Insurance Issues for Construction Projects: the Court of Appeals takes a stab at CGL policies

Update 3/9/2017:  George’s blog is no longer active on the web.  Therefore, I have edited this post to include my full article below.

Recently, I had the honor and privilege of guest posting on George Simpson’s blog, entitled North Carolina Insurance Law.  George’s blog is a gold mine of information for those concerned with insurance issues, and it is a staple of my blogroll.

My post is entitled:  “Court of Appeals Finds Applicable Coverage Under CGL Policies Despite Exclusionary Language”


The Court of Appeals has been busy this summer deciding two somewhat similar CGL policy cases, both of which the insurance professional should keep an eye on.

1.         Damage to Property Other than Work Product
First out of the gate, Builders Mutual Ins. Co. v. Mitchell, a case involving a declaratory judgment action between two CGL carriers for the same insured.  In that case, Umstead Construction Company was insured, at various times, by both Builders Mutual and by Maryland Casualty Co.  Umstead performed some renovation and repair work on a house on Figure Eight Island, and poor workmanship caused the home to experience water drainage issues and rot, damaging the home’s interior, marble terraces, and decks.
Builders Mutual settled the underlying claim at mediation, and sought contribution from Maryland Casualty.  In the declaratory judgment action, Maryland Casualty claimed that there was no coverage because there was no “occurrence” as defined in the policy.  However, the Court noted that “an occurrence” under the policy could include accidents resulting from faulty workmanship that caused damage to any property other than the work product.
Here, because there was damage to previously undamaged portions of the house that were not being worked on, an occurrence had arisen.  The Court also noted that the fact that the accident may have arisen from Umstead’s negligence did not prohibit coverage.

The Court held that Maryland Casualty’s definition of “your work”, to include all damage, even that of property other than the work product itself, was too broad to be upheld.

2.        Coverage of Consequential Damages and Lost Profit

Even more recently, the Court addressed CGL policies in Alliance Mutual Insurance Co. v. Glen Dove. In that case, a grain elevator ignited moments after some repair welding was conducted.  The mill owner sued for, among other things, cost to repair the elevator, cost to repair the grain bucket, and for lost business and revenue.

Alliance argued that since coverage for damage to the elevator itself was excluded under the “your work” exception, the portion of lost revenue and other consequential damages attributable to the loss of use of the elevator should also be excluded.  The Court, however, held that the “your work” exclusion does not cover lost revenue and other consequential damages.  The Court noted:

to adopt the plaintiff’s very broad reading of the exclusion clause would result in the exclusion clause swallowing up the whole of the commercial liability policy, and render any coverage contained therein illusory.

The Court therefore held that there was coverage for the loss of use and consequential damages flowing from damage to the specific property the insured was working on.

Insurance coverage issues are important to all design professionals, because if the general contractor doesn’t have applicable coverage, the A/E may be left holding the bag.

What are your thoughts as to what CGL insurance policies should and should not cover? Obviously, CGL policies are not meant to be performance bonds, but where does the line between coverage and non-coverage get drawn?  Share your thoughts in the comments.


Photo:  “insurance” by Alan Cleaver via Creative Commons license.

Sleep, perchance to get LEED credit? (Tue Tip)

dog sleeping on the job

Sleep.  A subject dear to my heart.  I currently have a coffee mug at work that says: “Eat. Sleep. Read.”  Seriously; that’s what it says.  (h/t to Malaprop’s Bookstore in Asheville for the mug).  What does sleep have to do with the subject of construction law besides, that is, the potential of any legalese to cure insomnia?  LEED-sanctioned nap rooms.

What is that you say? Never heard of such a thing?  Well, now you have.  There is a move afoot to get the USGBC to give LEED credit (that is, green design credit) for buildings that utilize nap rooms.  According to Rob Freeman of, such nap-specific spaces might qualify in future LEED rating systems based on the proven benefits of napping on employee productivity.

I knew there was as reason I loved my naps….. productivity, of course!

Seriously, do you think a “nap room credit” should become part of a future LEED rating system?  What about the issue raised by a commenter to the article, that the use of the room might change over time, negating the positive impacts?  Share your thoughts below. 


Photo:  Sleeping on the Job by SEO via Flickr/Creative Commons license.

Tell me what construction law topics to write about, & you could win!

Here is a bribe.  But an honest one, that will benefit us both.  You tell me (via email, comment, tweet, or phone call) a topic, subject, case, or other area that you’d like to see specifically addressed here on Construction Law in North Carolina.  Everyone who submits an idea will be entered into a drawing.  For those with really great ideas, I reserve the right to enter their name into the drawing twice. 

thinking cap
Get your thinking cap mojo on!


The winner will get a free 1 year, 12 issue subscription to the print version of  Architectural Record as thanks.  

Ready? Set?  Get your thinking caps on and send me your ideas!  I’ll close out this contest at 9/1/2011 at 12:01 a.m., and the winner will be announced on the blog. 


Photo: “Thinking cap” by Matthew Allard via Creative Commons license.

Construction Contract Drafting– half price to my readers!

Following this week’s apparent theme of “what have you given me lately”  (part 3 coming tomorrow)…..

Did you know that, as readers of my blog, you can attend the upcoming webinar on Construction Contract Drafting for 50% of the retail rate?  Yeah, me neither.  Sorry I didn’t realize it earlier when I first mentioned this speaking gig, but regardless, if you hesitated signing up because of the cost……. now you have less of an excuse.

half off signs

Half off is *always* a good deal, whether buying battle axes, knives, swords, or continuing education credit! 


To get the discount, you must register through this link.  You can also purchase recordings using the promo code:  ZDFCT .

Hope to “see” you on the webinar!



Photo: half off by Joseph Robertson via Creative Commons license.

Free AIA Home Tour Ticket Giveaway (Tue Tip)

Mark your calendar now and make plans to attend AIA Triangle‘s 2nd annual Tour of Residential Architecture on October 1st, 2011.  The Tour is will showcase 6 homes designed by 6 local architects.  The selected homes reflect a wide variety of housing options – including urban infill, adaptive reuse, historic preservation, new construction, renovations, and additions.

broken down house

Win FREE tickets to the Tour, courtesy of New Raleigh, by entering their AIA Home Tour Ticket Giveaway contest here during the next week.

If you aren’t the lucky winner, you can purchase tickets ($15)  here.   Good luck!!!


 h/t to my wonderful colleague Angela Allen for letting me know about the giveaway!

Photo:  “Benton, Pennsylvania” via Jayu/Creative Commons license.

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