For a combined purchase price of $20 million, USI Insurance Services has purchased two insurance providers in the St. Louis area. As part of the purchase, Dennis D. Flatness, CEO of Welsch Flatness, and John J. Campbell, president of Construction Insurance, will be retained as executives.

A post on the Swanson Midgley, LLC blog looks at the limits of a commercial general insurance policy, arguing that the “seminal” case on the subject is Weedo v. Stone-E-Brick, Inc., decided by the New Jersey Courts in 1979. The Weedo decision gave the example of badly applied stucco, and if the problem is only the peeling and chipping “the poorly-performed work will perforce have to be replaced or repaired by the tradesman or a surety.” The more important point was “should the stucco peel and fall from the wall, and thereby cause injury to the homeowner or his neighbor standing below or to a passing automobile, an occurrence of harm arises which is the proper subject of risk-sharing as provided by the type of policy before us in this case.

Moving on from the 1970s, the post then examines the recent case of Big Construction v. Gemini Insurance, which was decided this year in the State of Washington. Here, more than thirty years later, the courts are considering “whether the alleged damages constitute ‘property damage,’” nothing that “a general liability policy is not intended to encompass the risk of an insured’s failure to adequately perform work.”

The Ohio Supreme Court recently determined that underlying obligations of defective workmanship are not claims for "property damage" caused by an "occurrence." Westfield Ins. Co. v. Custom Agri. Systems, Inc., 2012 Ohio LEXIS 2485 (Ohio Oct. 16 2012).

The case evolved from a certified question from the United States Court of Appeals for the Sixth Circuit. A property owner sustained damages from defects in a steel grain bin constructed by the insured, Custom Agri Systems, Inc. When the property owner sued, Custom tendered the suit to Westfield, its insurer. Westfield argued none of the claims against Custom for defective construction or consequential damages resulting from the defective construction were "property damage" caused by an "occurrence."

In E.H. Spencer & Co., LLC v. Essex Ins. Co., No. 09-P-1812 (Mass. Ct. App. April 8, 2011)(unpublished), insured Spencer was the general contractor for a residence. During construction, the project suffered water penetration damage resulting from a window left open by a subcontractor and the puncture of a heating system pipe while Spencer was installing roof shingles. Spencer sought coverage under its CGL policy issued by Essex. Essex denied coverage and Spencer filed suit. Read the full story… Reprinted courtesy of CDCoverage.com

In Forecast Homes Inc. et al. vs. Steadfast Insurance Co. California’s Fourth Appellate District Court found that only a named insured, as opposed to an additional insured can satisfy a general liability policy’s SIR. In its decision, certified for publication on February 11, 2011, the court ruled in favor of the respondent Steadfast Insurance Company. View Appellate Decision.Read Full Story

In Group Builders, Inc. v. Admiral Ins. Co., 123 Haw. 142, 231 P.3d 67 (Haw. Ct. App. 2010), the Hawaii Intermediate Court of Appeals determined that construction defects did not arise from an occurrence and therefore were not covered under a CGL policy. [See our Group Builders' post here]. Bills were recently submitted to the Hawaii State Legislature in an effort to rectify the Group Builders’ decision.The bills are identified as SB1192, HB939 and HB929. They are patterned after a Colorado statute, Colo. Rev. Stat. sec. 13-20-808, seeking to overturn an appellate court decision, General Security Indemnity Co. of Arizona v. Mountain States Mutual Cas. Co., 205 P.3d 529 (Colo. Ct..App. 2009). Similar to Group Builders, General Security held that damages from faulty workmanship did not arise from an occurrence. Ironically, Group Builders relied heavily upon the General Security”s outline of the majority/minority positions regarding construction defects.Read the full story...Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com

