Builders and Contractors Exchange
Weekly Bulletin: 16 Jan 2006
Commercial General Liability Insurance Not Comprehensive
By: Katharina Brekke Powers
Commercial General Liability (“CGL”) insurance used to be called Comprehensive General Liability Insurance. Indeed, we often see contracts that continue to refer to CGL insurance as “comprehensive.” However, the change of name from “comprehensive” to commercial was made because CGL insurance is not comprehensive. A recent case from the Fourth Circuit provides an apt reminder. In that case Travelers sought a declaratory judgment in federal court to determine coverage under CGL policies. The general contractor had been sued in state court by Wal-Mart and I.B. Ventures, LLC for site development work performed by one of its subcontractors. The subcontractor allegedly had selected and used defective fill material.
The court had to decide whether the term “an occurrence” as defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions” would include the type of damage caused by the subcontractor. Applying Virginia law the court noted that the Virginia Supreme Court had not considered whether a contractor’s deficient performance is an “occurrence.” However, the court relied on a case from the Western District of Virginia which held that “[t]he insurance policy issued to the [contractors] is a general liability policy covering accidents causing bodily injury and property damage.” However, such a policy is not a “performance bond” and does not cover “poor workmanship.” In other words this type of policy does not normally provide coverage for business risks. The court went on to state that the damage to the site was not a result of the general contractors’ defective performance. Moreover, such damage was not “unexpected” or cause by an “occurrence.” Thus, the court found that the policy in question did not provide coverage for this type of loss.
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This article is meant to bring awareness to this topic and is not intended to be used as legal advice.