One of the most highly debated issues in insurance is whether or not construction defect claims constitute “occurrences” under a commercial general liability (CGL) policy. For years, debate on either side has raged on as contractors have sought reimbursement from their insurers for legal fees, settlements and other costs of a claim made by a third party. Some state courts maintain that construction defect claims are not covered by CGL policies because faulty work is not an “accident” which is what general liability is designed to protect against. However, more and more courts are concluding that defective construction is an accidental occurrence and would therefor qualify for coverage under a contractor’s general liability policy.
According to experts, the majority view with the Supreme Courts of Tennessee, Indiana, Florida, Alaska, Wisconsin, South Dakota, Mississippi, Georgia, Texas, South Carolina, Minnesota and Kansas is that construction defects are in fact insurable occurrences. Furthermore, Colorado, Arkansas, Hawaii and South Carolina have passed statutes that mandate that construction defects be viewed as and included as covered perils for contractors.
Still, determining whether or not a Michigan contractor’s misstep qualifies as an accident or not is no easy task. As such, insurers and litigators have more or less developed a list of criterion used to help determine whether or not a claim is an accidental defect or if the incident arose from negligence or other professional mistakes on the part of the contractor. Here are a few questions that insurers consider when determining if a construction defect claim is covered by a Michigan contractor’s standard CGL insurance policy:
- Was the faulty work or incident an accident?
- Did the faulty work result in property damage?
- Is the construction defect expressly excluded from the policy’s coverage?
- If there is an exclusion that applies, is there an exception that restores coverage?
Even still the debate can be lengthy and resource consuming, and not all insurance policies are created equally. As such, fully understanding your policy and having strong coverage is a huge benefit for any Michigan contractor.
When it comes to protecting yourself against allegations of contractor default, there are a number of options available to Michigan contractors. At Capital Insurance Agency, we specialize in helping Michigan contractors find complete business insurance coverage that meets all their needs and specifications at affordable prices. Our MI Contractor Insurance specialists will take the time to sit down with you to discuss your exposures and coverage options before crafting a risk management strategy that will help protect your operation from the unexpected. To learn more about our operation and our MI Contractor Insurance policies, give us a call today at (888)296-0418.