50 State Survey – Defective Construction as an “Occurrence”

By Saxe Doernberger & Vita, P.C.

Standard commercial general liability (“CGL”) policies cover bodily injury and property damage caused by an “occurrence,” which is in turn defined as an “accident.” For claims arising out of defective construction, courts have applied different interpretations of the “occurrence” definition.

There are many nuances among the states on this issue, although generally most fall into one of three analytical camps:

(1) Some states hold that defective or faulty workmanship is an “occurrence,” provided the construction contractor did not intend to cause damage. This analytical framework reserves the analysis concerning whether certain aspects or items of damage (for example, the faulty work itself) are uncovered due to exclusionary provisions.

(2) Many states have held that defective or faulty workmanship which causes damage to other work or property is an “occurrence.” This framework can often lead to coverage for most damage that results from the faulty work – for example, the cost to replace wet dry wall as a result of faulty window installation. However, the analysis may be complicated by court interpretation of what constitutes “other work or property.” For general contractors in some states, the entire construction project might be considered their work, leaving them without coverage despite the fact that, at first glance, the case law seems favorable.

(3) Finally, a small number of states find that defective or faulty workmanship is never an “occurrence.” Courts taking this approach typically cite to one of two rationales: either the contractor was contractually obligated to provide work free from defect; or the contractor should have foreseen that it would be responsible for correcting defects in its work. Courts will often cite to the concept that correcting deficient work is a “business risk” for contractors which is not intended to be covered by insurance.

The following PDF map identifies how each state has analyzed the issue of whether defective construction qualifies as an “occurrence.”

50 State Survey—Defective Construction as an “Occurrence”

This survey is published by Saxe Doernberger & Vita, P.C. Questions about this survey can be directed to Rebecca Nelson at rnelson@sdvlaw.com.

Disclaimer: This survey was updated as of August 2024. This material is made available for general information purposes only. The field of insurance law is ever-evolving, and courts may change their views at any time. Readers are advised to independently verify the information contained herein. This material is not intended to, and does not constitute, legal advice, nor is it intended to constitute a solicitation for the formation of an attorney-client relationship.