If you are involved in construction, insurance is vital. There are too many risks and you want to make sure you have insurance to cover many of those risks. Commercial general liability insurance (CGL) is an insurance product most contractors maintain and need to maintain. However, not all policies are the same by virtue of the endorsements issued with the policies that restrict coverage. It is important that you know what coverage you have and that you are not working on projects where you have no coverage. That would be a mistake for both you and the party that hired you.
You may think you have coverage only to find out that you do not, which seems to be the case in South Winds Construction Corp. v., Preferred Contractors Ins. Co. Risk Retention Group, 2020 WL 2463778 (Fla. 3d DCA 2020). In this case, a contractor was sued for water damage on the 6th through 11th floors caused to a condominium project. The contractor’s insurer denied coverage and, thus, its duty to defend the insured in the lawsuit, because the policy had an exclusion that precluded coverage for buildings and structures exceeding three stories. Essentially, this is a type of condominium exclusion where the policy does not apply to high-rise projects.
While an insurer’s duty to defend its insured in an underlying lawsuit is broader than its duty to indemnify its insured, here, the claim fell clearly and squarely within a policy exclusion. It was an easy coverage denial from the get-go. Southwinds Construction Corp., supra, at *1. (“This placed the claim squarely and unambiguously within the exclusion from coverage applicable to work in buildings above three stories in height.”)
It is possible the contractor was performing and had performed many condominium projects or projects exceeding three stories in height. All the while the contractor had no coverage as long as it was performing work with a policy that had this exclusion. Not only does this harm the contractor, but it also harms the owner that was relying on insurance coverage in the event of property damage caused by the contractor. This does not mean the contractor is not liable. It just means it has no insurance coverage!
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.