Contractors across the nation will be watching the Mississippi Supreme Court Oct. 5 to see if it upholds a Rankin County circuit court decision that ruled the insurer is not responsible for subcontractor performance under a contractor’s Commercial General Liability policy.

In Architex Association Inc. v. Scottsdale Insurance Co., Architex alleges that “an unintended construction defect by a subcontractor constitutes an occurrence that triggers coverage under a contractor's CGL insurance policy,” according to a statement from the law firm of Burr & Forman LLP of Jackson, Miss., representing Architex. The lawsuit alleges that Scottsdale has a “duty to investigate and defend” Architex in the matter.

In short, the contractor wants Scottsdale to fulfill the terms of the policy it paid for.

“The question this case presents is whether a standard form commercial general liability policy, the type generally purchased by generals, provides coverage under any circumstances for defective work,” says Mike Kennedy, general counsel for Associated General Contractors of America.

“The insurance industry made a very conscious decision to provide this coverage and charge these premiums. We are asking the insurance industry to stand behind the language of the policy it has today.”

If the industry wishes to exclude such coverage, it should change the language, revise the terms in contracts it is selling to contractors, and adjust the price accordingly, Kennedy adds. If the Mississippi Supreme Court doesn’t uphold existing contract language and find in favor of Architex, “construction contractors will be in a position of questioning the basis on which the insurance industry is calculating the premiums it charges,” Kennedy says. “If insurance carriers are not going to provide this coverage, contractors will question their risk and how that is factored into the premiums.”

The suit resulted from damages sought by the owner of the Country Inn & Suites in Pearl, Miss. Burr & Forman anticipates a decision before the end of the year. The ruling will not only set precedent for all Mississippi contractors, but could be cited as precedent in other states grappling with the same issue.

Similar cases are pending in Florida, Texas, Georgia, Minnesota and Tennessee.