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Business Law - Commercial General Liability Insurance Policies

In Hartford Casualty v. Construction Builders in Motion, a homeowner brought a breach of contract action against her general and sub-contractors for defective workmanship on the construction of a single-family residence.  The contractors filed claims with their insurers seeking defense and indemnification.  The insurers then sued in Federal Court seeking a declaratory judgment that they were not obligated to defend or indemnify the contractors in the underlying suit under their Commercial General Liability policies, since the actions complained of were not covered.  The District Court agreed and granted summary judgment in their favor.  The Court ruled that, based on the language of the policies, in order for the contractors to be covered in the underlying action the plaintiff would have had to allege property damage as a result of an "occurrence" that was essentially accidental in nature.  The Court stated that there is no coverage where the underlying suit alleges damages that extend only to the construction project itself as a result of construction defects or faulty workmanship.  Instead, only when the alleged damage is to property other than the construction project itself (such as the property of others) does coverage exist.  The Court was reluctant to extend the coverage further (i.e., to cover defective workmanship), fearing that doing so would turn the CGL policy into something akin to a performance bond.  Even consequential damages suffered by the homeowner were not enough to extend the coverage, and no exceptions to the policy exclusions applied either, since there was no original coverage to begin with.

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