Seeking Coverage Certainty in an Evolving Legal Landscape Jeffrey J. Vita Partner Saxe Doernberger & Vita, P.C. Jim Hensley Regional Technical Director Construction Claims Willis North America

Take Away Tips

Choice of Law Lex Loci Contractus vs. Restatement 2 nd

CD As An Occurrence

 “insurance applies to ‘bodily injury’ or ‘property damage’…caused by an ‘occurrence’”  “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”

CD As An Occurrence  Consult with your broker regarding potential changes to policy language  Endorsements: 1.“A negligent act or omission in the performance of a ‘construction contract,’ but only with respect to ‘property damage.’” 2.“Damages because of ‘property damage’ include damages... because of ‘property damage’ to ‘your work’ and shall be…an ‘occurrence,’ but only if the ‘property damage’ is unexpected or unintended from the standpoint of the insured.” 3.“Notwithstanding any applicable case law holding that a construction defect is not an ‘occurrence,’ any ‘property damage’ to ‘your work’ shall be deemed to be caused by an ‘occurrence’ as long as neither you nor the subcontractor who may have performed the work expected or intended the defect or damage.”

CD As An Occurrence  Seek legislative solutions  Colorado  Hawaii  Arkansas  South Carolina

Additional Insured Claims CG “Arising out of” CG Limits coverage to “ongoing operations” CG Excludes coverage for completed operations CG Replaces “arising out of” with “caused in whole or in part.” Excludes completed operations CG Reinstates completed operations coverage

Additional Insured Claims Section II – Who Is an Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury”, “property damage”… caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf; In the performance of your ongoing operations for the additional insured(s) at the location(s) at CG

Additional Insured Claims  Always give notice and think of AI coverage following loss/claim  Check what AI endorsement or obligations are required of you  Obtain a copy of AI endorsements and review carefully to ensure compliance with contract  Don’t be afraid to ask for the endorsement you need

Contractual Liability Exclusion  Excludes coverage for: “bodily injury or property damage for which the insured is obligation to pay damages by reason or assumption of liability in a contract or agreement”

Contractual Liability Exclusion “This exclusion does not apply to liability for damages: (1)That the insured would have in the absence of the contract or agreement, or (2)Assumed in…an ‘insured contract.’”

Contractual Liability Exclusion  Go in with your eyes wide open

Known Injury and Damage  Montrose and first manifestation endorsements  If insured knew “bodily injury” or “property damage” occurred in whole or in part before policy period, any change, continuation or resumption of such “bodily injury” and “property damage” will be deemed to have been known prior to the policy period

j5 and j6 j(5) excludes PD to: “…[t]hat particular part…on which you…are performing operations…” j(6) excludes PD to: “…[t]hat particular part of any property that must be restored, repaired, or replaced because ‘your work’ was incorrectly performed on it.”

j5 and j6

Interpretation Favorable to Policyholder Alaska Missouri California Florida Texas Michigan (but only in federal court) Kentucky No Case Law Exists (affirmatively confirmed) Connecticut Washington Interpretation Favorable to Carrier New York Tennessee New Jersey Ohio Massachusetts Conflicted Jurisdictions Illinois Louisiana Georgia Oregon

j5 and j6 © Saxe Doernberger & Vita, P.C.  Clarification of Coverage:  Identify “that particular part”  Identify whose work caused the damage

Builders Risk Coverage for Increased Costs

Builders Risk Coverage for Increased Costs  Example: Property Damage impacts ability to timely complete project  Insuring Agreement: Policy covers “all risk of direct physical loss or damage”  Keating vs. Oceanside

 This policy shall not pay for “costs necessary to replace, repair, and/or rectify any fault or defect in workmanship or materials, (but ensuing loss or damage is covered)” Faulty Workmanship Exclusion Builders Risk  Typically not defined  Can be considered “Faulty Product” or “Faulty Process” or both

Faulty Workmanship Exclusion  Some courts consider “Faulty Workmanship” ambiguous and construe the exclusion in favor of the insured, limiting the term to product or process, whichever is advantageous to the policyholder  Some Courts alternatively find “Faulty Workmanship” to be unambiguous, finding that it precludes losses associated with faulty product or process  Review language of exclusion to see if other words infer a product or a process Builders Risk

Choice of Law Most Favorable Venue Endorsement

Questions

Thank You! Jeffrey J. Vita Saxe Doernberger & Vita, P.C Jim Hensley Willis North America