When it comes to construction defects, claimants and insureds alike need to appreciate that CGL insurance does not cover the cost of fixing defective work. Rather, it is designed to cover “resulting damage” or the damage to other (another trade’s) work resulting from defective or faulty workmanship. This is an important distinction that needs to be understood so that a claim is appropriately presented and couched. Even though a claimant may not sue other’s CGL carriers directly, the claimant still wants to maximize potential insurance coverage.
There are times where a party will need to prove the resulting damage covered under a policy: (1) under Florida law, if a claimant gets a judgment against an insured, it can then pursue the insured’s CGL insurer; (2) if the claimant and insured enter into a Coblentz agreement that allows the claimant to sue the insured’s insurer under an assignment; and (3) when an insured is in a dispute with its insurer regarding coverage.
For example, in a case where the claimant entered into a Coblentz agreement with the insured that allowed the claimant to sue the (insured’s) CGL insurer per an assignment, the claimant sued the insurer for resulting damage associated with the insured’s construction defects.
The first defect item dealt with the improper application of exterior coating that resulted in damage to exterior brick. But, there was no evidence that the subcontractor that applied the coating was the same or a different subcontractor that installed the brick meaning there was no evidence of damage to other work (or another trade’s work). This was the claimant’s burden of proof. The claimant needed to establish that the subcontractor that improperly installed the exterior coating damaged the brick installed by another subcontractor. Therefore, the claimant was unable to recover on this item.
The second defect item dealt with a defective mud base that resulted in damage to tile. Again, the claimant did not prove that the mud base and tile installation were performed by different subcontractors. The claimant needed to do this to establish that the defective mud base installation resulted in damage to the tile subcontractor’s work. Therefore, the claimant was unable to recover on this time.
The third defect item dealt with the defective construction of a balcony that damaged a garage below. Specifically, the balcony had to be rebuilt in order to repair the damage to the garage. The court importantly held that this work (removing portions of the balcony and replacing those portions) in order to repair the damage to the garage below was resulting damage. This means that rip-and-tear work required to repair resulting damage was covered under the insured’s policy.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.