CGL Policy Ruling Covers Contractors

New Jersey’s high court ruled this summer that damage from a subcontractor’s faulty workmanship is covered under the general contractor’s commercial general liability policy.

The ruling stems from a New Jersey lawsuit charging that the subcontractor that built a condominium complex failed to properly install roofs, gutters, windows, doors, and other components, which later led to serious water-related damage.

The condo owners sued and lost. A trial judge ruled in favor of the insurers, noting that CGL policies don’t cover consequential damages from defective workmanship.  

The Appellate Division of the state Supreme Court reversed that ruling, noting that the damage resulting from the subcontractor’s shoddy work was property damage caused by an “accidental occurrence.” The ruling defined it as unintended “continuous or repeated exposure to substantially the same general harmful conditions.” It can’t reasonably be argued that the subcontractors expected or intended for their faulty workmanship to cause property damage, the panel said.

The state Supreme Court affirmed the appellate ruling, adding that the term “accident,” as used in the policies, includes unintended and unexpected harm caused by negligent conduct. 

With its decision, the New Jersey supreme court joined two dozen other state high courts that have agreed on this issue.