurrence without directly addressing that question. The case is also a good example of the timing issues with respect to occurrences, which I mentioned in my last post. Finally, for those of you keeping score, Texas, like Massachusetts, has declined to adopt a blanket approach to triggers of coverage.
In Don's Building Supply, Inc. v. Onebeacon Ins. Co. the Texas court answered questions certified from the Fifth Circuit Court of Appeals about when property damage "occurs" and, more specifically, whether an insurer's duty to defend is triggered where damage is alleged to have occurred during the policy period but was inherently undiscoverable until after the policy expired. The court stated with respect to the first question that the key occurrence date is "when the injury happens, not when someone happens upon it," and answered yes to the second question.
Don's Building Supply ("DBS") sold and distributed a synthetic stucco product called EIFS. The product was installed on various homes from 1993 to 1996, during which DBS had a CGL policy. From 2003 to 2005 homeowners filed suit against DBS, alleging that the EIFS was defective and not watertight. The homeowners alleged that moisture penetration began within six months to a year after the application of the EIFS.
DBS's insurer, OneBeacon, filed a declaratory judgment action. The Texas court held that under the policy definition, the property damage occurred when a home suffered wood rot or other physical damage; the date that the damage was or could have been discovered is irrelevant.
The court refused to adopt an overall approach to triggers of coverage, stating that the trigger determination should be driven by the contract language, which varies from one policy to another.
Friday, May 22, 2015
Change In Citation Rule Can Have A Big Impact
An issue that comes up frequently in construction defect litigation is whether a contractor's General Liability policy provides coverage for damages to the building itself caused by the contractor's faulty construction. Many such cases have to do with weatherproofing: for example, if a building's windows are not weathertight because the contractors made a mistake, will their insurance cover the cost of repair?
I have been personally involved in several such cases, bringing one to the United States Court of Appeals. (B & T Masonry Constr. Co., Inc. v. Public Serv. Mut., Inc., 382 F.2d 36 (1st Cir. 2004).) The issue has always been whether approximately six exclusions apply, separately or together, to exclude all or some of the damages. The analysis can never be a quick one because each exclusion has to be analyzed separately under the facts of the case. The exclusions vary in the timing of when the damages had to be discovered, where in the building the damages were, whether the work was done by the insured or a subcontractor, and other factors. The exclusions overlap but don't always exclude all damages.
If a new citation rule announced in February by the Massachusetts Appeals Court had been in effect just a few months earlier, though, the entire exclusion analysis would arguably be unnecessary. The Massachusetts Appeals Court has stated in at least two unpublished Rule 1:28 decisions that a construction defect is not an occurrence. Mello Constr. Inc. v. Acadaia Ins., 70 Mass. Ap. Ct. 1004 (2007); Davenport v. U.S. Fidelity & Guar. Co., 56 Mass. App. Ct. 1109 (2002).
Rule 1:28 is a rule of the Appeals Court that allows a panel of Appeals Court judges to decide a case without circulating it to all the judges on the court. The theory is that such cases are so clear-cut that additional work by the court is unnecessary. Until February, citation to Rule 1:28 decisions was prohibited by the Appeals Court.
In a footnote in Chace v. Curran, the Appeals Court announced that Rule 1:28 decisions issued after February 25, 2008 "may be cited for their persuasive value but . . . not as binding precedent."
If the new rule had been in effect when Mello was issued, I would be much more likely to recommend that an insurer deny coverage outright based on the theory that a construction defect is not an occurrence, rather than relying on exclusions which, after a long analysis, may not exclude all damages.
So, although citation rules may seem picayune, they have far-reaching consequences.