As Contractor Shake-Out Continues, So Does Wrangling Over Insurance
In South Carolina, the courts could not produce consistent rulings.
Attorney Patrick J. Wielinski said that because consecutive rulings in South Carolina had gone "covered, not covered, covered, not covered" on defects, coverage had become unpredictable and "hard to plan." He added that neither insurers nor contractors could be sure what coverage they were getting and paying for.
To settle the matter in Arkansas, lawmakers adopted a statute that requires all commercial general liability policies to contain a definition of occurrence in the form of an endorsement.
In general, in order for a defect to be classed as an occurrence, it has to be unintended and unforeseeable, speakers said.
While some insurance executives noted that such coverage was always intended for and priced to include defects, attorneys for insurers did not see anything strange in challenging definitions of such basic concepts. As one insurer's lawyer said, each must be decided within its own context "and every project is unique."
"We don't want to be providing coverage for something we didn't intend to cover and didn't price into the premium," he said.
Even so-called manuscript endorsements, which are non-standard and negotiated by the parties, can be troublesome in trying to fix the occurrence issue if the wording isn't sound, said Jeffrey J. Vita, an attorney who has represented contractors against insurers. "Be careful in creating manuscript endorsements that you aren't creating more problems than you solve," he said.
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Contractor general liability in most policies would cover injuries or property damage caused by a company's work, including damage to the property.
Builders' risk coverage, on the other hand, would insure against losses from events such as fires or storms while a contractor is working on a project.
However, even the definition of a subcontractor can end up in court.
