Product Update

"State Positions on Faulty Workmanship as an 'Occurrence'" Updated in Construction Risk Management


In most states, the courts have established a position on whether defective workmanship can constitute an "occurrence" under the CGL policy. The most common position of courts is that faulty workmanship is, in and of itself, an occurrence capable of triggering coverage under the CGL policy. The second most common holding is that faulty workmanship itself is not an occurrence, but resulting damage caused by the faulty work is an occurrence. A few additional states have held that only resulting damage to third-party property due to faulty workmanship is an "occurrence." However, four states and the District of Columbia maintain that defective work is not an accident and therefore not an occurrence, and a handful of states have either not addressed this issue or have not established a consistent position. But even in states that have formed a position on this issue, these positions can change abruptly, either by reversal from a higher court or, in a few instances, by the passage of legislation. Most recently, the Ohio Supreme Court clarified that state's position in Ohio N. Univ. v. Charles Constr. Servs., Inc., Slip Op. 2018-Ohio-4057, holding that defective work does not meet the "fortuitous" standard and, therefore, does not meet the definition of "occurrence." As a result, contractors in Ohio no longer have coverage for damage to or damage caused by a subcontractor's faulty workmanship under standard CGL wording. The color-coded "State Positions on Faulty Workmanship as an 'Occurrence'" map in this release of Construction Risk Management shows where all state courts currently stand on this issue.

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