Case Before U.S. Appeals Court Threatens Alabama Subcontractors’ CGL Coverage
|Targeted News Service|
Even though the
"Construction insureds pay substantial premiums for liability insurance to protect themselves from property damage arising out of inadvertent and alleged construction defects," the
In the underlying case, the dispute involved a project by the parish to replace the roof on two of its buildings with a 40-year roof shingle. The parish contracted with
Kiker subcontracted the roofing portion of the work and work was completed in
The second building almost immediately began leaking and two years later the first building also began to leak, causing extensive damage to the gypsum substrate of the roof as well as the interior and ceiling of the buildings.
Despite repair efforts, the problems were not fixed and the parish hired a roof inspector, who investigated and claimed the leaks were caused by installation errors, construction defects and other breaches by Kiker. The parish sued and, though Penn National defended Kiker, it did so under a reservation of rights, claiming there would be no coverage under the policy for damages caused by a breach of contract or breach of warranty.
At trial, the jury awarded the parish
In their brief, ASA, AGC and the Alabama AGC wrote: "The proposition that an insurer should not be obligated to pay claims that are outside the coverage of the policy is not astounding. However, some insurers are extremely adept at finding reasons, some would say excuses, to deny what otherwise appear to be claims more than arguably within the coverage of the policy. This is particularly true as to claims involving allegedly defective workmanship by insured contractors under their commercial general liability policies, and if the position advocated by Pennsylvania National is adopted by this Court, insurers will invariably have yet another excuse to deny legitimate claims."
ASA, AGC and the Alabama AGC further argue in their brief that "applying the Contractual Liability Exclusion to property damage to an insured contractor's work simply because that property damage may breach its contract has a profoundly negative effect on CGL coverage for the construction industry. It is nothing short of a radical departure from the means by which CGL coverage has traditionally been marketed and provided by the insurance industry to contractors."
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