NAHB Fighting Disputes Over Liability Insurance Claims
NAHB is stepping up its legal response to some insurers who are attempting to avoid insurance coverage in all construction defect claims by arguing that the property damage involved in these cases — typically caused by a defective building product or the faulty work of a subcontractor — does not meet one of the three main requirements for coverage under comprehensive general liability (CGL) insurance.
Under dispute is the insurers’ interpretation of a policy’s “occurrence” requirement, which in effect requires the property damage to be unexpected and not intended by the insured party in order for it to be covered.
Insurance companies are denying coverage by arguing that property damage resulting from a construction defect can never meet this requirement because, as a matter of law, any property damage to a house resulting from a construction defect is expected or intended by the builder. Therefore, this type of damage can never be covered by insurance.
NAHB has filed friend-of-the-court briefs in several cases, challenging the insurers’ rigid interpretation of the “occurrence” requirement on the grounds that it is overly broad and is not supported by any language in the insurance policy.
The attempt by insurers to avoid coverage in all construction defect cases by expanding the policy’s “occurrence” requirement would deprive builders of valuable insurance for which they have paid substantial premiums.
NAHB is interested in hearing from association members who know of any cases involving this issue currently in the courts. E-mail David Jaffe at NAHB, or call him at 800-368-5242 x8317.
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