Court: Insurer Must Indemnify Contractor in Mass. ‘Sick Building’ Case

A federal court ruled that an insurer has a duty to defend and indemnify a flooring company which installed carpets and tiles in a Massachusetts office that were so fume-ridden, they made the building unusable.

In a closely watched legal decision, the First Circuit Court of Appeals found that the CGL policy issued by Essex Insurance Corp. to BloomSouth Flooring Corp. covers property damage that is intangible, like odor.

The case centered on a construction project at the headquarters of Boston Financial Data Services (BFDS).

BloomSouth, a subcontractor on the project, had hired two separate subcontractors to supply and then install carpeting in BFDS’ building. After the work was completed, employees complained their offices smelled like a “locker room,” and some claimed of health problems from the fumes – a problem known as “Sick Building Syndrome.”

BFDS paid $1.4 million to repair the problem, and then sued BloomSouth, arguing thatdefective carpeting made the space unusable. BloomSouth sought coverage under its CGL policy and Essex, citing the lack of physical damage, declined to pay.

The Court agreed that the nature of the damage rendered the office unusable and that business risk exclusions written into the policy did not apply to the situation. The case, some legal scholars say, could have future implications for building defect claims in the Bay State.

Topics Carriers Massachusetts Contractors