In a unanimous decision issued earlier this morning, the New Jersey Supreme Court held that consequential damages caused by a subcontractor’s faulty workmanship constitute “property damage” caused by an “occurrence” under the plain language of the CGL Policy.
In making its decision in Cypress Point Condominium Association Inc. v. Adria Towers LLC, the court reviewed the history and development of the ISO CGL and distinguished two earlier cases finding no coverage, Weedo v. Stone-E-Brick, Inc. and Firemen’s Ins. Co. of Newark v. Nat. Union Fire Ins. Co., because those cases interpreted older policies which did not contain a critical exception to the “your work” exclusion; the subcontractor exception. Prior to Cypress Point, Weedo and Firemen’s were considered the seminal cases on this issue.
SDV attorneys Gregory Podolak, Michael Barrese, and Bethany Barrese authored the amicus brief in support of coverage on behalf of Turner Construction. That brief emphasized, among other things, the history of the Insurance Services Office’s (“ISO”) development of the CGL forms at issue in this case, and specifically the intent for adding the subcontractor exception. That policy form evolution ultimately proved to be a critical factor in the Court’s conclusion. The decision devotes significant time to discussing the differences between multiple iterations of ISO CGL forms, with the court recognizing that the subcontractor exception was added to make clear that “the standard CGL policy…specifically covered damage caused by faulty workmanship to other parts of work in progress; and damage to, or caused by, a subcontractor’s work after the insured’s operations are completed.”
This is a significant win for policyholders. It reaffirms ISO’s stated intent to provide coverage for property damage caused by defective work, and eviscerates insurer arguments that consequential damages caused by defective work of subcontractor’s are not covered by the CGL Policy under New Jersey law.
The full decision can be found here. We’ll be releasing a detailed Case Alert soon.
Aug 04, 2016