Standard commercial general liability policies cover accidents caused by defective construction, according to a court ruling by the Wisconsin Supreme Court.
The court reversed a decision of the court of appeals, which had ruled that a contractor was without general liability coverage for millions of dollars of damages that resulted when a building foundation for a warehouse sank. The appeals court had reasoned that accidents caused by defective construction are never covered by common CGL policies issued to contractors because policies exclude “contractually assumed liabilities.”
A 3-2 majority of the Supreme Court justices reversed the decision, saying the language of the insurance policy was in question because the damage to the warehouse was caused by soil settlement, which occurred due to faulty site-preparation advice supplied by the soil engineering subcontractor. Therefore, the damage was accidental and not intentional, and the court ruled the contractor’s insurance would cover the damage.
“The Wisconsin Supreme Court’s decision reassures contractors that their CGL policies can provide them with meaningful coverage when things go awry,” said Rick Wanner, president of the American Subcontractors Association. “Contractors purchase CGL policies knowing that they cannot anticipate every turn of events that could cause problems on projects.”
ASA used some of its legal funds to support the contractor in bringing the case to the Supreme Court. ASA stated that the court of appeals decision rendered CGL policies worthless to contractors.
To read more about the court decision, click on the link to the right.
