NH Construction Law
  • Home
  • Blog
  • Links

#91:  Liability Insurance for a Subcontractor's Defective Work

7/26/2020

1 Comment

 
“May unintentionally faulty subcontractor work that damages an insured’s work product constitute an ‘accident’ under a commercial general liability insurance policy?”  With that opening sentence, the Michigan Supreme Court last month became the latest high court to give a “yes” answer, in Skanska USA Building Inc. v. M.A.P. Mechanical Contractors, Inc., 505 Mich. 368, 952 N.W.2d 402 (2020).
 
Skanska, the construction manager of a hospital renovation project, hired a heating and cooling subcontractor whose liability insurance policy named Skanska and the owner as insureds.  When the subcontractor installed the expansion joints in the steam boiler and related piping backwards, the heating system got damaged.  Skanska made a claim against the policy which, in typical fashion, indemnified the insured for liability on account of property damage “only if: (1) The . . . ‘property damage’ is caused by an ‘occurrence’ . . .”  The insurer responded predictably, pointing to the definition of “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and denying that the faulty installation of the expansion joints qualified as an “accident” because it wasn’t fortuitous.  The Michigan Supreme Court disagreed, interpreting “accident” as broader than “fortuity.”
 
The court found support for its conclusion by referring to the policy’s exclusion of coverage for an insured’s own work product, but with an exception for work performed by a subcontractor on the insured’s behalf:  “If faulty workmanship by a subcontractor could never constitute an ‘accident’ and therefore never be an ‘occurrence’ triggering coverage in the first place, the subcontractor exception would be nugatory.”  The court rejected the argument that an exception to an exclusion cannot create coverage where none exists, pointing out that it was obliged to read the contract as a whole and give effect to all of its provisions if possible.
 
This observation about the subcontractor exception to a coverage exclusion as indicative of initial coverage for faulty workmanship is nothing new.  U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.2d 871, 880 (Fla. 2007) (“the subcontractor’s exception to the general exclusion for a contractor’s defective work becomes important only if there is coverage under the initial insuring provision.”); Lamar Homes, Inc. v. Mid-Continent Casualty Co., 242 S.W.3d 1, 12 (Tex. 2007) (“By incorporating the subcontractor exception into the ‘your-work’ exclusion, the insurance industry specifically contemplated coverage for property damage caused by a subcontractor’s defective performance.”); National Surety Corp. v. Westlake Investments, LLC, 880 N.W.2d 724, 740 (Iowa 2016) (“It would be illogical for an insurance policy to contain an exclusion negating coverage its insuring agreement did not actually provide or an exception to an exclusion restoring it.”).  But what makes Skanska interesting is that the court took pains to distance itself from an earlier Michigan decision, Hawkeye-Security Ins. Co. v. Vector Construction Co., 185 Mich.App. 369 (1990), which had expressly relied on a New Hampshire case holding that “[t]he fortuity implied by reference to accident or exposure is not what is commonly meant by a failure of workmanship.”  McAllister v Peerless Ins. Co., 124 N.H. 676, 680 (1984).  The court of appeals in Hawkeye “agree[d] with both the reasoning and the conclusion as expressed by the McAllister court,” 185 Mich.App. at 378.  But the Michigan Supreme Court in Skanska decided that “because Hawkeye interpreted a 1973 policy that did not cover damage caused by a subcontractor’s faulty workmanship, Hawkeye is not persuasive.”
 
Will New Hampshire reach the same conclusion?  McAllister’s comment that “[t]he fortuity implied by reference to accident or exposure is not what is commonly meant by a failure of workmanship,” was repeated as recently as Concord General Mutual Ins. Co. v. Green & Company Building and Development Corp., 160 N.H. 690, 693 (2010).  But no subcontractor’s workmanship caused the damages in either McAllister or Concord General.  If our Supreme Court hears a case involving similar policy language, and abides by its longstanding rule that “[w]e will not presume language in a policy to be mere surplus,” International Surplus Lines Ins. Co. v. Manufacturers & Merchants Mutual Ins. Co., 140 N.H. 15, 19 (1995), it just might follow Michigan’s lead and hold that faulty workmanship can be a covered occurrence.

1 Comment
Roofer Ocala, FL link
2/27/2025 02:19:40 am

The legal complexities of liability insurance for subcontractor work highlight just how important it is to work with experienced and reliable professionals in the construction industry. When it comes to protecting your investment, ensuring high-quality craftsmanship is just as critical as having the right insurance coverage.

At RoofTek, we understand the risks associated with faulty workmanship and why hiring a trusted roofing contractor is essential for property owners and developers in Ocala, FL. Whether you need roofing repair near me, reliable roofers near me, or full-scale roofing services, we deliver expert craftsmanship and strict quality control to prevent costly mistakes.

As a leading roofing repair company in Ocala, FL, we ensure every installation meets industry standards, reducing the risk of defects that could lead to insurance claims. From new installations to repairs, we provide durable, long-lasting solutions that keep your property protected.

Don't leave your roofing project to chance—work with professionals who get it right the first time. Contact RoofTek today and invest in top-tier quality that lasts!

Reply



Leave a Reply.

    Author

    Frank Spinella

    Archives

    April 2025
    March 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    April 2024
    March 2024
    February 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    April 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    January 2019
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014
    August 2014
    July 2014
    June 2014
    May 2014

    Categories

    All

    RSS Feed

Proudly powered by Weebly