A Jan. 9, 2004, decision by the Wisconsin Supreme Court holding that standard commercial general liability (CGL) policies cover accidents caused by defective construction, is a victory for construction contractors and for American Subcontractors Association, which filed an amicus curiae (friend of the court) brief in the case early last year. ASA said it expects the decision to clarify the legal obligations of insurers to contractors that purchase CGL policies.
Wisconsin¹s high court reversed the decision of a 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 and rendered the warehouse unsafe for occupancy. The appeals court had reasoned that accidents caused by defective construction are never covered by common CGL policies issued to contractors because the policies excluded “contractually assumed liabilities.”
A 3-2 majority of the high court justices reversed the decision of the appeals court, citing the language of the insurance policy in question: “The damage to the warehouse was caused by substantial soil settlement underneath the completed building, which occurred because of the faulty site-preparation advice of the soil engineering subcontractor. It was accidental, not intentional or anticipated, and it involved the “continuous or repeated exposure” to the “same general harmful condition.” Accordingly, there was “property damage” caused by an “occurrence” within the meaning of the CGL policies.”
Browse the Wisconsin Supreme Court decision and ASA’s amicus curiae brief online.
Insurers have complained that court rulings interpreting CGL policies in such a way that they cover the costs of defective construction make it extremely difficult for them to forecast losses and have thrown the general contractors market into chaos.
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