Remember to Notify Your CGL Insurer of a Construction Defect Claim and Lawsuit

Here are some insurance considerations to think about if you are involved in a construction defect matter:

If you are an owner and experience construction defects, make sure to notify your contractor’s CGL insurer(s) of any claim for construction defects (such as a Florida Statutes Chapter 558 notice of defects letter). Also, if the CGL insurer has not retained counsel to represent its insured in connection with the construction defect claim, notify the insurer of your lawsuit against the contractor by sending a copy of the complaint to the insurer.

If you are the contractor that received the claim for construction defects (such as a Florida Statutes Chapter 558 notice of defects letter), make sure to notify your CGL insurer(s) of the claim and, of course, any subsequent lawsuit. You want to avoid any hiccup of the insurer arguing that it was not promptly notified of the claim pursuant to the CGL policy. And, you want to make sure the insurer defends you in connection with the claim and construction defect lawsuit.

Here is an example when there is a mix-up in the notification process where the insurer will argue it was not promptly notified of the construction defect lawsuit. A condominium association sent a construction defect notice letter to a general contractor for defects resulting in water intrusion. The contractor’s CGL insurer was aware of the notice of defects letter sent to its insured contractor. The contractor did not respond to the defects letter and the association sued the contractor for construction defects. A final default judgment was entered against the contractor in the matter (for the contractor doing nothing in the case and not defending itself). After obtaining the judgment, the association then sued the contractor’s CGL insurer to recover insurance proceeds under the CGL policy. (A third party can sue a CGL insurer after obtaining a judgment against the insured.)  This is a mix-up that perhaps could have been avoided if the insurer had been notified of the lawsuit and/or the insurer tendered its insured a defense. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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