You be the Judge: Contractor Dispute

If you have a dispute with a contractor, this may interest you.

A recent decision in New Jersey reviewed the coverage limitations on Comprehensive General Liability policies (CGL).

A condominium association recovered a judgment against several contractors whose work in the construction of condominiums was defective.

The contractors had CGL insurance, but the insurance companies claimed that defective workmanship was not covered by the policies.

The trial judge agreed with the insurance carriers.  The CGL policies provided for coverage under certain circumstances.  Defective workmanship--where the damages claimed are the cost of correcting the work itself--did not meet the CGL policy definitions for "property damage" or an "occurrence".

The decision was appealed to the Appellate Division.

YOU BE THE JUDGE: Does a CGL insurance policy furnished by a contractor cover the cost of correcting defective workmanship? 

The Appellate Division agreed with the trial judge. 

Generally speaking, CGL policies provide coverage for the risk of injury to people and damage to property caused by faulty workmanship; but no coverage for the cost of correcting the faulty work.  For the most part, the decision followed the policy interpretation announced by the New Jersey Supreme Court in 1979. 

Of course businesses and homeowners should require contractors to give a certificate of insurance naming them as additional insureds before starting work.  But remember--these certificates do have limitations.