The Supreme Court of Texas recently held a rare rehearing of a unanimous decision listening to arguments about whether it erred last year in ruling that a contract employee who suffered on-the-job injuries couldn’t sue the company that owns the work site. The court’s decision to revisit the case involving John Summers vs. Entergy Gulf States came after a bipartisan group of Texas lawmakers - along with labor groups and accident victims protested the original ruling, saying the Texas justices got it “flat-out got it wrong.” "It’s a reckless deregulation of Texas workplaces," said Craig McDonald, the director of Texas for Public Justice. "If this ruling is allowed to stand, there will be more accidents, more injuries and more deaths."Briefly, turbine mechanic John Summers was a contractor when he suffered back, shoulder and arm injuries in a 2001 accident while repairing a leak on a hydrogen generator at an Entergy Gulf States plant in Bridge City. He sued Entergy, a power provider with regulated utilities in Louisiana, Mississippi, Arkansas and Texas.The court said Entergy was immune from the lawsuit because Summers was covered by a workers’ compensation policy purchased by the company. The ruling extended immunity provisions to work site owners when such provisions had previously shielded only employers sued by their direct employees.The court’s decision also means that a “property owner could act as its own general contractor and could provide workers’ compensation coverage to its subcontractors’ employees,” said Lee Parsley, an attorney for Texans for Lawsuit Reform. “That decision was correct.” In arguing before the court Entergy attorney Jacqueline Stroh told the justices that “nothing warrants any consideration of this original opinion.”But Summers’ attorney Collyn Peddie argued the ruling rendered the term general contractor “meaningless and absurd,” and opened loopholes for most Texas companies to claim immunity from workers’ lawsuits. Peddie also argued that the Legislature never intended work site owners to be immune from injury lawsuits from contractors, a point supported in a brief signed by two Democratic and two Republican lawmakers. The lawmakers said the Workers’ Compensation Act provides protection from liability to employers who have purchased workers compensation insurance for their direct employees but was not meant to extend to employers who hired independent contractors.“There is nothing in the legislative history that says they intended this result,” Peddie said. An unusual coalition that brought together union leaders, and both Republican and Democratic lawmakers, has criticized the ruling, albeit for different reasons. State Rep. Craig Eiland, a Democrat from Galveston, said the court overstepped its authority and “caused chills and shivers among legislators ... who do not want activist courts.”Other critics include relatives of the 15 workers killed in a 2005 BP plant explosion, who in April urged the Legislature to undo the court’s ruling. Some of those hurt in the explosion wouldn’t have been able to sue, said Eiland, whose district includes Texas City, site of the BP plant explosion. “If this law had been in place, people ... who were maimed, crippled and burned would have been limited to Texas workers’ compensation,” Eiland said. The hearing was held at Southern Methodist University’s Dedman School of Law. The Texas State Supreme Court routinely holds hearings at law schools and other sites around the state.Read the court’s full decision here.

Monday, January 24, 2011 — CHARLESTON — South Carolina’s high court issues ruling that promises to redefine risk management for the states builders, developers and subcontractors. Under the new ruling general contractors might be held solely liable for financial damages arising from construction defect litigation. Previously these claims and the attendant financial exposure to builders are handled through their (the contractors) commercial general liability policies.The S.C. Supreme Court’s decision shits the burden of responsibility substantially to the general contractor, causing a great deal of concern among the states general contractors.The court’s decision surprised the construction community and attorneys who represent the building industry. Both parties are asking state lawmakers for a bill that would protect contractors from paying out lawsuit settlements. “Even the most conscientious builders can get caught up in these things,” said Jenny Costa Honeycutt, an attorney with Haynsworth Sinkler Boyd in Charleston.Read Full Story...

In this multi-district litigation, the court considered the insurers’ motions to dismiss plaintiffs’ suits for alleged property damage caused by Chinese drywall. In Re: Chinese Manufacture Drywall Products Liability Litigation, 2010 U.S. Dist. LEXIS 133497 (E.D. La. Dec. 16, 2010). After determining there was coverage, the court considered several exclusions and the ensuing loss provisions in the various policies. Ultimately, the court found no coverage and granted the motions to dismiss. Plaintiffs filed suit against the manufacturers, distributors, sellers and installers of Chinese drywall and their insurers. Plaintiffs alleged the drywall emitted foul odors, and damaged metal and electronic elements and devices in their homes. Considering the insurers’ motions to dismiss and for judgment on the pleadings filed by several of the insurers, the court initially noted that the policies all defined "property damage" to include loss of use of tangible property. Therefore, the damage caused by the Chinese drywall constituted a covered physical loss since the drywall prevented the Plaintiffs from fully using and enjoying their homes. The Court then turned to the policies’ exclusions. First, the insurers failed to meet their burden to demonstrate that the damage caused by the Chinese drywall was a latent defect. Second, the pollution and/or contamination exclusion was not applicable. The Chinese drywall was not environmental pollution as contemplated by the Louisiana Supreme Court’s analysis of the Read Full Story...

Attorney Clay Olsen’s South Carolina Construction Defect Blog recently posted some analysis of recent decisions in South Carolina which promise far reaching implications to construction defect and claims litigation in the state. The analysis focuses on two South Carolina Decisions LJ v. Bituminous, as well as the Auto Owens v. Newman matters.“South Carolina’s Supreme Court has made a loud statement which will certainly cause controversy within our borders as homeowners and builders will be affected directly by this decision. In pertinent part, the court reasoned that the natural consequence of faulty construction is property damage and this is, therefore, not an accident. There is no ‘fortuitous event’ as property damage is a natural result of faulty workmanship.”Read full article...

“I could sit here and tell you that construction defect litigation (and the consequential coverage litigation) is spiraling out of control. But if I did, I couldn’t put it as well as the California Court of Appeals did in a case issued earlier this year. Characterizing a construction company’s view of the current state of construction defect affairs issue, the court stated:‘It is not too much of an exaggeration to say that as soon as the last nail in a project is hammered and the keys are handed over to the homeowners, the ink on the first lawsuit over the construction of the homes is starting to dry.’”Read full article......