Dramatic Changes on the Horizon for CGL Coverage Law

This article also appeared in Advisen.

Recent changes in national case law suggest that a major shift is under way for CGL coverage of property damage to an insured contractor’s own work. Contractors of all tiers, property and project owners and developers, risk managers, and concerned others should watch this development closely.

For many years, perhaps as many as 50% of the U.S. jurisdictions that considered the point completely barred CGL coverage for property damage to an insured contractor’s own work under one theory or another, such as by holding that defective construction cannot satisfy the “occurrence,” “property damage” or “legally obligated” requirements in the CGL policy insuring agreement. Courts and commentators sometimes lump these theories together under the banner of “business risk doctrine,” as they are motivated by the underlying and mistaken belief that to allow such coverage would encourage negligent construction practices. (Of course, this begs the question, “Why are lawyers, doctors and design professionals deemed trustworthy of insurance for their mistakes, while contractors are not?” There’s a musty whiff of old school class prejudice in the air here.)