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Defective Work Is Not Cgl-covered Except In Cases Of Bad Luck

Monday, April 11, 2011 10:59 am


Commercial General Liability (CGL) policies are intended to insure risks. But they aren't intended to cover business risks that are "normal, frequent, or predictable consequences of doing business," according to the South Carolina supreme court. In other words, the "occurrence" that triggers CGL coverage must be the result of an accident--" an unintended, unforeseen, fortuitous, or injurious event." As a result, whether a defective construction claim is covered under a CGL policy can be a question of chance.

Defects are not in and of themselves extraordinary

The S.C. supreme court recently stated the answer plainly: Faulty workmanship is not an "occurrence." See Crossman Communities of North Carolina, Inc. v. Harleysville Mutual Insurance Co., No. 26909, 2011 WL 93716 (S.C. Jan. 7, 2011).

Indeed, at least 25 states have adopted the position that there is no CGL coverage for construction defect claims. Many courts have reasoned that if damages are "natural and ordinary consequences" of negligent construction, possessing no element of chance, then defective workmanship is not an occurrence. See Monticello Ins. Co. v. Wil-Freds Const., Inc., 661 N.E.2d 451 (Ill. App. 1996).

For example, in L-J, Inc. v. Bitu [...]

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