Although frequently contested as
exclusions, defective construction claims are being scrutinized by the courts
using various legal theories.
Traditionally, poor workmanship did not fall under the definition of an
occurrence. Poor workmanship is a business risk, poor hiring.
The rules have begun to slide towards coverage now if non-defective materials
or installations are damaged as a result of faulty workmanship. In other words,
a ceiling collapses onto a newly installed sink and tub, chipping the marble.
The tub and sink would be covered, but the ceiling would not. This rule is
analogous to a frozen pipe. The damage to the pipe is not covered, but the
ensuing water damage is.
In 2013, the Connecticut court found that defective workmanship was not
intentional, and therefore could constitute an occurrence. In the same ruling,
the court stated that the defect itself would not be covered, but ensuing
damage would be.
Since 2013, other courts have broadened the definition of occurrence by ruling
the "your work" wording excluded the work of subcontractors. So a
subcontractors defective work would be covered as property damage under the
prime's CGL.
With the broadening of coverage for customers complaints, the contractors pick
up valuable cost savings - legal representation. If defective workmanship is a
covered property damage, then the contractor is entitled to defense from the
insurance company.
As the courts broaden these definitions, you can expect consumers to try to
broaden the definition of "defective". Is inadequate soundproofing
between walls a defect or a design flaw? What are the subjects of potential
defects? Actual installation or functionality?
Of course, no contractor wants the reputation for or problems associated with
defective workmanship. Where does design meet implementation to arrive at
function? As the definition broadens, contractors will be held more liable.
Check the wording of your commercial general liability defective workmanship
clause. How broadly could it be interpreted? Ask your professional agent for
some expertise in this area.