Construction Defects as an ‘Occurrence’: State Legislatures Weigh In

   By Edwin L. Doernberger and Theresa A. Guertin, Attorneys, Saxe Doernberger & Vita, P.C.

In their article appearing in the November/December 2011 issue of Coverage, "Construction Defects as an 'Occurrence': State Legislatures Weigh In" by Edwin L. Doernberger and Theresa A. Guertin of Saxe Doernberger & Vita, P.C., the authors first note that a recurring issue for construction industry policyholders has been the availability of commercial general liability ("CGL") coverage for claims arising out of defective or faulty workmanship. Courts across the nation have taken divergent approaches to this issue. The article summarizes those varied approaches illustrating what one court described as an "intellectual mess." Four state legislatures-Colorado, Arkansas, South Carolina, and Hawaii-have recently enacted legislation addressing the issue. This was after courts in those states rendered decisions finding no coverage for constructional professionals under their CGL policies on the basis that construction defects did not constitute "occurrences" as defined in their policies. The article reviews the court decisions that apparently prompted the legislatures to jump into the fray. It further analyzes each of the new state statutes with the objective of assessing whether they help clarify or worsen the recurring issue. The statutes are compared. The article notes that the courts of all four states have not yet applied the statutes in their decisions. The article expresses strong doubts as to whether the new statutes, particularly those of Colorado and Hawaii, will resolve the long-running dispute as to whether defective construction qualifies as an "occurrence' under CGL policies.

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