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AGC Extends String of Successful Arguments for Insurance Coverage for Construction Defects

July 7, 2020

Together, AGC of America and its Michigan Chapter have extended the association’s long string of successful efforts to establish that the commercial general liability insurance (CGL) policy sold to construction contractors across the United States does provide coverage for property damage resulting from unexpected and unintended defects in a subcontractor’s workmanship (unless one of the policy’s specific exclusions applies).  On June 29, 2020, the Michigan Supreme Court became the latest of many state supreme courts to agree that such damage is an “occurrence.”

Since 2007, AGC of America has won similar victories in conjunction with its chapters in the supreme courts of Florida, Georgia, Indiana, Mississippi, New Jersey, South Carolina and Texas and in federal courts interpreting and applying the law of Arkansas and Minnesota.  Indeed, the association has led the successful effort to turn what was once the “minority rule” on CGL coverage for construction defects into the “majority rule.”

The latest victory came in a case entitled Skanska USA Building, Inc. v. M.A.P Mechanical Contractors.  The case grew out of a renovation of the Mid-Michigan Medical Center.  The construction manager of that project signed a subcontract with a mechanical contractor to install a new steam heating system, including steam pipe expansion joints.  Unfortunately, the mechanical contractor installed a number of the expansion joints backwards, causing approximately $1.4 M in damage to the heating system, electrical conduit and irrigation piping.  Relying on a case that the Michigan Supreme Court had decided back in 1990, the court of appeals held that the defective workmanship was not an “occurrence” and that, as a result, it did not trigger CGL coverage.  The Michigan Supreme Court reversed, explaining that the its earlier decision rested on an earlier version of the CGL policy and that the current version clearly covers defective workmanship, subject only to the policy’s express exclusions from coverage.  

 

AGC’s Larger Litigation Program

The Construction Advocacy Fund of the AGC of America provides the financial resources that the association requires to extend its advocacy into federal and state courtrooms across the country.  In conjunction with the association’s legislative, regulatory and public programs, the association’s litigation program seeks to protect if not enhance the business environment for construction contractors.  In other cases, AGC of America is currently seeking:

 

  • To persuade the Virginia Supreme Court to rehear a case in which it recently held that a supplier of materials to a bankrupt subcontractor may sue an upstream party for the amount of the subcontractor’s unpaid bills, on the theory that otherwise, the upstream party would be unjustly enriched by the value of those materials; and

 

  • To persuade the Tennessee Court of Appeals to reverse a lower court ruling that a first-tier subcontractor may sue a general contractor not only for breach of contract and the damages allegedly necessary to make the subcontractor whole, but also in tort and on equitable theories, and for compensatory and even punitive damages vastly exceeding exceed the sum necessary to meet that goal. 
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