A JD Supra report delivers some salve for contractors: the US Court of Appeals decided to overturn a ruling that let an insurer off the hook for paying out a contractor's General Liability Insurance claim. Here's the scoop.
The report states the contractor Kiker failed to:
- Replace a roof's gypsum panels with plywood.
- Install felt under the shingles.
- Properly cover the flashing where the roof and brick wall met.
This questionable work led to a slew of property damage, so the property owner sued Kiker over the cost of repairs and was awarded $350,000. Naturally, the contractor sought coverage through his General Liability policy, but the provider Penn National Insurance filed for a judgment to remove its obligation to pay for the claim. The insurer argued the policy doesn't address claims over an implied breach of warranty, which is one of the arguments the property owner made.
The report states a court originally granted Penn National that judgment, but the Court of Appeals had other ideas. It noted…
- The property damage caused by faulty work could be interpreted as an accident (the contractor didn't work on the damaged sections, after all), which is something GL can cover.
- The policy can cover repairs the property owner had to make.
- The policy's "contractual liability exclusion" doesn't cover all breach of contract claims.
The court ruled that in light of these elements, the insurer has to pay for the full amount of the contractor's judgment.
That's good news for this contractor, but what does it mean for your business? Let's find out.
Broader General Liability Coverage Is Never a Bad Thing
The most exciting part about this ruling is that it could set a precedent for how General Liability coverage may be applied and interpreted. That doesn't mean all courts will follow suit, but it is heartening to hear judicial decision makers are opting to err on the side of giving contractors more protection, not less. (Related reading: "FL Bill Would Shorten Contractors' Liability.")
That's especially worthwhile news considering your General Liability Insurance is often the policy you rely on to address claims over construction work. Many policies can provide legal expense coverage when your business is sued over:
- Completed products or operations.
- Third-party bodily injuries.
- Third-party property damages.
To learn more about the necessity of this coverage, read "Construction Insurance: Why You Need It."
Reminder: No Ruling Replaces the Need to Read Your Policy
Even if a court ruling expands insurance protection, it's important to always read your policy and understand its provisions. When you sign up for General Liability Insurance or renew your policy, be sure to ask your agent about:
- Your policy's exclusions (i.e., situations where coverage doesn't apply).
- The incidents your policy can cover.
- Filing provisions so that your claim isn't rejected on a technicality (e.g., late filing).
It's better to understand what your policy can and can't do now than to be surprised later.
If you have other insurance questions, feel free to contact our contractor insurance agents at 800.688.1984 or submit a question via our Ask a Question form.